Unfunded? Unless your credit is totally in the toilet, you can probably get a business credit line to launch on your own

http://www.work.com/getting-a-business-line-of-credit-7/

by editor • 19 years ago

5 12 19 years ago

I'm no expert but I distinctly remember Rahoul Seth say at Startup School NOT to fund with debt in the early stages. Fund with equity and try to stay debt free until after the seed and 1st VC round.

mauricecheeks• 19 years ago

2 things to keep in mind:

It is in the interest of seed funders to encourage you not to fund yourself with debt. They want to ride the gravy train if you succeed.

It is in your interest not to fund yourself with debt. All probability suggests that there is no gravy train for you, just debt.

mukund• 19 years ago

Go for open source tool, learn them..use them, develop a solid business model and use this as a starter to showcase your skills. If its rock solid, you will get the recognition. Use this fame to seek out "real funds" to kick start your dream projects. Atleast thats what we are upto. Embracing open source and low cost solutions ensure you dont need a businesss credit line

pg• 19 years ago

This seems like a really bad idea.

rms• 19 years ago

It's a bad idea for a typical Web 2.0 startup but it's a great idea if you have a clear path to profitability.

far33d• 19 years ago

Debt is only reasonable if you already have enough positive cash flow (not positive revenues.. more money in than money out) to finance that debt.

But even if you have positive cashflow, it generally makes sense for young companies to reinvest those earnings instead of taking debt investment.

If your business fails, then you still need to pay off the loan. So that's what you get for not giving up your equity.

yaacovtp• 19 years ago

Not applicable for young web startups. Banks like lending to people and businesses with assets and revenues not ideas. Plus, if you take on debt you it makes it harder to cut and run if your idea doesn't pan out the way you planned.

ClintonKarr• 19 years ago

Might as well fund your start-up with scratch off lotto tickets while you're at it.

epall• 19 years ago

If your company goes south for any of a million reasons, who gets stuck with the bill? If you've sold equity, you've spread out the risk according to who's willing to take it. It's likely the founders opted to risk time more than money, so they're not out anything huge. If you get a loan, somebody's gotta pay it back at the end of the day.

zaidf• 19 years ago

Reminded me of the supposed quote by Trump to his daughter upon seeing a homeless guy...it went something like "Technically, he is richer than I am."

shsung• 19 years ago

Unlikely, unless you have some idea that makes sense to a business loan manager. You're relying on a non-tech person to see that your idea is a really solid idea, which may or may not fly.

The other thing is that even if your credit isn't in the toilet, banks might also want to take a lien on something valuable of yours, e.g., your car or your house, since you essentially have no assets in your company when you start. This is not always in your best interest, especially if your company goes belly up. Liquidating a house or a car that might normally be protected by bankruptcy is probably not going to be fun for you.

Unfunded? Unless your credit is totally in the toilet, you can probably get a business credit line to launch on your own

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