One bad business loan left this couple $1.3M in debt — why Dave Ramsey says don’t save the business

However, the problem isn’t the camp itself — it’s the debt attached to a separate deal they made along the way.

The couple now carries nearly US$1.3 million (C$1.8 million) in total debt, which includes a modest mortgage on their home, car loans, credit card balances and unpaid taxes. But nearly all of it comes from a large loan they took out to buy assets from another business, including event equipment and inflatables.

While the camp continues to earn money, the loan payments tied to purchasing the assets are overwhelming their finances and threatening the business’s future — and their personal stability.

A bad deal that spiralled into massive debt

Ramsey was stunned that the loan was approved in the first place. He criticized the lender for allowing the couple to assume such a large amount of relative to their income and experience, calling the situation reckless and avoidable.

He asked whether Heather and her husband could sell the business assets for anywhere close to what they paid. She said they couldn’t because after the deal closed, they realized they had significantly overpaid — by roughly US$400,000 (C$546,000) — for equipment tied to an event rental business.

Before offering advice, Ramsey shared his own experience of losing everything early in his career and being forced to start over. He told Heather that while the financial situation looked bleak, it doesn't define their future. In his view, the worst-case outcome wasn’t financial loss — it was squandering their relationship under the strain.

Although bankruptcy came up as a possibility, Ramsey first focused on alternatives. One option was to sell the assets for whatever they could get and attempt to negotiate a short sale with the lender. That approach, he said, would require legal help and a clear message: Take a reduced amount now, or risk recovering nothing later.

If that failed, he suggested a second option — keeping the summer camp running, settling the smaller debts and negotiating a repayment plan for the remaining balance. With steady revenue still coming in, he argued that working through part of the debt may be possible, even if it takes years.

The takeaway from Ramsey’s advice was clear: When a bad deal puts everything at risk, the goal isn’t always to save the business at any cost — it’s to protect your future, your finances and your relationships.

When small business owners have to consider bankruptcy

Starting a small business always involves risk — especially when it’s funded with large loans. As Heather’s situation shows, taking on more debt than a business can reasonably support can cause the operation to quickly spiral out of control.

Many small business owners rely on personal savings to keep things afloat, particularly in the early years. Research shows that a large share of new businesses (71%) use personal funds to cover cash-flow gaps or unexpected costs (2). While that can help a business survive in the short term, it also puts the owner’s personal finances at risk.

Heavy borrowing increases that risk even further. When debt payments outpace income, business owners may find themselves unable to cover basic expenses, let alone reduce what they owe to any lenders. In those situations, bankruptcy can move from a distant fear to a real option.