Hidden Treasures
Where to find the funds to finance your homebasedbusiness.
By Carolyn Campbell
By planning ahead and considering your financial options, youcan determine which sources will help you build your business andensure your future success. Use the following tips to find thefinancing that will help you build and grow your homebasedbusiness:
* Create a business plan to determine how much money youneed. Setting up a business plan helps you figure out whichfinancial resources will meet your needs, Sussman says, andimpresses upon potential lenders that you're serious about theventure. "If you need $1,000 to buy a computer, you willchoose different sources than if you need $50,000 to buy afranchise," she says. A credit card, for example, couldprovide the cash you need for a computer, but it wouldn't helpyou come up with a franchise fee. A home-equity loan, on the otherhand, would be overkill if all you need is a few hundred dollars toprint marketing materials.
* Conserve your available funds to make the most of the moneyyou have. As a seasoned homebased-business owner, Chuck Randahas found that conserving financial resources is another way togenerate funds for his business. For 18 years, Randa has owned andoperated Whiteface Chalet, a Swiss-style inn in Wilmington, NewYork. By doing all his banking with the institution that holds hismortgage, and by negotiating with a small-business specialist atthe bank, Randa has been able to negotiate for specialized servicesthat are tailored to his business's financial situation."The bank allows us to skip a mortgage payment in our twoslowest months, May and June," he says. In exchange, Randaagreed to a longer term for his loan. "And when we explainedour business to the bank, they also offered us a free checkingaccount and a safe deposit box, saving us even moremoney."
During the first two years of operation, Randa paid anaccountant $7,000 to complete a monthly financial report for him.He saved money the next two years by learning to compile his ownreports. "My computer cost $2,200, but I saved $3,000 thefirst year and $4,000 the second year as I continued to learn theaccounting tasks."
* Pool your resources. Assembling a variety of financingsources can help you build your credibility as a viable business,which also increases your likelihood of receiving financial helpfrom additional sources, according to Claudette Hayle, president ofThe Hayle Group, a New York City financial and managementconsulting firm that specializes in helping small businesses obtaincapital. "Many financial sources don't want to be the solelender," Hayle says. "You are much better off ifyou're able to acquire seed capital through friends, family orother sources rather than going to a bank as a business owner withno capital. If the bank sees that you've already acquired somefunding, they often feel that you have an investment to protect. Abank that may not be as inclined to lend you the full $100,000 youneed could give your package a more serious look if you come upwith the first $40,000."
