In today’s economy, people are always looking for ways to supplement their income. Starting a home-based business is one way to do that. In fact, if you play your cards right you may even be able to turn it into a full time job and ditch the commute. Of course, starting a business requires cash, which can be hard to come by. Following are a few suggestions on where you can get start-up funds for a home business.
The first step in starting a home business is to have a plan. Before attempting to raise funds for a business, know what the money will be used for. Set a goal and determine how you’re going to get there, then you’ll know how much you’re going to need to start the business and keep it running until the business can pay for itself.
Your Own Money
Although most people won’t have the money for a start-up simply sitting in their savings account, using your own money is probably the best method of funding a home business. Dipping into a 401k or a Certificate of Deposit may impact your future, but not having to borrow the money may offset the loss of interest you would accrue by leaving the money in savings. Another possibility is to sell some of your assets, such as an extra vehicle or unused property. You’ll have to weigh the pros and cons and make the decision. If financing the business yourself is not an option, taking out a loan will be necessary.
Borrowing from the Bank
If you don’t have the money to do it yourself, the most logical place to start is the bank you already deal with. If you have borrowed money from them previously and can demonstrate you have a chance of making the business show a profit, they’ll probably be willing to lend you the money. Of course, interest will have to be paid, and you’ll most likely have to provide collateral, such as taking out a mortgage or second mortgage to finance the business. If you don’t have a good credit record, the bank will be hesitant on taking a chance on you, which makes it difficult for first time borrowers or those with prior financial setbacks, such as a bankruptcy.
For most people, starting a home business taking out a loan of any sort is not their first choice. But in most cases it’s the only practical way of getting the business off the ground. Approaching a family member for a loan is a traditional method of getting a business started. The terms of a loan from a family member will undoubtedly be much more agreeable than with a bank or credit union. If you are fortunate enough to have a relative that has a lot of money they may be willing to lend you the start-up funds with a pay-me-when-you-can plan, which will ease the pressure of having to make ‘regular’ payments.
Receiving a government grant for a home-based business can be extremely difficult. They are available, but most government grants are geared toward not-for-profit organizations that provide a public service. If you believe your start-up will make you eligible for a grant, be extra careful in seeking them out because many times the offer you come across will be a scam. Sticking with a government website, such as www.business.gov for researching a grant is your best bet to ensure you’re dealing with the right source of government grant money. On a local level there may be programs available aimed at improving the community by providing funding for small businesses. These may be small business investment organizations or local government programs.
If you’ve exhausted all other possibilities, it may be time to think about using a credit card to finance your endeavor. Consider taking this route only if you’re absolutely sure or as sure as you can possibly be that your home business actually has the potential of becoming a viable business enterprise. Credit card rates can be exorbitant and interest can build quickly.
Guest post from Bailey Harris. Bailey writes for www.insurancequotes.org, a site that provides quotes for car insurance.