Ditching Debt

27 Oct

These days it seems as if everybody has debt: consumers, corporations, and especially the government. But (there are) business owners determined to become debt-free. They are ditching credit cards and giving their bank loans the old heave-ho.

Banks don’t have a clue.

Co-founders and brothers Courtney and Carter Reum said that banks would not lend them enough.

Company: VeeV Acai Spirit
Owner: Carter and Courtney Reum
Headquarters: Los Angeles

We had it in our heads that we wanted to create something different, really different. VeeV is a liquor brand based on the acai, a super fruit known for its antioxidant properties.

We funded the business through about five or six angel investors. Roughly a year ago, we decided to expand. We were growing really quickly, doubling our sales every six to 12 months.

We wanted to launch a seven-figure marketing campaign and decided to apply for a bank loan to fund it. That didn’t go terribly well.

Within four or five months, we reached out to a lot of banks. We were only approved for small loans. We didn’t want to cobble all of them together and deal with four or five banks.
So we decided to borrow the money from our initial investors and pay them back with interest. Luckily they agreed. We have had a great summer of sales. By the end of the year, it should be paid back.

I am not saying we will never take out a loan. But it looks like we will be debt-free for the next 12 to 18 months. We prefer it that way. The economy is still rocky. We also want to show all our investors that we are a well-managed operation and capable of paying off debt quickly. It also looks good to any company that is interested in buying us.

Loans terrify me.

Mauro started her own candle company. She launched it with $3,000 and without using credit.
Company: Objects With Purpose
Owner: Ianthe Mauro
Headquarters: Topanga Canyon, Calif.

In 2009, I went through a divorce. I also got diagnosed with two autoimmune diseases. I kept lighting candles every day and setting an intention. I was getting obsessed with finding the best scents, the prettiest.

But most candles are made from petroleum-based waxes and release toxins when they burn. Other problems include wicks made with lead and synthetic perfumes.
The cleanest burning thing that I found was coconut meat. My candles are made with as many organic and natural ingredients as possible, including cotton, apricot oils and white beeswax.

I have not taken out any business loans. I have always been opposed to it and it terrifies me. I started this business with $3,000. I chose to start with only what I could afford to start with. I got some seed money in my divorce and I chose to roll out really slowly.
I looked into getting a loan thinking if I did that maybe I could start with a bigger splash, cast a bigger net. But, I am not going to have a business unless I can do a business independent of all loans.

I have always been really good about debt. I have one credit card that I pay off every month. I want to live a life interest-free. The true American dream is that we can sustain ourselves, not something we are chasing, can’t afford and are putting on credit.
I won’t ever take out a loan in the future. As soon as I imagine growing really fast, it makes me scared and I can’t sleep at night. I want everyone to have these candles and love them, but I am willing to have it take time.

No more credit cards!

Susan Tellem with sons and co-owners John and Dan, daughter Tori and husband Marshall.

Company: Tellem Grody Public Relations
Owner: Susan M. Tellem
Headquarters: Los Angeles

When I sold my first public relations business, I made some stupid mistakes, like buying a house that was too expensive. So I didn’t have a lot of extra left to start my second business.

In 1992, I went to work with the largest PR agency in the world for six months as one of their top executives in Los Angeles to make some money. I am an entrepreneur at heart, so that did not work. I left after a year and started my second business.

I had my business contacts and already had the infrastructure — a computer and a phone.
A few years later, when I started to build my company and do fairly well, I applied for a line of credit for $25,000 at the bank. I hated having that over my head. I asked them to close it when I still owed $12,000. I also maxed out our company credit card to the tune of about $12,000.

Today, I am happy to say that I’ve paid off most of that loan and credit card debt. I owe about $2,100. I don’t use credit cards. That is it. Once you start accumulating credit like that, there is no going back.

We have made a vow to live within our means. I am tired of paying the ridiculously high interest rates. I figure if I don’t have any debt, we’re ahead of the game.
I have never missed a payroll in my entire life, and I never intend too. But if something happens, I have an equity line on my home. I absolutely do not want to dip into it. But, I always have that as a backup.

Still, reliance on credit or loans can ruin a small business. You’re not living within your means.

October 2011 – http://money.cnn.com

One Response to “Ditching Debt”

  1. insidersgroup October 27, 2011 at 1:41 am #

    This article demonstrates Insider’s OP5 Formula used by Successful Businesses.

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