A slow economy is often the inspiration for would-be entrepreneurs to finally start the small business venture they have been considering for some time. Although starting a home based business can sometimes lead to success and growth, many more times the enterprising individual finds him or herself owing more than they anticipated. This situation is not only disheartening, but it may put the hopeful business owner and their family at risk of losing their home and other valuable possessions.
Before making the decision to strike out on their own and create a home based business, individuals should have a solid business plan and enough savings to fund their startup costs and living expenses. A realistic business plan should anticipate how the length of time needed before the business will begin contributing to the income of the owner. If the owner has good credit, a personal loan may be available to offset business startup expenses and loss of regular income.
More times than not small business owners will find themselves owing more debt than they are able to repay. When this situation occurs, the business has several options to manage their financial obligations. The first choice of most people is a do-it-yourself debt reduction plan, but debt consolidation or bankruptcy are two other choices that are often considered.
DIY Debt Reduction
If the business is producing enough income to meet the personal living expenses of the owner and some of the business debt, a DIY debt reduction program may work. The two methods most commonly used in this approach are the snowball plan where smallest balances are paid off first, or the avalanche plan that concentrates on eliminating the highest interest loans first. In both cases, any funds available for debt reduction are applied to the remaining balances until no debt remains.