“Dear Steve,
I had some bad luck in small business and had to use my credit cards and now I am about $50,000. in debt. I have very little income coming in right now and have about 3 months of cash left to pay the mortgage and monthly bills. I want to pay my bills,but I am or will start to have some hard times. What is your Answer?
What is the best way to handle it. I might have some money coming in with my job, but I having been waiting a long time for the companies to start up, so I can make sales. I am in the insurance business and things are real slow. Let me know what you think I should do?
Joe”
Dear Joe,
I stumbled as I read your question over your statement “had to use my credit cards” to help fund the business. Actually, you didn’t have to use them, that was your choice.
It could simply be possible that what you have worked hard to create is a business that will not be able to generate sufficient income within the time available. The business might just be a failure.
This is a very difficult time to start a business for some, and a perfect time for others. What’s the difference and why do some succeed when others fail? There are lots of reason why businesses succeed or fail but a large amount of it is luck.
What you can do to give yourself the best chance of success as you start a business that has a long timeline before it will pay off is to avoid all debt so the startup does not create obligations before it generates income. And if you do decide to launch anyway, then make sure you have six to twelve months of cash to sustain it without any income at all. It is just so sad to watch people sacrifice everything, put all their money into a new business and have it fold within six months.
Luckily you’ve recognized the reality of your cash situation right now and you’ll need to prioritize the cash you’ve got left and pay your mortgage, utilities, food and transportation first. Without any money coming in, any money you send out now towards your unsecured creditors and credit card companies is just going to accelerate your speed towards foreclosure.
The logical course of action here is to secure employment or income to bring money in. If you can do that then we can start to talk about solutions like a debt management program to get you some breathing room possibly to get you back on your feet. Otherwise, without expense reduction and no income, bankruptcy is probably in your future.
Bottom line, stop funding startup business, search for income, prioritize payments to only the most important creditors and obligations. Do that first and then give me an update.
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