Searching for Financing
Searching for Financing
Inadequate capital is the cause of many best home businesses from
home 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 best home business to start
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:
