Can Your Personal Debt Impact Your Web Development Company?

Personal debt will not keep you from starting a web development company or any other type of business. However, it can impact credit rating and how you handle the revenue your startup makes. What should you do if you have mounting debt and no way to stay on top of the problem?   Technically, you should not have to put your dreams on hold with your web development company. You will need to adjust how you handle the debt and your credit score. Here are some things to consider regarding personal debt and your business.

1. Join the Crowd

In the Q1 Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York found the national household debt was $17.05 trillion for 2023. The average household debt is $101,915, including mortgages, car loans, credit cards, and other personal loans.   Most people have some form of debt from student loans and buying the necessities for shelter and transportation. Not all debt is bad, but how you pay and handle your debt can impact your ability to get loans your business might need.

2. Understand Liability

Debt works in two ways to impact your business. First, you and any partners needing loans may have to tap into personal credit scores and payment history to show you are a reliable source.   You will also be personally responsible for any corporate debt incurred. Although an LLC or corporation does offer some protections, you still have to pay off any loans you incur in the operation of your business.   Even bankruptcy proceedings will not fully remove what is owed. They just help develop a payment plan to give the creditor what they are due.

3. Pay Off Debt

If you decide you need to pay off debt to move forward with your web development company and remove stress from your life, you may have researched various methods. Should you use the debt snowball? Should you go to the highest-interest items first? What is the right way to pay off debt?   There is not a right or wrong way to get to zero payments owed. You must choose what works best for you and allows you to keep building your company while gaining financial independence from lenders.   Many experts do recommend starting with the highest-interest loan first and paying it off before moving to the next highest interest rate. One exception is if you have so many payments they are making it impossible to meet your obligations. In such a situation, pay a few of the low-balance loans off to free up funds to work on the principle of other debt.

4. Bank Locally

You may have more success talking to a local bank that already knows you as a customer. Seeking a loan or new payment structure from a place you already do business with may be easier than one that goes solely on numbers and what is on paper.   Local banks are also vested in supporting small business owners in the area. In addition to shoring up the local economy, they may get repeat accounts from entrepreneurs.

5. Crowdfund Your Costs

Around 38% of startups fail due to cash flow issues. The problem often occurs during times of growth. Many big box retailers require net-30 on orders. You may need to spend money to get your product in larger stores and see more success, but you must find enough funds to produce items before payment. Another scenario requires hiring additional employees and all the expenses involved before you see a payoff.   One way you can come up with money without taking on more personal debt or struggling to get a loan due to personal finances is crowdfunding. You can sell a new product, package or just ask for help on various platforms. Rally the collective funds of family, friends and current customers to get the numbers necessary to push forward. 

How Does Personal Debt Affect the Success of a Web Development Business?

The success of a web development firm may be greatly impacted by personal debt, which can restrict cash flow, hinder investment opportunities, and obstruct business expansion. Understanding web development fundamentals thoroughly is crucial for attracting clients and generating revenue, thereby ensuring financial stability.

6. Reduce Expenses

The best way to stay on top of costs is to reduce the money going out. Look at your personal life and your business costs. Are you getting water delivered once a week that no one in the office drinks? Lose the delivery service. Perhaps your employees leave the lights on when they leave and you could save a bundle by installing motion sensors that only turn lights on when someone is there.   Look at every fixed and variable cost in your business and home, and slash ruthlessly to get your finances in order and help your business remain healthy.

7. Get a Side Hustle

In a recent survey, around 53% of Gen Zers and 40% of Gen Xers have a side hustle. One thing you can do to reduce personal debt faster is to come up with extra funds to throw at your loans.   The gig economy is alive and thriving. You can pick up food-delivery jobs or even develop something to do that ties into your work. For example, you might offer small landing page packages as a side gig that still relates to web development.

Get All Debt Under Control

The biggest impact on your web development company will be reducing all forms of debt. Business and personal finances affect professional development and the ability to separate work and life.   Pay off the debt you can and seek the best financing terms for the rest. Use the tips above to move forward with your company without losing momentum or personal peace of mind. Eleanor Hecks is the founder and managing editor of Designerly Magazine. She’s also a web design consultant with a focus on customer experience and user interface. She lives in Philadelphia with her husband and dogs, Bear and Lucy. Connect with her about marketing, design and/or tea on LinkedIn.