What happens if you can't pay back a business loan?

Question

I want to start a small business of my own but I am hesitate to even try to get started. I think I have a plan that will work but I am going to have to get a loan to make it happen. I just want to know, what happens if I can't pay it back? Will I have to personally file bankrupt of what?

Answer 1

Most banks will make you personally sign for loan.
Hopefully you have a good credit score.
Have a plan for a slower than expected payback or some sort of savings to fall back on.(just in case)
Main thing is have a very positive plan but in the back of your mind have a plan B just in case cash flow is slower than expected.
Above all protect your good credit!!!
If you have real estate collateral that can be your plan B. Try not to use that first. Save equity line on your home etc. for emergencies if you can.
Try to get the loan just in your name without using your personal real estate as collateral.
A Certificate of Deposit (CD) cash in the bank for collateral is an excellent way to start a business. Keep your CD and borrow against it for a portion of the loan. You should be able to get the loan for only 1.5 % interest above what you are earning on your CD .
Using CD;s is an easy way I think to start a business.

However, if you are a minority, or small business there are government loans available through the Small Business Administration.
You want the lowest interest rate and the longest term payback as possible, but with no penalty for early payoff.
Hopefully, you can make regular payments on the principle to reduce the loan amount.
Banks like good customers. Never be late with a payment. Always speak to your banker with a positive attitude..
Let him know you plan to be a good customer at his bank now and in the future.
Never allow it to come to bankruptcy. It will haunt you for many many years.
Good luck and have the best plan possible for you and lots of fortitude. If you want to do this very much you will find the best way.

Answer 2

If you haven't got a business plan yet, you better get started. A good business plan will help you get a loan. But it has to include how and why you think it can work. You'll need to do your homework and look at similar businesses to show how you have something different o offer. Go the Small Business Administration and get some info from them. They also give classes that help you with setting things up. They won't give you a loan based on nothing. If you have a house they will likely want that as collateral. You've got a lot to do before you even think about this. Have you considered getting a partner or a financial backer?

Answer 3

Your businesses assets will be liquidated by the lender, as well as other collateral used to secure the loan for the lender. If you start a business or any other plan in your life while focusing on failing/becoming unsuccessful that is exactly what you will manifest in your life. We don't start businesses thinking of failing; we start them thinking of profits, then your mind will find ways of making it succeed.

Answer 4

Four large, ugly men come to your house. They hang you from the ceiling by your toenails and make you chant the McDonalds jingle until your head start to grow little sprouts of extra hair. They then cut this hair out and sell it to get the money that you owe them.

Answer 5

If a corporation borrows money, and then goes bankrupt. The creditors get the company. The shareholders loose their money. But the shareholders can not be sued for the missing money, and their credit rating is not affected.

Answer 6

Mick Parker and Roland Lewis asked the same question. You should see their answers side by side.

Answer 7

you should first incorporate your business. so if you do default on your loan you are not liable personally.

Answer 8

They take your business, house, car, anything of value...you lose it all...

Answer 9

that or you go to jail

Answer 10

they come and break your legs.