Starting a business may actually hurt your personal financial position. If you’re going to borrow money personally for a new vehicle or a home, being self-employed will create a problem if your business is new. Retail bankers are not business bankers and may not have the skills to evaluate or understand your business. And, it’s not their job to review your business to determine if you have the capability to repay a loan. They will want to see two years of profitable operation in the form of financial statements and tax returns. If you are unable to produce those, you will not be viewed favorably. In fact, if you have yet to produce two years of profitable operations, your business will likely hurt your chances to get any kind of loan.
If you plan to purchase a new home for example, the mortgage company will look at the income and credit of you and your spouse. Your combined incomes will be used to qualify you for the loan. If your spouse earns enough income to qualify for both of you, then all the better unless your business has filed tax returns showing a loss. If so, that loss will be deducted from your spouse’s annual income.
Plan major purchases, college education expenses and the like against your plans to start a business. In some cases, you’ll be better off waiting to start your business until after the major financial expense event.
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