Survey says owners not borrowing money for business formation

Illinois residents who wish to start a new business may be interested to know that, whether it is due to the recession or a bad experience, one survey indicates that a large percentage of entrepreneurs with companies 10 years or younger avoided applying for business loans. In fact, money for business formation came from other sources. The reasons for not borrowing money from a lending institution varied, but the most popular reason was that owners did not want to take on the debt.

Other owners believed that they would not be approved for a loan, and some of them may have been correct. During the recession, lenders were hesitant to loan money without a proved record of accomplishment. Obviously, that would be difficult to have for a new venture. Therefore, owners used their own money, started a business that did not require a substantial amount of startup costs or borrowed from friends and family.

Many expressed the desire not to be beholden to a commercial lender. This is mainly due to the fact that many lenders require personal collateral from entrepreneurs to secure a loan. If the business fails, the loss of that collateral -- which could be the family home -- would be in jeopardy. If there is no risk of this happening, an owner can focus on developing and growing the business rather than how to pay back a debt.

Any Illinois small business owner likely understands that there are numerous risks associated with business formation. The decision not to borrow money from a commercial lender is one that needs to be given as much weight as any other issue. Once the decision is made, plans can be made accordingly. This choice could affect how other legal and business decisions are handled.

Source: Forbes, "Survey: Small businesses snub lenders", Mary Ellen Biery, Aug. 3, 2014

No Comments

Leave a comment
Comment Information
Get Help Now

How Can We Help You?

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Map address

2015 West Fullerton Avenue
Chicago, IL 60647

Toll Free: 888-574-7062
Phone: 773-696-1788
Chicago Law Office Map