Searching for Financing
Searching for Financing
Inadequate capital is the cause of many home business failures even though most home-based businesses require a limited amount of start-up money. There are several sources to consider when looking for financing for your business. But first you need to consider how much money you are going to need. Consider all of the expenses of starting up your business and add on at least three months of operating costs. Do a cash flow analysis as given in Appendix I (6KB PDF) to determine capital needs. The SBDC (1-800-455-7232) can assist you with developing and completing your cash flows. When you know what you need, start looking for sources of capital. Experienced business owners recommend that at least half, if not more, of your business opportunity investment should come from personal savings. This can include profit shares or early retirement funds, real estate equity loans, cash-value insurance policies, or credit card advances. (Note: credit card interest rates may be very high compared to other sources of capital.) If you do not have enough startup money, consider borrowing from friends and relatives who believe in you and your business plan. But remember to do it on a business-like basis by writing up a loan agreement that specifies the amount borrowed, the length of the loan period, the interest rate, schedule of payments, and any collateral.
Banks are sometimes reluctant to lend to owners of new businesses because the business has no background of proven success. If you are persistent, have a good business plan, demonstrate through market research that there is a market for your product or service, and can prove your worthiness as a business owner, you will find many ways to finance your business. Possible loan sources include commercial finance companies and savings and loan associations. Following are other sources for loans:
