Why Is It So Easy for New Entrepreneurs to Fall into Debt?

COLLABORATIVE POST

If you really think about it, starting a business is like jumping out of an airplane and building a parachute on the way down. It’s thrilling, terrifying, and, let’s be honest, a little bit crazy. Alright, more than just “a little bit”. But here’s the kicker: while you’re focused on crafting the perfect product, getting your brand out there, and finding customers who can’t wait to throw money at you, debt can sneak up. You want to avoid costly errors, but debt ruins it all.

And suddenly, that jump feels less like an exhilarating adventure and more like a free fall with no parachute in sight. So, why is it so easy for new entrepreneurs to fall into debt? It’s really important for new business owners to feel confident in their finances, and being in debt doesn’t help. But why is this so common though? Well, let’s break it down.

There’s the Temptation of Easy Money

This is basically where it all starts; this is exactly where the debt happens! So, when you’re just starting out, money can feel like the magic ingredient that will turn your dreams into reality. Just think about it: there are banks, investors, and even your rich uncle who might be more than willing to throw some cash your way if you’ve got a great idea and a bit of a plan. The problem? It’s incredibly easy to overestimate how much you need—or worse, how quickly you’ll be able to pay it back.

Many new entrepreneurs fall into the trap of thinking, “I’ll just take out this loan, and once the profits start rolling in, I’ll pay it off in no time.” But the harsh reality is that businesses often take longer to become profitable than expected. Meanwhile, those loans (and the interest they carry) start to pile up, leaving you deeper in debt than you ever anticipated.

While yes, debt doesn’t necessarily need to be scary, and yes, debt is super common, and there are even programs and people out there like Alex Kleyner National Debt Relief who focus on helping individuals out when it comes to debt, you still shouldn’t think of debt as something that’s a breeze. It’s not the boogeyman, but it’s also not your friend either. Some debt that you can realistically and effortlessly pay off is fine, but never ever get into anything that’s way over your head!

Overestimating Revenue and Underestimating Cost

Ah, the good old optimism of a new entrepreneur! You’ve got the best product or service in the world, right? Surely, customers will be lining up around the block, wallets open and ready. But here’s the thing: the world doesn’t always recognize brilliance immediately, and building a customer base takes time, effort, and—surprise!—more money.

But here’s the thing though, new entrepreneurs often overestimate how much revenue they’ll bring in during those early days. At the same time, they tend to underestimate the actual costs involved in running a business. It’s honestly really had to balance.

The Pressure to Keep Up Appearances

The Pressure to Keep Up AppearancesLet’s face it: there’s a lot of pressure in the entrepreneurial world to “fake it till you make it.” You want to look successful, even if your bank account is screaming otherwise. If you were to read up online about advice, it’s also going to scream that you need to fake it til you make it too. That costs a lot of money, and that’s going to cause you to splurge and get into debt, too

— End of collaborative post —