LV Koopa
Jester from Hell
I'm gonna expand on this point a bit because I really think some people have to get this concept. I'm gonna go back to the scenario with someone who wants to start a business with $50,000 and show you what happens in the most simple of scenarios.
Scenario A: I put up $50,000 to start my own business and it tanks.
Well, once that $50,000 is gone - you have to survive. This means you have to pay rent, you have to pay for food, and you also need to find a new job that brings in steady pay. If all you have is that $50,000 you are pretty much fukked. There is no credit protection or bankruptcy case to save you when the bill collectors start calling. If things get really bad you might have to use cash advances on credit cards (among the worst ways to borrow money) and you're now leveraging debt with even more debt and neither one of them are increasing your cash flow. In short - you are fukked. It takes a lot of discipline, planning, and if you don't have a great source of income, years to escape this hole.
Scenario B: I borrow $50,000 (loan) to start my business and it tanks
Well, crap - we've lost somebody else's money. This isn't a good thing but it isn't the end of the world. Firstly because the loan payments are spread out. We may have lost $50,000 but from month to month if we can scrape up the balance of the loan (say $1,000 or so) we can keep our head above water. Even better - we still have our original $50,000 - we can just pay back a huge portion of the principal + all the interest. If we don't want to we've done our homework and know this loan will cost us X amount in Y years. As long as we get a job that can pay off the interest in reasonable time we are fine (remember how loans work, once you pay off the interest it's just principal and loan payments get smaller as time goes on assuming it's standard).
But, wait there's more. If we somehow don't have our $50,000 most legit loan companies will negotiate with you. They'll do things like lower the interest rate, stretch out payments, ask for something else as collateral, might even take $30,000 of your 50k up front and work it out then - they want their money, not to bankrupt you so you can't pay anything at all. It may cost you more than the 50k in the long run and take some time but chances are you'll be able to survive compared to someone who lost 50k of their own money. Most of your actual assets were never at risk and if they were you have some degree of control in how to get value out of them.
Notice in scenario B there isn't an immediate risk of ruin. That's why people borrow other people's money - even if shyt goes bad they'll have time on their side to pay it back. This doesn't even touch on borrowing that 50k for a loan and using your original 50k to invest somewhere else and use that to pay off the loan. If you want to be your own boss then learn how those that did it actually stayed that way. Some people can start a business with their own money and make it, but trust me when I say they are in the vast minority and it's pretty much the path of most resistance. Work smarter before you work harder.
