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For new entrepreneurs, a common question is, "Where am I going to get the money to
start my business?". Here are a few suggestions; most often people use more than one
of these methods for financing their start-up business.
If you need to borrow money, only borrow enough for essential items. For
example, advertising your business is an essential expense. Purchasing new
furniture is not. The less you borrow, the less you'll have to pay back.
Keep Your Current (Full-Time) Job
- This is the most cautious approach. You still earn an income while
you're getting your new business off the ground.
- Your days will be much longer. When you get home from the office, you
will have your home business to run.
- It may take longer to turn a profit. Because you don't have as many hours
to dedicate to starting your new business, you may have a longer wait before you
see some money come in.
- You'll have much less leisure time. Between working a full-time job and
running a home business, you'll find that you have little time to spend with your
family or friends, or for pursuing your hobbies.
Work Part-Time at Your Current Job
- More time for your home business. You'll be able to devote more time to
getting your home business up and running, which could translate into your business
seeing profits earlier.
- Less income. Obviously changing from full-time to part-time status at your
current job will mean a loss of income.
- More leisure time. Because you're only working part-time at your other job and
your home business allows for more flexibility, you can choose to take more leisure time.
Live Off Your Spouse's Income
- Careful budgeting required. Learning to live off one salary when you're
used to two requires a period of adjustment for everyone in your household.
- Allows you to completely focus on your business. You can concentrate on
growing your business and turning a profit.
Use Your Savings
- Not an option for many people.
- Requires careful budgeting. Savings won't last forever. You'll need to
figure out if they will adequately cover your expenses and fund your business.
- Temptation to mis-use the money. Don't give into temptation to buy a cool
new multi-media computer (if your business doesn't need it) or some fabulous solid
oak office furniture.
Get a Loan
- Banks often cater to small business. Banks usually have departments that are
meant to help small businesses get a loan.
- Be well-prepared. Call your financial institution beforehand to find out
what they require from you when you apply for your loan (often, a business plan or
a financial proposal). Give yourself time to adequately prepare before you meet
with them. Make sure you provide them with everything they ask of you; this will
improve your chances of being approved for the loan.
- Be aware that you are held liable for the loan. You have to make payments on
your loan at regular intervals. If you cannot make the payments, your bank will
likely penalize you in some way. Make certain you understand the consequences of
defaulting on your loan. Don't be afraid to ask questions of the loans officer.
Borrow Money From Family or Friends
- Friends and family often won't charge you interest. This alone can save you a great
deal of money.
- Friends and family are often supportive. This can help you tremendously,
especially when you're first starting out.
- But it can still go wrong. Some people swear that friends/family and money just
don't mix. If they lend you money and your business doesn't work out, your relationships
with them may suffer.
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In this section:
Getting Started
Money Matters
Doing Business Online
Your Home Office
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