Capital Ideas
Perhaps the most important thing to remember about start-upcapital is that it doesn't all have to come from a singlesource. Successful entrepreneurs often tap a variety of financialsources to help make their dreams come true. These include:
*Current salary. Squirrelling away portions of your paychecktoday can help fund your own business tomorrow. If you'realready past the planning stage and are ready to launch your newventure, consider moonlighting, or cutting back your full-time jobto part-time to ensure you'll have some steady funds rolling inuntil your business begins to soar.
*Friends and relatives. Think about borrowing the start-upfunds you need from close friends and loved ones. If you do, besure to put everything (interest, terms of repayment, penalties) inwriting to avoid damaging personal relationships, in case somethinginadvertently goes wrong. Borrowing money from people you knowtypically results in lower (or no) interest rates.
*Bank loans. Entrepreneurs typically find banks reluctant tofinance start-up ventures. The key to obtaining small-business bankloans frequently involves getting the loan guaranteed by the SmallBusiness Administration (SBA), which assures the bank making theloan that it will ultimately be repaid. You should be aware,however, that the SBA is more likely to guarantee a loan forsomeone who has been in business awhile than for someone juststarting out.
*Home equity loans. The key to obtaining a home equity loan,clearly, is actually owning a home of your own so you can borrowmoney on the part of the mortgage that you have already paid off.The bank will either provide a lump-sum loan payment to you orextend a line of credit based on the equity in your home.
*Retirement funds. If you've got money stored up in aretirement savings plan offered by your employer, you may be ableto get your hands on some of it in the form of a loan. Consult theplan's documentation to see if this is an option. If it is,you'll likely be allowed to borrow up to half of the amount youhave in the plan.
*Credit cards. Because of the high interest rates (often 18percent or more) associated with them, credit cards are not anideal source of start-up capital in all situations. But if you needto get your hands on some instant cash for equipment or inventory,and expect fairly immediate financial returns so you can pay offtheir balances quickly, credit cards can turn out to be quite handyin moments of need.
