“Don, I’m ready to launch.”
Let’s say you’re leaving Google to start a consulting business.
You have about $2 million of Google stock, six months of household expenses in cash, and you think the business needs around $300,000 to get through the first year.
Payroll. Software. Legal and accounting. Consulting fees. Equipment, insurance and travel as applicable. Then add another 10% to 20% as a buffer for the things you didn’t anticipate.
Round it up and call it $300,000.
You could sell $300,000 of Google stock tomorrow and be done with it.
But you don’t really want to.
So you ask:
Can I borrow the money instead?
You can. I’m just not sure that’s the first question.
What are we actually trying to accomplish?
The $300,000 has a job. It needs to give the business enough runway to get started while leaving enough liquidity at home if things take longer than expected.
Now let’s figure out if keeping your Google stock makes sense in the first place.
Why are you still bullish?
How concentrated is the position relative to everything else you own?
What is this stock supposed to do for you from here?
Does owning $2 million of Google still fit the plan and your tolerance for risk?
And with $2 million of concentrated stock, there may be meaningful embedded gains. So before deciding to sell, we want to understand the estimated tax cost based on your actual cost basis and circumstances. That’s also where I’d bring in your CPA or tax advisor so we’re looking at the decision from both sides.
If keeping the Google stock still makes sense, then borrowing becomes something we can consider.
There’s something else we need to account for.
You’re leaving Google to start your own business.
That means your paycheck is changing. Your future Google RSU vesting may be changing or ending depending on the terms of your awards and departure. Your benefits may change. And instead of Google providing the income, you’re stepping into the entrepreneurial world where the business may need capital from you before it starts paying you.
So the $300,000 decision isn’t happening by itself.
We’re deciding how much of your existing wealth you want to commit to the business, how much liquidity you want to protect at home, and how much debt—if any—you’re comfortable carrying while the business gets going.
What does the business actually need?
Before we decide where the $300,000 comes from, let’s figure out what the business actually needs.
Let’s say you’ve estimated the first year at around $250,000.
Payroll or contractors. Software. Legal and accounting. Consulting fees. Insurance. Marketing. Travel. Whatever it takes to get the business up and running.
Then we add another 10% to 20% as a planning buffer because costs or timing may not land exactly where you expect.
Round it up and call it $300,000.
Now let’s look underneath that number.
What does revenue look like?
How much business is already contracted versus still in the pipeline?
When do you realistically expect the first dollars to come in?
How long will clients take to pay?
What’s the monthly burn rate?
And is there one client or contract that the whole first-year plan depends on?
This is just a sample list of questions. The bigger point is cash flow and budgeting.
We want to know the numbers.
What does the business cost each month? What does your household cost each month? How much cash do you need before the business starts paying you? And how long can you reasonably operate if revenue takes longer than expected?
That becomes the foundation for everything else.
So where should the $300,000 come from?
Once we have a baseline for the cash you’ll actually need—and we’ve made an honest effort to understand the cash flow and build a real budget—we can start looking at the options.
It’s what successful investors do. It’s what successful businesses do.
And now you’re both.
First, do we have cash beyond our reserves?
Remember, I don’t want to count the household emergency fund as business capital. We’ve already decided what that money is there to do.
For your personal finances, that could be three to six months of expenses, or whatever number you’ve decided is your sleep-at-night amount based on your circumstances.
The business should have its own reserve as well. We’re not commingling the two. We want to know what cash belongs to the household, what belongs to the business, and what each reserve is there to do.
If there’s additional cash beyond those amounts, great. Some of the $300,000 may already be sitting there.
If not, we move to the next question.
Do we sell some Google stock?
That may be the cleanest answer.
Sell the shares. Fund the business. No loan. No interest payment.
The tradeoff, particularly for someone sitting on $2 million of Google stock, is that there may be substantial embedded gains.
So let’s estimate the tax consequences based on the actual cost basis and bring your CPA or tax advisor into the conversation.
Selling could still make sense. But if you’re already in a particularly high-income year, or there’s a reasonable case for realizing gains in a later year, borrowing gives us another option to evaluate. The same is true if, after reviewing the position, you still want to own the stock.
Now borrowing becomes more interesting.
Not necessarily as a permanent solution.
I think of it as a bridge.
A small-business loan or line of credit could be one option.
Another could be a securities-backed or pledged-asset line of credit. With this type of arrangement, eligible investments are pledged as collateral and you borrow against them rather than selling those investments immediately. The actual amount available, interest rate, collateral requirements and other terms depend on the lender and the securities being pledged.
That can provide access to cash without an immediate sale of the pledged investments, but it introduces another set of risks.
If the value of the pledged investments falls, the lender may require additional collateral or repayment. Depending on the loan agreement and circumstances, pledged securities may ultimately be sold to satisfy collateral requirements. A sale could also create tax consequences.
So I wouldn't look at the ability to borrow and automatically conclude that we should.
Either way, I’d analyze the debt the same way.
What does it cost each month?
Can we comfortably make those payments during good times and bad?
What happens if the business takes longer to produce revenue?
And if we’re borrowing against investments, what happens if the value of that collateral falls?
Does everything have to work?
The initial reaction might be to start shopping lenders and comparing rates.
I’d start with the business.
Can the business reasonably support the debt?
In other words, what would the monthly payment be? When do payments begin? How much revenue does the business need to generate to comfortably make those payments?
Then stress-test it.
What happens if revenue doesn’t show up when expected?
What if a client pays 45 days late?
What if the business takes six months longer to get going?
What if an unexpected $25,000 expense shows up?
Put another way:
Does everything have to work?
Embedded in that question is whether we have a margin of safety.
It’s not that different from building an investment portfolio for the long term. We want room for scenarios where things don’t go according to plan. That becomes even more important when you’ve left a predictable paycheck and started your own business.
Things happen.
We want some of that baked into the numbers before we borrow.
And most importantly,
what is the plan for eventually paying the loan off?
The business could eventually generate enough excess cash to pay it down. We could also revisit selling Google stock in a future tax year if the timing and circumstances make more sense, or use proceeds from another liquidity event if one occurs.
We don’t need to know exactly which of those will happen today. But we should know that there are reasonable ways to get out of the debt.
That’s why I think of borrowing here as a bridge.
We’re not borrowing because we’ve decided never to sell Google. We’re buying some time between needing $300,000 for the business today and deciding when it makes sense to create that liquidity from the portfolio.
And like any bridge, I want to have a pretty good idea of how we’re getting to the other side before we step onto it.
So what are we really deciding?
We started with a pretty straightforward question:
Do I have to sell my Google stock to fund my business?
No.
But that doesn’t mean borrowing is automatically the better answer either.
We started with $2 million of Google stock and a $300,000 first-year business need. From there, we worked backward.
How much does the business actually need?
What cash do we want to protect personally and inside the business?
What are the potential tax consequences of selling Google stock?
If we borrow instead, can the business comfortably carry the payments if things take longer than expected?
And what’s our plan for eventually paying that debt off?
Once you work through those questions, the answer doesn’t have to be all-or-nothing.
You could fund part of the business with excess cash, sell some Google stock and finance the rest. Or one of those sources may clearly make more sense once you see the numbers.
The mix matters less to me than understanding why we chose it.
You’re leaving Google and becoming an entrepreneur. That’s already a big change. I don’t think the financial plan should require the business, the stock market and your personal life to cooperate at exactly the same time.
Give the business room to work.
Protect what needs to be protected at home.
And if debt is part of the plan, know what the bridge is for and how you intend to get to the other side.
That’s the work.
Continue Learning
If you’re working through a decision like this, there are other questions that tend to come with it:
what to do with concentrated Google stock, how to think about taxes, what changes when the RSUs stop, and
how much cash to keep when your paycheck becomes less predictable.
I write about those decisions throughout our Insights section, so that’s a good place to keep exploring.
Schedule A Conversation
And if you reach a point where you’d rather talk through your own numbers and tradeoffs, you’re welcome to schedule a conversation with me. We can start with what you’re trying to accomplish and go from there.
This content is for educational and informational purposes only and should not be considered personalized investment, tax, or legal advice. Each situation is unique and should be evaluated individually.
Founder, Financial Advisor