A bank would value a startup at zero, and thus expect you to put up your personal assets as collateral. That would be a big mistake.
It's because banks can't evaluate startups that venture investors exist.
It's because banks can't evaluate startups that venture investors exist.
1) You're certainly right that banks have nothing to go on. My credit isn't amazing, but its certainly decent enough that I could probably manage a small loan from the banks on personal credit alone. It would provide a few months float money, at the least.
2) You've argued heavily before that there needs to be an element of becoming personally committed[1], providing motivation. Having a Personal Loan over your head is certainly one way to do that.
3) Are there other options? Raising Angel money would be more difficult for us that for some projects, because we're not as Sexy as we could be.. We sent in a yCombinator proposal that was very ambitious, but were rejected, so we scaled back to what we thought we could achieve on our own.
We're doing a pretty decent job on it, but its not going to be the next Google, or even the next Scribd. Most Angel Investors seem likely to want to back a sexier horse, so to speak.
We do have a dedicated group of users waiting to sign up for paid subscriptions, and we know we could hit profitability reasonably quickly, but how do we get from here to there?
[1] http://www.paulgraham.com/die.html
2) I see your point, but the problem with being in debt is that it is something you don't have control over or can easily fix. Having a collections agency call you all of the time threatening to repo your personal possessions is not exactly a positive motivator either. I would rather run out of money and be piss poor than have an unpaid loan over my head, personally.
3) Raising angel money is extremely hard I'm finding... This is a huge benefit of YC, IMHO. Guy Kawasaki said in one of his books that you are more likely to get struck by lightening than land VC funding. That quote is not as ridiculous as I once thought..
Thats awesome you've got dedicated users, keep it up. Aim for the sky though, dont tell yourself you wont be the next Google b/c if you think that way you surely wont be.
Plan B) Suck it up, and pay for it for the next 5 years. Obviously, this plan sucks, but it's better to have tried, isn't it?
I'd love any other ideas for financing- We want to make this happen; I'm just looking at it, and seeing a loan as the most achievable option. I'd love to be wrong ;)
If they don't help you out financially, they might connect you with angels they know.
The short version: if you already have traction and are passionate, find an angel.