Is it possible to start a business with debt?

Almost everyone in the Netherlands has a student loan, mortgage loan or subscription with a payphone. As long as you can afford the monthly repayment, such a debt is no problem. But research from Statistics Denmark shows that 650,000 Dutch households have problem debt. This is the case if you can not pay off your debt. Due to high interest rates, debt often rises rapidly. It is difficult to start a business with problematic debt.

Starting a business often involves start-up costs and investments. Ordinary banks are not eager to lend you money because it is a risk to lend money to someone who is in debt. In most cases, settling your debt is the first step in your entrepreneurial career.

Here are your options for starting a business if you are in debt:

Help from the municipality

If you have no income and no money of your own to start a business, you can seek help and financial support from your municipality. This assistance is regulated in the Decree on Assistance to the Self-Employed (Bbz). “Problematic debt stands in the way of this,” says Hans Heyer, an independent consultant in Groningen municipality. If you are in debt restructuring (Debt Restructuring of Natural Persons, Wsnp), it is not permitted to start a business. Unless you get permission from the examining magistrate. “If you are in the last months of debt consolidation, we would like to start preparing Bbz. But the basic principle is that you solve problematic debt before you can appeal to Bbz.”

Debt relief from your municipality

If you seek help from the municipality, you will be assigned an adviser who will try to make agreements with your creditors. This is what is called an ‘amicable process’. If it is not possible to come to a payment scheme, the municipality can choose to pay off your debt. You will then receive a so-called restructuring loan from the municipal credit bank: a loan that you must repay within three years. The advantage of such a rescheduling loan is that you pay it off according to repayment ability. That means we look at how much you can pay off. This often goes hand in hand with income management, where your income is deposited in the credit bank’s account. The bank then pays your fixed costs.

Debt-free? Call Bbz

The municipalities offer a preparatory process for start-up entrepreneurs who have settled their debts, with or without the help of a social worker. Heyer: “Then you get professional help to start your business. Such as making a business plan and market research. ” During this process, you will continue to receive your unemployment benefits, and your obligation to apply for a job will lapse.

A business plan is required to appeal to Bbz. This plan should show that your business is viable. The municipality usually engages a consulting firm to assess the business plan.

You can receive a maximum supplement to your income from Bbz for 36 months. The municipality decides how high the supplement is and how long you get it. It is also possible to borrow up to 39,057 euros (2022) to start your own business. The conditions depend on your situation. You can check with the municipality about this. Heyer warns: “This is working capital. You can not use a loan from the municipality to refinance another debt.”

Seek help yourself

You can also contact a debt counselor for assistance in resolving your debt, such as Jeannette Meersma from Kram & Meersma. She regularly sees clients with business plans. “Ambitious young people with a student loan or a story with expensive phones and people with debt who want to work as self-employed,” she cites as an example.

Meersma is the first to make an overview of all debt. Which ones can you get rid of or not? And in what time frame? Meersma: “We can restructure debt. Then we make a payment agreement with creditors, such as the tax authorities.” If creditors do not wish to participate in such a settlement without justification, the court may compel them to do so, which is what is called a coercive agreement.

Coaching for entrepreneurs

In addition to solving debt, a debt counselor can also coach you in starting your business. Meersma: “We always look at a budget, an overview of your income and expenses. Do you have debts? Does your business have a good revenue model? Then we will coach you on how to best approach your finances. ”

According to Meersma, debt does not necessarily mean that you have to postpone your business plans. “BKR shows your payment behavior. Sticking to the payment agreements can also have a positive effect.” Some banks do not allow you to open a business account if you have debt. “But you can also do business transactions on your private account,” says the debt counselor.

You need a business account for certain business services, such as iDEAL. Do you get a rejection from your bank? Then try again with another. Not all banks look at your BKR status when applying for a business account without credit.

An overview of debt advisers can be found on NVVK’s website, the industry association for debt counseling and social banking.

Apply for funding

If you have debt, you usually can not go to a regular bank to finance your business plans. There are other ways to get funding. Think crowdfunding or borrowing money from friends. Many starters also end up with Qredits. “Even starters with a blemish, such as debts from the past,” says chief operating officer Roy Spit. This does not surprise him: “We come across this quite often. It is too risky for banks to lend money to these entrepreneurs. These are often relatively small amounts, and it costs the banks too much time to assess the applications, which is not profitable. Bankruptcy is a no-go in the Netherlands. At least for ordinary banks. “

Second chance

Qredits is a non-profit fund. The fund works with various banks and the Ministry of Economic Affairs and Social Affairs: “It is our task to give people a second chance,” explains Spit. This does not mean that you simply unravel the financing of your company at Qredits: “Our consultants evaluate all applications. Since the corona crisis, we have done a lot via video calls, but with risky inquiries, we always check the company’s location. “

Have you ever gone bankrupt? The adviser then carefully reviews the bankruptcy report. “Has there been serious negligence or fraud? Are you to blame? We want to know how you handled the bankruptcy and what you want to do to prevent it from happening again. In some situations, the entrepreneur could not do anything about it. So we just accept such an application and see if it is possible to grant a loan. ”

Loans from the credit bank

If you need a loan to start your business, you can also go to a credit bank affiliated with Sociale Banken Nederland. These banks work with municipalities and aim to help with financial problems. Whether you actually get a loan depends on your situation.

Be honest about your debt

Spitz’s best advice to indebted budding entrepreneurs: “Be honest about your debt. You can present such a fine plan, but if you do not say anything about your debt, you are immediately behind 1-0. “He notices that entrepreneurs often think that they can cover up that something has happened. . “But we see everything.” Go to the following: “Do your own research: ask BKR what is privately registered. How nice it is if we receive a business plan with a BKR transcript and an explanation as an attachment. Explain why this debt exists and show what you have done to resolve them. Call your creditors and arrange a payment arrangement in advance. “

In addition to a rigorous assessment of financing applications, Qredit’s entrepreneurs are helping to avoid getting into debt again. Spit: “We’ve researched this, and it turns out that people who have successfully completed the WSNP are more likely to run into problems again.” Therefore, the foundation works with 650 coaches who mentor entrepreneurs for up to a year after start-up. “To begin with, with a WSNP past, such a coach is more or less mandatory.”

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