7 Tips To Fund Your Home-Based Business!
For most home-based businesses, bank loans are the traditional sources of funds. However, it is not always easy to obtain. If you are having problems tapping into this resource, do not fret. There are other ways to secure funding. Here are a few suggestions for you:
1. Personal credit cards are still the number one way that novice entrepreneurs fund their businesses. Of course, the rates are not attractive, but at least you won’t be required much collateral other than your credit score and credit is available right away upon approval. Even more effective than personal credit cards are business credit cards. You can call your bank, tell them you are starting a business, and receive assistance in applying. While they will still require you to pledge your credit score, it will not appear on your profile, hence, could make it easier to secure funding in the future.
2. There are many companies that provide micro-loans to people without applying “use of proceeds” requirements. These loans are considered unsecured though. An individual who has good credit could receive up to $50,000. Ask your financial adviser about peer-to-peer lending.
3. Invest a portion of your retirement fund into your business without getting a loan or taking a taxable distribution. If you believe your new business has great opportunity for growth, it really makes sense to invest instead of getting a loan, which saves on the interest you’d otherwise pay the bank.
4. Small Business Administration’s Microloan Program: This program provides startups with loans of up to $50,000. The average loan is just $13,000 and must be repaid within a maximum of six years.
5. Cash-out refinance: There are no “use of proceeds” requirements, these loans are typically amortized over 30 years, and because rates are near an all-time low, this can be a very attractive option for you. Keep in mind that cashing out home equity through a refinance means that you would have to pay interest on the entire amount regardless of whether you use it right away.
6. Unlike a cash-out refinance, a home equity line of credit allows you to use cash as needed, and interest only increases on the withdrawn amount. HELOCs are typically amortized over 15-20 years and are variable, so your payments will be understandably slightly larger because they’re paid off faster.
7. An equipment lease is a loan in which a lender buys equipment and then “rents” it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business owner may purchase the equipment for its fair market value. This option is great for home-made businesses that are making small purchases and have no earnings yet.
Subject Matter Expert – Home Business