Starting and Growing

Starting a Business With Your Spouse: Your Financing Options

Starting a Business With Your Spouse: Your Financing Options

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For many married couples, running a business together sounds like a dream job. Not only will conflicting weekday schedules become a thing of the past, you’ll also get to work towards the same business goals with your favorite person. So is it any surprise that nearly one in five small businesses in the U.S. is family-owned?

While running a business with your spouse isn’t for everyone, some couples thrive when they work as a team. That’s certainly true for Liliana Gala and her husband, Angelo, who opened EDX Crossfit in Lafayette, Colorado in 2017.

“Angelo and I have complementary skills,” she said, “which makes for a great match to be in business together. We have complete trust in each other to get our share of the work done. Plus, we love being around each other during the day.”

But what happens to your spouse dream-team when your options for business financing range from slim to none? While going into business as a married couple does not automatically mean you will not be able to secure a loan, there are a few things—as with any co-owned business—you should be aware of before you begin the hunt for financing.

Why Being A Spouse-Run Business May Hurt Your Chances For Financing

With any business partnership, lenders typically expect anyone with 20% or more stake in a company to apply for the business loan. This means you and your spouse should expect to go through the loan process, even if your finances are intertwined.

When you are co-signing a loan with your partner, both of your personal credit histories will have an impact on your loan application. Even if one spouse has stellar credit, a spouse with poor or no credit history will certainly reduce your chances of securing the best loan possible

One thing you should always consider when applying for a business loan is how you’ll pay it back. As a married couple, both of your finances are tied up in the company, which can give some lenders pause.  

For the Galas, many well-meaning friends and associates advised them to start their search for working capital slowly.

According to Liliana, “We were advised from business consultants as well as close friends (who are successful venture capitalists) that it is too risky to go into business together. They said, ‘Don’t put all your eggs in one basket.’ They advised that my husband start the gym, and that I keep my job so that we have at least one steady source of income that is reliable.”

Of course, married couples are hardly immune to the many routine issues facing other small business owners. Regardless of your relationship status, securing a long-term loan when you’re a new business is rarely a simple matter—a fact that came as a surprise to the Galas, who were already on good financial footing.

“We were expecting to have to pay for most of the start-up expenses, as well as our living expenses, for at least the first year in business out of our own pockets, and so we started saving as much as possible,” Liliana said.

Finding Alternative Financing Sources

Of course, a traditional small business loan isn’t the only option for financing a spouse-run small business.

The Galas ended up finding success by turning to friends and clients. These were individuals they’d worked with before, so unlike with a bank, the Galas didn’t need to prove their profitability and reliability.

“We were able to secure our startup funding from five private lenders, or angels,” Liliana said. “These are individuals who gave us a personal loan out of their own pockets, and were all people we knew closely. They had experienced our services firsthand, and believed in our vision to start a business.”

Not every married team is going to be able to find angel investors among friends and former clients, but there are other options available when you just need some funds to get your idea off the ground.

Opening a business credit card account early in your days as a small business co-owner can make a lot of financial sense, both to secure some working capital and start building up your business credit score. If you do decide to apply for a term loan, be sure to get your credit in check before you search for a lender.

Running a business with your spouse can be an uphill battle—but it’s not an impossible one. And for the Galas, being able to work together every day is the ultimate reward. As long as you’re aligned on your goals and willing to compromise when needed, you can always find a way to make it work.

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