>If you have a growing business making money it should be fairly straightforward to get a loan under your business name.

this is not my experience, not without a personal guarantee or collateral that holds it's value better than servers.

(Leasing servers was also an option that would have made sense then. Most of the leasing deals I was offered that didn't include personal guarantees were two year leases wherein I paid about as much as the servers would cost up front over two years. It would have made sense in that case, but it's super expensive compared to buying servers)

This. Loans for small business require personal guarantees. If you are at a point that you need the capital that badly that you cant leverage it from existing cashflow, and VCs put you into their "maybe later" bucket (e.g. "no" for the rest of us), then requiring a personal guarantee is a signal for you. The signal means you should consider whether or not you should continue your endeavor, as the bank values your net worth and its leverage, far more than it values your business.

I've been down this road. I did not answer this question properly. Doesn't matter how much you believe in yourself, if the bank wants a personal guarantee, they dont really believe in your vision.

My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain.

>My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain.

My own personal view, if I could go back in time, would be to tell myself to go all in. I think it had a shot, and I needed to take that shot. I still think risking a bankruptcy to get a better chance at that would have been worth it.

I don't regret trying. I needed to try. And I think it was a near-run thing. I could have made it. I feel like there are several points here where if i zigged instead of zagging, I'd have done really well.

I just regret that I spent so long at it, without much success. A spectacular flameout involving business and personal bankruptcy after three or five years would have been far better for my long-term financial health than just slogging along at 1/4 wages for a decade.

I disagree depending on the circumstances.

If you are just trying to make ends meet, then yes, probably don’t go for it.

If you need access to working capital to hire more people, increase production, etc then it’s completely worth it.

For reference I founded a consulting company. We landed large projects. Had to pay employees to produce the deliverables, but did not get paid until later.

Basic math here is: Typically Net 30 terms. Usually have to pay a month or so worth of salary before hitting milestone to allow billing (then 30 more days to get paid). With $80k/mo in salaries we required working capital.

Even at the criminal levels that are charged for startup loans (plus personal guarantee) it is worth it when you are making 60%+ margins.

I have since paid down the loan and then sold the consulting side to focus on some products with a small in-house team. Funded for years at this point.

Local bank offered $250k on a 3.8% APR. SBA offered $110k on 8% APR. bank loans aren’t that bad in a low interest rate environment.. SBA has a much more flexible repayment plan tho

Plus once you’re in profit, your loan frees up capital for growth.

You can file bankruptcy on failed loans. 2-3 years out the game and then you jump right back in

Don’t act like bankruptcy is bad, it’s a valid pathway and you should by all means use it instead of sitting in a hole for 5 years or more. But learn from it, don’t be that person filing chapter 7s every 7 years

> If you have a growing business making money it should be fairly straightforward to get a loan under your business name

That's a tale told by everyone who read books about business or took some MBA classes.

It is not the case.

You can only be guaranteed to get a loan that is collateralize by FCF. FCF loans are stupid because you pay interest on a loan that is given to you in the amount of FCF. If you already have FCF, the only reason to get that loan is to build a business credit history by, quite literally, paying for it. That credit history is irrelevant for next 5-10 years because conventional financial vehicles do not care about your credit history until it is about 10 years long.

That's why VCing is the thing. If you are small, you have growth and you have FCF, your rapid path forward is with VCs, not conventional loans

FCF == Free Cash Flow

Nope. They generally want physical assets, as collateral. Even then, you may have to sign personally, because your business has no credit history, etc.

When I was in tangentially involved in sales, companies under 2 years old were required by the underwriters to provide a personal guarantee. Similarly, any credit card issued in the name of the company either had very low credit limits or personal cosigners. This was like 20 years ago though, so things could be different now.

Opened a CC last year for my 8 month old business, got $40k line of credit on $100k gross revenue. The limit may have gone up since then (my personal cards have)

It feels a lot like 2005 all over again, easy credit that will wash up at the first hint of economic downturn (I had cards reduce their limits in 07 just because)