Business loans: borrowing to earn
Lesson 6 of 11 in our free Good Debt vs Bad Debt guide: a 5-minute money game with the key points below.
This lesson is in the full version.
Free with a code from your uni, college, council, landlord or employer (worth £600/year). Lesson 1 of Good Debt vs Bad Debt is free for everyone.
Got a code? Unlock this lesson
Questions you'll answer
Illustration: £6,000 at 7.5% over 3 years is about £186 a month. The cart's profit after all costs is about £400 a month in a good month and £100 in a bad one. What's the honest verdict?
Quick facts
- An oven that lets a baker double output for orders she already has → Produces income. It earns, and the demand is real.
- A flashy logo redesign before any customers exist → Doesn't produce income. Nice, but it doesn't make money by itself.
- Stock for a confirmed wholesale order → Produces income. Sold before it's even bought.
- A company car for the founder to look successful → Doesn't produce income. Aura points, no income.
- Fact: “A personal guarantee can make you personally liable for a business loan.” — Even with a limited company, signing one means your own money can be on the line.
- Fact: “Start Up Loans are government-backed personal loans for business, from £500 to £25,000 at a fixed 7.5% a year.” — Run through the British Business Bank, repaid over 1 to 5 years, with free mentoring. Still a loan: you repay it even if the business fails.
- Myth: “If a business fails, any business loan just disappears.” — The debt is still owed. Who owes it depends on the structure and any guarantees.