How To Finance Your Home Based Business
With the United States economy struggling, unemployment rates soaring and federal
government debt at an all time high many people who are suffering financially or who are worried about their own employment situation are considering starting up their own home based business. After you've decided on a product or service one of the first questions you must ask yourself is how am I going to finance my home business enterprise?There are several options available including the more traditional plan of approaching your local banker. If you decide to take this route you must make sure you are well prepared before approaching the loans officer. Many banks are very conservative when lending money for home business or small business startups because of past experience,
According to Ibid: Micro enterprises (businesses with 1 to 4 employees) have a slightly lower business failure rate than other small businesses; after five years in business, 70.4 percent of micro-enterprises survived compared with 66.9 percent of other small businesses (Ibid). And, according to a study by the U.S. Small Business Association, only 2/3 of all small business startups survive the first two years and less than half make it to four years.
With statistics like this it's hard to blame the banks for taking a cautious approach to home business and small business loans. When approaching your bank be sure to have your marketing plan in place along with financial projections for the short term and long term for your opportunity. Also, if possible, provide a demonstration of your product or service and make available numbers to help support the demand for your offering.
If you decide against asking your local banker you may want to consider approaching friends and family. Instead of asking for the money outright you can frame your approach by giving a presentation about your home business opportunity and then make it known you are selling shares in your venture based on a percentage ownership.
The federal government's Small Business Administration is also an option but the competition for small business loans from this organization is fierce. According to numbers released for the SBA's 2009 fiscal year, the 7(a) program made 36 percent fewer loans than it did in 2008, backing only 44,221 loans from banks for starting, purchasing, or expanding a small business. So instead of approaching them for financing directly you may want to consider asking them to guarantee a private loan you are arranging which may increase your chances of receiving that funding.
You can also investigate any government grant opportunities which may be available for small business startups. There is a small business loan searching tool available at: http://search.business.gov/startloans.html.
Another alternative may be to draw from your retirement fund. Many people consider this as a last resort because of the potential risk involved, but it may be worth considering depending on the confidence you have in your home business opportunity.
One final approach may be angel investors or asking other successful businesses in your field who finance startups. If you take this route you must be prepared to give up something in return such as a percentage of ownership in your enterprise.
These are some of the financing opportunities available to help start your home based business and if you are well prepared and confident in your opportunity then the road to success may only be a meeting away.
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