Every work from home business begins with a great idea. After the initial planning phase, money must be obtained for start-up and operational costs like advertising, materials, and the mortgage.
Before you quit your day job or begin distributing business cards, consider multiple sources of income to finance your home business.
Determine how Much Money you Need
The type of business you start determines how much money you will need. For example, buying a franchise costs more than selling wooden furniture you already build in your workshop. Record a comprehensive list of all your start-up costs and expenses. Factor in daily expenses such as utilities, insurance and vehicle maintenance. Additional expenses for a new or existing business include the following items:
- Computer and printer
- Additional telephone outlets
- Office supplies
- Website design and maintenance
- Professional organization memberships
- Construction of a workshop
Use Your Own Money
Redeem savings bonds, stocks and other resources for cash. Withdraw money from your personal savings account, but be sure to maintain a balance of three to six months of living expenses in case of an emergency. You can also sell items for cash. Seek an appraisal for high quality antiques, jewellery or art to ensure you receive a fair price. Consider working a seasonal part-time job to finance your work at home business.
Borrow From the Bank
If your credit score support a loan, the bank may finance your work at home endeavour. Compare rates from both local and online banks. Apply for a personal loan or secure a home equity line of credit.
Withdraw Money From Your Retirement Accounts
Before withdrawing cash from a 401(k), consult a tax professional to determine the amount of the penalties and taxes you will be charged for early withdrawal. In most cases, borrowing retirement account funds proves to be costly. Consider the reality of your saving habits to determine if you can commit to repaying yourself for retirement.
Utilize A Credit Card
Charge initial business expenses on a personal credit card. After you establish your business, open a business credit card account. Credit cards charge high finance fees for balances and even higher fees for cash advances. If you miss one payment, your credit score can be affected which could hinder your ability to earn credit in the future.
Ask Friends or Family for Money
Many relationships have met demise due to lack of loan repayment. In writing, agree to interest charges and repayment terms. Your friends and family may accept free services in exchange for a loan of start-up cash.
Small Business Association
Throughout the U.S., the SBA supports small businesses with loans. Check out the SBA website or contact your local financial institution for more information.
Occasionally, states offer loans to small business owners. Carefully research the paperwork and other requirements before submitting your application.
Research Peer-to-Peer Lending
Successful entrepreneurs make small loans to assist other small business owners in making money from home. Venture capitalists and investment angels supply funds to growing companies in exchange for stock options in the company.
Do Not Borrow Too Much Money
If you secure too many loans, you will find yourself unable to repay them. The extra stress will hinder your ability to make money while working from home. As with all loans, read all the fine print. Understand fees, repayments terms and interest rates.
Before You Ask For Money
Prepare your paperwork and sales pitch before you approach anyone for money. You will need a thorough business plan to prove to lenders that you have taken time to think through details surrounding your business. In the business plan, detail the company’s formation date, business structure, business objectives and purpose, financial resources, marketing plan and growth plan.
Obtain copies of your personal credit reports and credit scores. Correct any false information. Collect financial documentation. You will need your most recent tax return, a list of assets, a list of loans and current credit obligations.
During financial solicitations interviews, dress professionally and be prepared to answer tough questions like how you will repay loans and how much profit you expect to make in the first year. Even if lenders refuse to offer you cash, thank them for their time and maintain a cordial relationship. In the future, these same sources may change their minds and support your ideas.
With your great home business idea, find funding from multiple sources. To decrease financial stress, carefully plan your financial needs before starting a business. Approach every lender with courtesy and organize all paperwork in advance to increase your success in securing home based business funding.