My question with exiting or closing a business. My wife I, fairly young couple, started an LLC company (we are the only members) in state of WA where we got approved for an SBA loan without collateral (i.e. house, other assets, etc) with two equipment leases with low interests. Our business loan and equipment leases are in good standing (no late payment, collections, etc.).
Our business is fairly new and running out of cash flow. We do not have the means to request for additional capital because we don`t own any assets (i.e. house, etc) to begin with and a fairly new business.
Question 1: Do we tell the lenders that we will not be continuing our business or let an attorney deal with the ending of our business?
Question 2: When the business ends, what happens to the equipments (leased)? Does the leasing companies take back their equipments and give us the difference of what we STILL owe them?
Question 3: What happens when a business fails with an SBA loan? We personally guranteed the loan (which we do not have any assets, income, savings, etc. anyways). How does an SBA business loan play out when a business "dies".
Thanks for reading this and hopefully we can get some good feedback or experiences of what happens when owners do not make it in their businesses.
SIDE NOTE: I am not sure where everyone is getting that it takes a long time to get an SBA loan.
Our experience with our approval for an SBA loan of $75K
* Both not working (recent graduates in our early thirties)
* Owner (we) invested 20%
* No collateral (i.e. house or other assets)
* Personally guranteed the loan (don`t own anything to start with?)
* No experience in our business model
* Created our own professional business plan (75 pages)
* Both our credit scores above 700
* No bankruptcy, etc.
ALL APPROVED WITHIN WEEKS by major commerical banks. Even got two equipment leases also. All of the loans with low interests. It can be done, but also good to think about "what if it does not work" or bankruptucy of your business. We all want to start a business/live our dreams, but what are we willing to sacrifice...your health, your family, your house, your assets, your credit history & finances? OK, enough of me talking about REAL stuff where starting businesses really need to think about ALSO.
JUST REMEMBER: if you DO get approved for a business loan, does NOT mean that your "idea/dream" will work. Bottom line, need to have PLENTY OF CASH FLOW or where you can get additional funding/capital if needed (i.e. from equity from house, etc.) or know someone who will lend you more money. From my experience so far, get at LEAST six months of working capital or more (which means greater owner investment for a bigger loan amount). Hopefully this helps and start ups really need to understand what they are getting into...not just focusing on great idea/dream and how to get capital. WORK on solid business plan (financial projections) and plenty of resources for additional funding IF NEEDED. Learn from our experience where most people don`t talk about.