Gail Vaz-Oxlade is mad, really mad, at Canadian lenders these days. We’ve all seen the author and television host force people to pull up their britches and get their debts squared away on her popular TV shows, ‘Til Debt Do U$ Part and Princess. And while no one is a bigger believer in personal responsibility when it comes to taking on debt, this time Vaz-Oxlade is setting her sights on banks and their ‘irresponsible lending practices.’ She sees a disconnect between the amount of credit lenders are willing to extend and the ability of people to assume that debt. Gail Vaz-Oxlade wants to ‘school’ lenders and is taking advantage of Credit Education Week (Nov. 13 to 19th) to ask Canadians to avoid credit card transactions, using only cash, in order to send a message to lenders.
We caught up with Ms. Vaz-Oxlade to talk about debt specifically as it pertains to entrepreneurs. She believes that one of the biggest mistake entrepreneurs make is starting their businesses without a plan. According to Vaz-Oxlade, more than 80% of businesses fail for this reason. She cautions, “You need to know how many months you can go without income and for how many months you have money to float the business.”
Gail Vaz-Oxlade put her money where her mouth is. A while back, she had the idea of starting a financial magazine targeted at women. She mapped out the costs and revenues and how much debt she was prepared to assume before she pulled the plug. At the end of the day Vaz-Oxlade lost the money. She recalls, “I remember the day I sat on the stairs and said, ‘I have to stop now. If I keep feeding this monster it’s for emotional reasons and not for business reasons.’ You have to be willing to pull the plug.”
Ms. Vaz-Oxlade is philosophical about one-size-fits-all rules for finance. When asked what is a reasonable amount of debt for entrepreneurs to take on, she says, “Everyone wants an answer to that. There is no answer, there’s your answer”. This was music to our ears: as we mention often in our, book about mompreneurship, Mom Inc., your entrepreneurial venture needs to work for you, and only for you.
That being said, Gail Vaz-Oxlade has some great general tips for entrepreneurs:
Using a credit card to finance your business is a really bad idea. You are far better off getting a line of credit. (BUT, you must keep your transactions only for the business. Your interest on the line of credit is tax deductable, but once you start buying shoes on it the tax man is going to come for you.)
Don’t live on overdraft protection - it is supposed to be temporary.
Hold your credit card in a different bank than your bank accounts. If you don’t, your bank can access assets from other accounts to pay your credit card bills.
Protect your family – don’t put your home at risk to finance a business start-up.
Make sure you communicate with your spouse regularly about the business. If you have secrets, take that as a bad sign!
Want to learn more? Visit Gail Vaz-Oxlade’s blog and follow Gail on Twitter.
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