People often ask, “where can I find money for my start-up business?”You have a great business idea, you want to take the plunge and become an entrepreneur, be you’re own boss. You have grand dreams of building an empire. Living the dream. Driving the Ferrari to the beach from your home-office beach mansion…Hey, I’m not here to dampen anyone’s spirits. I wish you all the best and seriously hope you accomplish what you set out to accomplish. The one problem is that a new business needs some capital to start, to create new things and ideas, to grow past the infancy stage.Basically we, as business owner’s, are the ones who are tasked with keeping the business afloat (funded) until the business can generate enough money to cover its costs.So where can we find capital?Unfortunately, the places that we first think of when we think of borrowing or getting an investment for our business, like banks, private investors, investment bankers and venture capitalists usually do not want to do business with a home-based start-up company.BanksBanks won’t take the risk unless you personally guarantee the loan. Now should you personal guarantee a loan for your small business?I would urge you to think about this before you go and sign (in blood) on the dotted line. Unfortunately, no matter how excited and enthusiastic you are about your new venture, the odds of your business succeeding over a five-year period are stacked against you (at least statistically, but that’s why you read my website? right?)So the last thing I’d like to see happen to you is getting saddled with personal debt that you’ll still be responsible for even if your business does fail. People have lost their homes because of this type of thing.So, this would be a LAST RESORT.Venture Capitalists / Private Investors (Sometimes called “Angel” Investors / Investment BankersUsually, venture capitalist and private investors won’t make the investment on an unknown venture, especially a one or two person home business start-up. Even if you found a Venture Capitalist “VC” to invest in you you’d have to abide by their rules and probably give up a percent of your business (think: the show Shark Tank). That being said you can gain from their experiences and contacts and utilize their resources. So this is something to consider and it will be different for everyone.Some people would hate to have report to and abide by the rules of a “VC” (like reporting to someone at a job) and some people will think of it like a great resource to tap into. Every person and situation is different.So where do I look for capital if the peeps with da money won’t help me…Here’s my list of resources you should look to tap for cash for your start-up. I’ve listed them from the last to the first way I’d fund my new venture, but we’re all different and have different circumstances so you can order them which ever way works best for you.Family/FriendsBorrowing money from family members to start-up a new business venture seems like a good idea. You probably won’t get raped on interest charges and they probably will leave you alone to run your business (unlike banks and VC’s).The problem I’ve found with borrowing from family members is just that, their family. It can get a little awkward around the table during the holidays. (instead of being a friendly family gathering, you are now a borrower and they’re the lender) it can really change the family dynamics.Remember, friends and family members we actually see, unlike a bank where we are just account numbers to them. On the outside chance your business has problems making a profit and you have problems paying your friends and family, it’ll be that much more uncomfortable when you see them.Remember, whether you like or not, family is family for life.Personal SavingsAfter putting together your business plan, your break even analysis and you’ve given ample thought about what challenges lie ahead. I’d use what ever savings I’ve accumulated (before borrowing from someone else).There are two major advantages about using your own money.First, if you go bust you won’t be in debt with anyone. This is a god-sent. I, personally sleep much better at night knowing that I don’t owe people or banks money (I’ve learned that lesson with student loans).Secondly, When your own skin’s in the game you tend to focus more. It’s basic psychology that people will do more to guard against losing something, so when you run the risk of losing your savings you tend not to procrastinate as much and will schedule the necessary time needed to actually run a business.Using your own savings is my second favorite way to fund a new business venture. When your business is just starting out it may be your only option.Just Bankroll it YourselfThe best way to start a new home-based business venture is to bankroll it yourself. Meaning taking any profits from the business and reinvest them into the business.Simple, right?I know you’re asking yourself right now, “How the hell can I roll the profits back into the business when I just started the business and we have no profits?”This scenario will most likely be the case for the immediate future. So during these unprofitable months you will have to bankroll the operation. This will come from two sources, one being to use your personal savings. The other is to pay the expenses for the business from your paycheck. Since your not making money yet in your new business, I’m guessing that you’re still collecting a paycheck from an actual job.We’ve already discussed using your personal savings but how much of your income should you allocate to your business?Well I like to know that I have emergency funds in place before spending all of my excess cash on a new business venture. If you still don’t have an emergency fund in place let me stress that it’s an important thing to have.So after all bills have been paid each month. I’d take half the money left over and invest in an emergency fund (or replenish the savings that you spend initially, the last thing you want to have is no cash on hand when running a business.) Use the other half on the business, to pay for advertising, website hosting, supplies..etc.The majority of the cost of a new home-based business should come from sweat. Do as much as you possibly can to keep your costs down. Then once you start making sales, advertising income, profits of any kind you will use less of your own money on the business and the business will start to sustain itself.Once your business is profitable, then you could (and should) hire other people to do the things that distract you from making money in your business.Stay away from debt, only give up ownership in your business if they really bring something valuable to the table and avoid family friction, these are the first steps to running a profitable business.
Very often in my Startup Business Mastery Workshops, I get asked by young entrepreneurs to advice on what I consider the three key principles they could practice to keep their new businesses from failing. After sharing these ideas with many, I thought that it would be useful to share them with you to with your startup.Starting a new business is adventurous and according to statistics, about 80% of new businesses fail within the first two years. Notwithstanding, 90% of businesses started by people who know what they are doing to sustain their businesses, are still growing five years after.This note is meant to give you the key drivers that influence the success of the 90% of those startup businesses that succeed? It is important to bear in mind that successful people are not smarter than you; they are just ordinary people like who have discovered how to do what they are doing better than their competitors.If you have done everything that is crucial to start a business, it is now time for you to live by the following three principles if you must succeed.1. Be CourageousSuccessful business people are intensely courageous in their ability to take risk with their time and money. Look at it this way; a client of mine had just started his new business and everything (business name, website, good service, etc) was just ready to go. My client was not brave enough to invest in advertisement and other means of marketing promotions to get his business out to his potential customers.My client was afraid that, typical of advertisement and other business promotions, there is no guarantee that a particular medium (newspaper, magazine, Pay-Per-Click (PPC), or Search Engine Optimization (SEO)) would automatically pull in the required sales. So he began to play it safe rather than doing what was needful.Would you be better off not advertising and take your start up business ideas for granted? No! You must have the courage to invest anyway, hoping and believing that it would work for you.As business coach, my job is to help my clients to develop customized business strategies that spell out the critical steps and actions to take every single day to achieve their business goals faster. To be successful at this means that my clients must muster enough courage and discipline to implement the agreed strategic actions consistently until the results they expect shows up.The 80% of people that quit their business ideas often discover that they became discouraged very quickly about the unusual long hours and unending problems that successful start up business owners go through. This should not be your case.2. Determination (Persistence)Persistence is the foundation of any business. Successful startups work hard, hard, hard, and they focus on the most important areas of their businesses long enough to achieve their goals. You must determine in your mind to work hard and take the necessary steps to do what is most important for you to be successful.When I work with clients, one of the very roles I play is to help to clarify their visions for starting a new business. We spend time to understand their “WHYs”, the key drivers for starting the business and where they want to take their new business. This is crucial because, until you understand what is driving you into business, you may not appreciate the extent of involvement and sacrifice required you are required to make to become successful.Determination also means that you must love your business and the products and services you are offering your customers. You must be passionate to share them with your prospective customers.In the business of sports, it is often said that the time athletes, footballers, wrestlers and other sports people push really hard is when they are on the edge and hurting, when they’re most tired. Likewise in running a conventional business, persistence keeps you moving constantly forward and upward across the numerous obstacles and challenges you would normally encounter until you succeed. This is what happens with success, many times it comes when you are at the edge of giving up, when you had little or no breathe to push through.3. Be PatientIf you are starting a new business, it takes an average of four to seven (4 -7) years of consistent hard work to become successful. The lesson to learn here is that success does not happen overnight. You have to be on the road long enough to master the trends and be able to see the patterns you are looking for. What keeps you long on that road is patience.As in farming, you must understand the three fundamental stages of sowing, cultivating, and harvesting. These three stages are natural and successful start up business observes them.After you have done everything else to startup your new business, (as in planting the seed), you must obey the natural law of cultivation, a process that is hard to explain except to say that it is a waiting period. You cannot jump from planting to harvesting; that would be tantamount to treating your new business as gambling; a process that looks for the easy way out.Successful business people understand that the cultivation period is outside their control, and the best way to deal with anything that is outside someone’s control is to treat it patiently and calmly.It may be true that you have taken reasonable steps to start up. Also, you may have invested in some of the best business building tools, and now the first three months have gone by with no customer knocking on your door. Another six months have gone past, yet nothing has happened instead, anxiety, doubts and worry are building up; don’t despair. Be patient, as long as you are doing the right things, you will make it.
There are three main reasons many people fail building business credit. The 1st BIG reason people fail, is that their business isn’t setup credibly in the lender’s eyes. The perception lenders, vendors, and creditors have of your business is critical. Before applying for business credit a business must insure it meets or exceeds all lender credibility standards. There are over 20 credibility points that are necessary for a business to have a strong, credible foundation.To insure you are seen credibly, it is very important that you use your exact business legal name. Your full business name should include any recorded DBA filing you will be using. Insure your business name is exactly the same on your corporation papers, licenses, and bank statements.Whether you have employees or not your business entity must have a Federal Tax ID Number (EIN) to start getting business credit. Just like you have a Social Security Number, your business has an EIN. Your Tax ID number is used to open your bank account and to build your business credit profile. Take the time to verify that all agencies, banks, and trade credit vendors have your business listed with the same Tax ID number.Your business address must be a real brick-and-mortar building, deliverable physical address. It cannot be a home address, cannot be a PO Box and cannot be a UPS address. Some lenders will not approve and fund unless this criteria is met. There are Business Address Solutions available at companies like Regus including address only where you receive mail and packages at your dedicated business address.You must have a dedicated business phone number that is listed with 411 directory assistance, under the business name, to successfully obtain business credit. Lenders, vendors, creditors, and even insurance providers will verify that your business is listed with 411. A toll-free number will give your business credibility, but you must have a LOCAL business number for the listing with 411.Lenders perceive 800 number or toll-free phone numbers as a sign of business credibility. Even if you’re a single owner with a home-based business, a toll-free number provides the perception that you are an even bigger company. It’s incredibly easy and inexpensive to setup a virtual local phone number or a toll-free 800 number.A cell or home phone number as your main business line could get you “flagged” as an un-established business that is too high of a risk. DON’T give a personal cell phone or residential phone as the business phone number. You can forward a virtual number to any cell or landline phone number.Credit providers will research your company on the internet. It is best if they learned everything directly from your company website. Not having a company website will severely hurt their chances of obtaining business credit. There are many places online that offer affordable business websites so you can have an internet presence that displays an overview of your company’s services and contact information.It is important to get a company email address for your business. It’s not only professional, but greatly helps your chances of getting the thumbs up from a credit provider. Setting up a business email address is just too easy and inexpensive to neglect.The 2nd BIG reason people fail building business credit is that they apply using their social security number. Always apply first without using your social security number. Some vendors will request it and some will even tell you on the phone they need to have it, but submit first without it. Many don’t even know you can get approved without it.When you apply using your SSN you almost always are giving a personal guarantee. One easy way to know if you have business credit already is if you obtained credit without signing for it and providing your SSN. TRUE business credit doesn’t require an SSN in most cases to qualify.Business credit is using your EIN to qualify for credit. When you have enough credit built for your EIN, you can then get approved without providing your SSN. If you provide an SSN, your personal credit WILL be pulled in most cases. That personal credit will then be used for the approval decision.Most credit issuers will approve you without your SSN if your EIN credit is strong enough. If your EIN credit is not good enough, you might be declined and they then might ask for your SSN. No matter what ANY credit representatives tell you, credit CAN be obtained based on your EIN only.The 3rd BIG reason people fail building business credit is that they apply for credit in the WRONG ORDER. A business credit report can be started much the same way as a consumer report commonly is, with small credit cards. The business can be approved for small credit cards to help them build an initial credit profile. These types of initial cards in the business world are commonly referred to as “vendor credit”.A vendor line of credit is when a company (vendor) extends a line of credit to your business on “Net 15, 30, 60 or 90” day terms. This means that you can purchase their products or services up to a maximum dollar amount and you have 15, 30, 60 or 90 days to pay the bill in full. So if you’re set-up on Net 30 terms and were to purchase $300 worth of goods today, then that $300 is due within the next 30 days.You can get products and services for your business needs and defer the payment on those for 30 days, thereby easing cash flow. And some vendors will approve your company for Net 30 payment terms upon verification of as little as an EIN number and 411 listing. When your first Net 30 account reports your “tradeline” to Dun & Bradstreet, the DUNS system will automatically activate your file if it isn’t already. This is also true for Experian and Equifax.You need to have a total of at least five (5) Net 30 day pay accounts reporting. Some vendors require an initial prepaid order before they can approve your business for terms. Vendor accounts are hard to find, so keep in mind that your vendors do not necessarily have to serve 100% of your business needs.Avoid these three BIG mistakes to quickly build an exceptional business credit profile and score that you can use to obtain credit for your business.