Starting a business is a lot like having a baby. First you realize the dream is a reality, then you begin thinking about how to make things work and what it will entail. Initially, your business will require constant attention to nurture it, you’ll begin to understand its nuances and what adjustments are needed
to keep up with it. As it grows in the next years, you continue to nurture and sustain it, and regardless of the amount of work involved you love what you do, it’s not really work, and at times you are so content working long hours and weekends that the rewards far outweigh the sacrifices. Over time, your goal is to make it self-reliant to give you more flexibility and latitude while still overseeing its successful journey.
However, the initial years are tough and you cannot afford to shirk your duties. As an entrepreneur, the business is your “baby” and you devote hard work, and long hours to nurture and make it grow. Financing the start up is perhaps one of the biggest challenges facing the new enterpreneur. According to Entrepreneur.com’s staff publication, Start Your Own Business, Fifth Edition, self-financing is the number-one method of financing used to start-up new businesses. But what’s the best deal for self-financing?
Tasks ahead with your own business
For most start-up businesses, cash is sometimes required quickly and the fastest way is to loan the money to the business from personal finances. This is sometimes known as bootstrapping and means you won’t borrow money from outsides sources. Using your own money as a loan to the business allows the loan to be paid back without incurring loan-related interest and for sole proprietorship can build owner’s equity. When treated as a business loan, this also helps with taxes as it relates to the business. However, personal loans are risky, especially if borrowed off a severance package, because the business owner doesn’t want to drain the money needed to live while building the business.
Other loan alternatives are to get micro-lending, where you get small loans that can be paid back over time. The Association for Enterprise Opportunity’s database provide more details on getting these loans (as little as $100 to as high as $35,000) for start ups. Credit Unions and banks offer term loans, which have the advantage of a designated limit and require the business to stay on a budget. The disadvantage is that this mode of borrowing can be rather costly because of higher interest rates. And one point to remember is that the interest paid on loans is subject to taxes.
Despite the economic recession, obtaining a credit card is yet another method to consolidate expense and build a credit rating. By securing a business credit card. you could end up saving based on the credit card rate compared to the rate on a loan. Moreover, with the hundreds of credit card rewards that are available today, you could actually save on your business expenses in the long term. With some research efforts, your nascent business cash needs could be resolved by finding a 0% credit card; and paying on it regularly helps build a good credit rating for both you and your business.
When starting a new business, look at prospective business costs, future revenue streams and timelines for reaching business goals. Determine which method of start up financing is best and go for it. With so many options, you can realize your entrepreneurial dreams.
- Start Your Own Business = http://www.entrepreneur.com/syob
- Owner’s equity = http://www.moneyinstructor.com/art/ownersequity.asp