As you prepare to become your manager, you need to plan your finances well. You will need enough money to cover 6 to 12 months of business and personalization before you can start your own business. That being said, you have a few options to consider where that money comes from.
If you are lucky enough to have a well-maintained savings account, thank you. This should be your first choice to fund your business. Be careful: do not risk your future by withdrawing money. If you have a savings account to cover a “rainy day” home renovation, the last thing you want to do is spend that money, and then you find that you need a new roof!
Consider leaving your money in your savings account or the stock market, and take only what you need.
Benefits: Using your savings account prevents you from taking out a business loan, which many business people are reluctant to do. If you have less than stellar credit, you can buy a Deposit Certificate and use it as a loan while you earn interest.
A small business association (SBA) has been set up to help entrepreneurs get the money they need to start a business. There are banks that cater to small businesses like yours that can help you earn big money. Start with your own bank, or look for a mortgage lender. Look for other lenders too, such as Women’s Business Loans. (Note: banks do not lend to beginners, so you will need to be in business for two years before applying for a bank loan.)
Benefits: The SBA provides a business loan guarantee, which means applicants with challenging credit points still have access to funding.
Your Retirement Fund
This way, you use your own money to fund your company, and then pay for it yourself. Just make sure you pay for it! Sometimes there may be fines for borrowing money; so you want to make sure you know about them before you take this option.
Benefits: 401 (k) funding actually has a lower risk than SBA loans. If things go awry, you still have to pay for the loss, but 401 (k) offers a pre-tax deduction, to reduce operating costs. Additionally, there are no credit effects and your home is not in line as collateral.
Home Equity Line of Credit
If you are the owner of your home, do not borrow more than 80% of the value of your home with a mortgage loan to avoid buying real estate insurance. You will increase your chances of single authorization if you have good credit and good payment history. Be sure to check out the current interest rates before deciding on this strategy. And remember: you put your house in line, so if your business fails, you risk losing out if you can afford to repay the loan.
Benefits: Funds are easily accessible once you have been approved. Interest is tax deductible, as it is interest on the loan.
Friends and Family
Having a friend or family member who is willing to invest in your business idea is a real blessing. Some may want to get involved in business to get an investment, while others may give you a check saying; “pay me anytime.” Either way, make sure you are clear about the terms of payment (and give interest); and how much you are willing to have someone involved in helping you make business decisions.
Benefits: If you have a family member who can afford to invest in your business; this means they can be more tolerant of letting you build your business. Gain extra knowledge about Bootsrapping at nailpatel.