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Home Based Business Funding Strategies 101.
By Denise Taylor
Having a business of your own is a dream of many people today. While it might be difficult for you to choose a business that will work for you, be open to the idea of doing several things that are closely related to your skills and interests...it's a "win-win" if you're able to use your talents, skills, and education to do something you truly enjoy while at the same time, creating multiple streams of income working from home! So, you know you have the desire and determination to make your home based business takeoff...but you have no idea on where to begin? My advice is, start with a proper funding strategy, because without sufficient funds, even the best planned home based business...whether big or small is bound to fail. The fact is, proper funding is a pre-requisite for the successful operation of a home based business...Period. Even if you join a free home based business opportunity, funds will still be needed to cover the cost of doing business (which is never free). As a result of improper financial planning many businesses fail within a year or two, due to lack of sufficient working capital. If you feel you do not have sufficient funds to startup your business, you need not put off from moving forward, because you can always apply for a loan. Here's a rundown of just some of the loan options that may be available to you. * SBA Loans: This loan is often easily obtained by home based business entrepreneurs and is backed by the U.S. Small Business Administration. It guarantees 75% of the individual loans made by banks. As a result, lending banks have less risk of financial loss in the event of the borrowers default. For more information visit: www.sba.gov
* Business Loans: Most home based businesses have little or no equity when just starting out and often have a limited track record of success; as a result in order to qualify for the loan they would need to present a clear concise business plan, and most likely provide a personal guarantee which encumbers the business owner's personal assets as collateral for the loan.
* Personal Loans: These bank loans are granted to individual applicants based on their personal income and credit worthiness. This may be an alternative solution for individuals who can't satisfy the sometimes ridged requirements of qualifying for a business loan. Good income and solid credit rating will often be the only requirements needed to qualify for the working capital to start your new business. If you plan on leaving your current job to start a home based business, it is advisable to apply for the personal loan while you're still employed. This will insure not only your qualifying for the loan, but allow you to secure a higher loan amount as well.
* Credit Cards: Credit cards can certainly be very useful for your home based business, if used carefully. Many small business owners partly finance their business with credit card loans. The interest rates are generally on the higher side and make sure you perform your due diligence, to obtain a card with the lowest interest rate you can qualify for. (Again, just another note of caution...if not managed properly, the extended use of credit for financing your new business can become counter productive...and possibly lead to business failure).
* Home Equity Loan: This loan requires you to pledge your home or some other real estate property, as collateral in the event you default on your monthly loan payments. Needless to say, this approach can be very risky, especially if you do not have a sound business plan. The major advantage with this option is that a large amount of money can be obtained for your home based business, for a term of 10 to 15 years. You have two options, either you take a lump sum upfront or draw small amounts as needed, when you require money for your business.
* Savings: Many home based entrepreneurs turn to their savings accounts when they need cash to start a home based business, The benefit of not having to go thru a loan approval process and having immediate access to cash, with no interest payments is a very attractive option.
* Friends and Family: I've purposely left this option for last. I personally do not believe in mixing friends or family with business and/or money. I'm sure it works well for some individuals however, I've never had good luck with it. You know your friends and family better than I do, so use your best judgement....my advice is "approach this option with EXTREME CAUTION!!"
At the end of the day, the success of your home based business will ultimately depend on how well you properly plan your business strategy, which includes accurately gauging how much cash you will need upfront for business setup & fund reserves, to allow the ability to whether any unexpected financial drought within the first two years of business, as well as how you'll manage any financial commitments you establish.
This intel first appeared on: http://startupbizhelp.blogspot.com
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Denise Taylor
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