how do business owners who operate a business that loses money year after year, afford to pay themselves?

Question

Let’s say you went $100,000 in debt starting a business, and it costs $5000 to operate every month and you make only $4000 every month for the first year.
But you have a house and family, etc.

Where is the money going/ coming from??

In: Economics

Answer 1

TL;DR: they just borrow more and more until the party stops.

Actually, that is *partly how* businesses lose money. In short, it’s borrowed. Publicly traded cos trade shares for equity infusion, and then they do payroll from that. When debt climbs and climbs the company collapses at some point — generally when lenders see that there is little chance of being repaid and so no more loans are made.

The wonders of bankruptcy laws often allow debt to be repaid at pennies on the dollar, or not at all. Then it’s, “Let’s break open the champagne, issue some more shares and keep doing this crime we call business…”