Man Accumulates Rs 1 Crore Debt Running Cloud Kitchen, Seeks Advice To Pay Off Loan: 'My CIBIL Is Damaged'

A 25-year-old entrepreneur who racked up over Rs 1 crore in debt running a cloud kitchen has turned to the internet for financial advice. In a viral social media post, he explained that after being laid off from a BPO job in 2021, he launched a small cloud kitchen using Rs 2 lakh borrowed from extended family. While the business initially thrived, it collapsed after he launched an aggressive expansion strategy.

As demand grew, the entrepreneur said he bought additional space before moving to a larger location. The expansion was funded through more borrowing, and what started as a Rs 2 lakh project soon snowballed into nearly Rs 1 crore of debt.

"The restaurant generated revenue and had customers, but the debt burden became impossible to sustain. Cash flow was constantly being drained by interest and repayments. The stress got severe. I lost around 25 kg in a short period, and my family became extremely concerned," the user wrote in a Reddit post.

Providing a breakdown of his Rs 1 crore debt, the man highlighted that it included a Rs 45 lakh mortgage and Rs 40-45 lakh from private lenders. He described the private loans as cripplingly expensive, noting that some lenders charged 10 per cent interest per month while others demanded daily repayments of one per cent of the principal.

"Eventually, my mother's family stepped in and helped with Rs 30 lakh, primarily because they were worried about our situation. However, they also insisted that the business be shut down," the man said.

Giving a breakdown of his present financial situation, he wrote, “Mortgage EMI: Rs 67,000/month. Mother's income: Rs 15,000/month. Sister's income: Rs 36,000/month. My CIBIL score is badly damaged. I have some kitchen equipment that wasn't sold.”

The man sought advice on whether he should go for a top-up on the mortgage loan to start another small cafe or avoid entrepreneurship completely and focus on getting a job.

"If you were in my position, what would be your path to rebuilding income while carrying Rs 70 lakh of debt? I'm looking for honest opinions, even if they're hard to hear. Thanks for reading."

Check The Viral Post Here:

25M, restaurant failed, ₹70L debt remaining. Considering taking more debt to restart. Need honest advice.
by u/StonedButterchicken in IndiaBusiness

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'Don't Take Loan'

As the post went viral, the majority of social media users unanimously advised the individual not to take another loan and instead opt for a corporate job to slowly pay off the debt.

"Take a break, OP. You are pushing your entire family into an unending debt spiral. Restart your career. Pay off debts. Start small, grow slow but never take loans beyond 10% interest rate as a thumb rule. Have equity deals not debt. All the best - you are young and you have a long way to go," said one user, while another added: "You got greedy, and expanded too quickly. Perhaps you read somewhere that using debt as a leverage to get rich is a good idea. Problem is, people who use debt to get rich are already rich."

A third commented: "I'll be blunt here. Extremely stupid financial planning on your behalf. At this point, I have no recommendation. Do not start another cafe or restaurant because those are heavily competitive."

A fourth said: "I have run two bars in Goa (one mid-successful, another one ended up with the manager flushing the money down the drain). I know two cents about this industry, so advising you to try to grab a corporate job and pay off your debt. After paying off the loans or getting very close to it, if you still have the heart to restart something then go on with a cloud kitchen. Or a food cart would be more preferable."