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Question for the Money Doctors

Question submitted on Apr 15, 2010.

Question

Is it smart to borrow $20,000 for a start-up business in these economic times? My husband and I both have income sources and we would be able to pay the loan back. The business will also accrue an almost immediate income which could be used to pay back the loan. However my current debt to income ratio is around 30%. My husband’s is pretty much 0 and we both have good credit. What do you think?

Answer (answered by Meet the Money Doctors)

If you read “The Millionaire Next Door’,” by Thomas J. Stanley and William D. Danko, you will discover that most millionaires are small business owners. If the business opportunity is solid (as opposed to a loan to a relative to start a business, for example), then I encourage you to go ahead with it. You stated that your debt to income ratio is about 30% and that your husband’s debt to income ratio is zero. Therefore, as a couple, if your incomes are about the same, your debt to income ratio would be about 15%, which is not high at all. Furthermore, if the income does accrue from the business immediately, it is likely that the business will pay back the loan. Good luck.


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