Either way, best of luck.

I worked for a tiny, failed internet startup for a couple of years. In the middle of nowhere, Texas, as a matter of fact. And we had no problems getting investors through my co-founder’s well-connected father. All we had was an idea. We never generated a dime of income but we managed to get several hundred thousand in funding (of course, our idea was one of the ones that theoretically could end up being worth eBay- or Amazon-style $billions, while the potential market for your business seems considerably smaller; but still).

You have an established business with a good cash flow as well as a solid plan for increasing your revenue. That’s worth something. You can come up with a valuation based on that. Say $200k. I personally would pay $5k to you in exchange for 2.5% ownership of your company (I would need to do some due diligence first, but from reading your blog, you seem to be the kind of person that I would trust with it — even so, I’d go into it fully knowing that there’s a decent chance that I will lose my entire investment). I’m sure there are other readers of your blog here who would be willing to pay similar amounts. There is so much money out there that you would not believe it. People are sitting around with money burning holes in their pockets, looking for new things to invest in. So you could use that valuation (which may be somewhat conservative) to raise $98k, and you’d still own 51% of the company.

You could do it a couple of ways. First would be to create the corporation with 10,000 shares that you own. You trade all of the company’s assets (which, presumably, are currently your personal assets) to the corporation, and in exchange you receive 10,000 shares of stock. Then you, as a stockholder, sell off the shares to other individuals based on the valuation. That way the money would go to you for your personal use. The other way would be to issue yourself 5,100 shares of stock and then issue further stock from the corporation, and all funds raised would go to the corporation’s coffers for business use. $98k would be enough that you could pay off all of the business debt and still have $10k left over to help with cash flow for the next couple of months.

What would be the downsides? Well, you’d have somebody to report to. You would have to provide detailed financial statements to investors, but that would be a small amount of work. It would be a way of keeping you accountable and focused on the business. When you share your financial statements with 10 other people every 3 months, you find it hard to hide things like gambling on the stock market. You’d need to pay yourself a reasonable salary out of the revenues, and profits would be allocated according to the Board of Directors (which you could effectively control with 51% ownership). So you’d reinvest some of the profits and give some out as dividends to the investors (including yourself). So you’d basically be giving up half of your potential profits from this business, forever. But it would go a long way to getting you out of your current mess, and maybe it would be worth it. You could, of course, gradually buy out your investors at whatever amount you could negotiate.

Anyway, it would probably cost you $1000-$1500 in lawyer’s fees to get all of this set up. If it sounds like something you’d be interested in, I’m sure you could put a more definite price on it with just a little effort. And honestly I don’t think you’ll have problems finding investors if you decide to go this route. Anyway, e-mail me if you want to discuss this or other possible plans.

On other notes (I just got done reading this entire blog), you definitely need to sell your house. No doubt about that. You may also want to discuss it with your roommates / tenants about it. Maybe they would want to buy you out if they like the house and have the money to spend. Since they are already living there then there might be a way to create a win-win if you explain your situation to them. You sell to them, avoid foreclosure or a short sale, catch up your payments and they get a good deal on the house. Even if it requires a promissory note from you for $25k or something to make up the difference, the payment on $25k is a lot less than on $400k.

Just stop worrying about the girlfriend and the social life. Running a startup small business is choosing to put such things off for a couple of years. It’s just so much work. Running up a whole bunch of credit card debt makes it even worse. Yes, you need some balance in your life just to keep from going crazy, but a girlfriend is probably not in the cards for another year or two. You can’t afford the money (because of the debt) and you REALLY can’t afford the time (because of the business). You just have to keep your eyes on the future. Once you’ve got that $40k/month revenues then you will feel like such a badass and you’ll be able to spend plenty of time and money chasing women. Just try to put it out of your mind, and do whatever you need to do to keep from going crazy. Don’t feel bad about it. It’s better to do it this way. A lot of people get married right out of college, get crappy jobs and then go on have regular fights about money, and it only gets worse once the kids arrive. Getting the money taken care of first is the wise thing to do.

Otherwise, keep your head up. You are making good progress. It might be nice if you updated your spreadsheet to reflect the current situation with 0% interest, etc. E-mail me if you have questions or need help with anything.

Just remember, you are still young and you have your whole life in front of you. Everything is not always as good as you might think when you are successful and everything is not always as bad as you might think when you are struggling.

How did you end up with so much debt? You say it was through bad trading (forex, options), but I haven’t seen any posts that go into much detail about that. But those kind of trades are definitely not for amateurs.

Did you just not know what you were doing? Or did you fall victim to some scams? Maybe your trading became an addictive form of gambling. Anyway I would be more curious about how you ended up losing so much money day-trading or whatever. Blogging about that part could be helpful to coming to grips with what happened.

But good luck with your efforts, you seem to be approaching this rationally and realistically, making sacrifices and setting goals to deal with your debts and actually contacting your lenders and following up.