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While it’s true that your home business may not have an overhead quite as large as opening a new store downtown, you’re still going to find yourself with plenty of expenses — some unexpected.
Whether you’re looking to leave your job and work for yourself permanently or just trying to turn your hobby into a much more lucrative venture on the side, you have to ask yourself: How do I finance my new home business? Many people will take that leap with what seems like a decent amount of startup capital, but it is not uncommon for new businesses to fail simply due to a lack of financing. So let’s explore some of your options.
1. The customer
There are several ways you can get funded by potential
customers. The best way is to demonstrate your product or service in a way that creates demand for it instantly. Dropshipping business opportunities are a great example of getting the client to fund your business! Many sellers on Amazon are actually dropshipping other peoples products.
What is dropshipping exactly?
Partnering with a drop ship wholesale supplier allows you to sell their products without actually having a store front, or even having stock on hand! People find your goods thru either a catalog you send them or more commonly from your website.
You set the price. When the client finds what they want they pay you for the items. You immediately send the dropship company the order along with the price of the item they want for it and they will fulfill it using your company name. That way it looks like it was sent by your company.
I used to resell books online before my distributor retired. I would resell his business loan resource guides. They were these HUGE books full of lenders nationwide. I would sell them for around $65 online. I would send him $25- $30 per book sold along with the name and address of the person who purchased it. He would mail it to them under my business name.
I was just out of college and this was a great way to make some extra money without having to buy anything but my distributors packet from him.
Interested in becoming a dropshhiper? Salehoo is a resource that lists 100s of companies looking for people who want to run their own dropshipping business!
2. Check your assets
The most common asset that people use to finance a business is a home equity loan or line of credit. There’s the possibility to borrow from your 401(k )or IRA savings account as well. Selling expensive items you own will also bring you some startup capital.
3. Borrow the money from friends and family
Don’t panhandle, but if you are a trustworthy person and know someone that would loan you money, it’s not an awful way to go. Just be careful about legal issues here.
4. Credit cards
Using a credit card or credit cards is the way many people
start their small business. The only problem is that you can quickly find yourself deep in debt. It’s important to only purchase whats needed. Don’t expect to be able to pay off your credit card bill right away. Most businesses aren’t profitable until 6 months or more have passed. Plan for that time! It’s always sad to see a business go under because they took on too much debt too fast.
5. Bank loans
A bank loan to finance your home business is a good way to go if you can qualify. You want to make sure you know the terms before you apply. And just like a consumer loan, you want to know the requirements. Many banks don’t work with start up businesses. Even if you have been a client for years. You need to make sure they work with a new business and find out their credit requirements. We provide equipment financing for start up businesses. But we no longer provide unsecured start up loans.
6. SBA7(a) loans
With these loans, the Small Business Administration pays back a portion of the loan if the small business fails. The SBA doesn’t actually give these loans. They are just the guarantor. You would go to a bank that is an approved SBA lender to actually apply.
7. Micro loans
These micro loans are administered by the Small Business Administration affiliates and work with small businesses that often might not get funding. Also the loan amount is often very small and most banks wouldn’t consider doing a deal so small.
8. Trade credit
By establishing a relationship with suppliers, you are able to receive product without paying when the items are delivered. You would typically set up a period of time to handle payments, this way you can make money before spending everything you have. This can free up funds for other things.
9. Social lending
Social lending involves private loans acquired from social sites like PeerStreet.com. These loans are funded when a person or a group of people all lend a little money to you. You would payback thru the social site.
10 Investors
Sometimes business men are willing to invest in a company for partial ownership. The perk here is that this isn’t a loan. You don’t have to pay anyone back, but that partial ownership means that you will probably be faced with the challenge of working with someone else on your new project. And they will own part of your business. Some people go to venture capitalist firms and they want that company to help them with not just money. But their expertise.
