Trying to obtain capital for a startup business can be extremely difficult for some, especially if you have less than perfect credit and/or no collateral or assets. Many startup entrepreneurs, who are in need of a small business loan or line of credit, may need to use a co-signor or personal guarantor to secure financing. In my experience working with startup business owners, often times that co-signor or personal guarantor is a significant other (e.g. boyfriend, girlfriend, husband, or wife). Using your significant other as a co-signor or personal guarantor to secure a small business loan can have its pros and cons and if you do it right, you will experience only the pros instead of the cons. Some of the most successful companies were built by people in romantic relationships. Here I will give you a few pointers to follow should you ever need to partner with your significant other to obtain a small business loan for your startup.
Pointer #1: Plan ahead, especially if you are married – Applying for a small business loan can be just as major as applying for a mortgage loan because it can change your life a great deal. If you know that you plan on starting a business someday and will need capital to grow that business, starting planning for it in advance. Sit down and talk to your significant other about your personal finances, your personal credit and their personal finances and personal credit. Discuss your startup business goals and aspirations. Be honest about your need for business capital and be straightforward about your possible need for a co-signor or personal guarantor with your significant other. Don’t beat around the bush; make it known that you may need their help and be sure to get their blessing. Simply put, ASK for their help. It can be easy as saying, “honey, would you mind acting as a co-signor or personal guarantor for me so I can secure a small business loan or line of credit for my startup business?”
Pointer #2: Let them know what’s in it for them – Asking your significant other to act as a co-signor or personal guarantor for you to secure a small business loan for your startup can have lasting effects on your relationship with them, especially if things don’t go as planned. So before you approach them, come up with a plan that will make it beneficial to them and let them know what that plan will be. For example, offer them a percentage of ownership in the business so they will reap the rewards of it success. If you don’t feel comfortable offering them a percentage of ownership in the business, offer them a percentage of the sales. Also, always put everything in writing and sign it along with your significant other. If your business just so happens to fail and you default on a small business loan or line of credit, also offer to pay back what ever funds you will owe to a lender (in their name) plus interest. That’s only fair. Make it a win-win situation.
Pointer #3: Don’t make it all about you – More than likely your significant other has their own career goals and aspirations. Take an interest in those goals and aspirations. Let them know that not only do you want to build a successful business so you can make the kind of money you want to make to build a better life for the both of you, you also want to help them accomplish what they want to do to make a better life for themselves. Tell them that you will dedicate your time and effort to helping them reach their goals and show them that you are serious by taking action to make it happen. They may be more inclined to invest in you (and your startup business) if you are also willing to invest in them. Again, make it a win-win situation so no one loses in the end.