Startup Dough For Home Businesses

If you're hoping to start a new home-based WHERE HOME venture, there are many financing options. Cash needs of businesses this size range from next to nothing to a chunk of change rivaling that of big business. BUSINESSES GO FOR STARTUP DOUGH Some of the mistakes home-based businesses make include putting too much startup debt (or too much debt, period) on credit cards or other high interest plans, poor cash flow management, and Cash Flow 1) As a business owner, you want to bill and receive payments as quickly as possible as well as follow up on overdue accounts. Essentially, you have to keep that cash flowing to stay afloat. more. Unless otherwise stated, statistics are on home-based businesses or small businesses with no employees. 2) Require deposits and/or have strict credit terms for you customers. Requiring deposits ensures you get some of the money you asked for if a customer fails to pay. 3) Having customers pay by credit card can help reduce or eliminate the chances of default. There are several online merchant services that will help alleviate this major financial stressor. Home-Based Businesses Glance at a -62.9% of Small Business Owners (SBO) without employees were home based Borrowing Basics Non-Employer 57.1% brought in less than $25,000 vs. Employer Small Businesses $25,000 Median startup capital 39% used less than $5,000 in startup financing You will notice from these sta- tistics, the need to hire employ- ees is one of the biggest reasons small business owners need to borrow money. 51.6% of all SBOS operate from their homes 25% did not use any startup financing »Employers Use a business loan from 23.8% of SBOS with employees were home-based a bank for startup capital Use a business loan from a bank to expand 6.9% had $250,000 or more in receipts •Non-Employers Use a business loan from a bank for startup capital Use a business loan from a bank to expand 19.0% 18.2% 7:3% Startup Financing 5-3% Personal/ family savings 59.6% Common 25% No startup financing needed Business 10.3%Credit card Credit Card 7-3% Business loans from banks Perks 7.0% Other personal/family assets Cash back 4.4% Home equity loan Travel rewards Government guaranteed/ direct loan -% Discounts and free merchandise 0.8% 0.3% Venture capital Credit Card Usage Expansion Financing Using your business credit card (or a credit card cash advance) to finance extravagant large startup expenses is very dangerous and is a good way of quickly burying yourself in debt. 49.3% None needed 31.6% Personal/family savings 11.8% Credit cards 7-9% Business profits/assets SALE 5-3% Business loan from bank 4.1% Other personal/family assets 3-9% Home equity Use your credit card for smaller purchases, such as supplies and equipment. Make sure you can pay this debt off in a reasonable amount of time Government guaranteed/ direct loan 0.5% 0.1% Venture capital Typical Startup Expenses (when your bill arrives for the best results). If routine pur- chases add up fast, you could just be burying yourself in debt. This list is not meant to be all-inclusive but give you a general idea of common startup expenses. 1 Legal Fees and Licenses This may include creating a legal entity and getting a business license and other permits. Paying your entire balance each month will help you get the most out of your rewards like cash back, travel perks, and free merchandise. 4 Insurance You may need insurance to protect you from legal or other issues. 2 Marketing Getting the word out about your business is another significant expense; however, the internet is a very affordable way to get the word 6 Merchant Service out, depending on your target market. Online marketing may just involve buying a domain name and having your website hosted, or it may involve more extensive design services. 5 Professional Services This could include an attorney, accountant, or other professionals. Will you accept credit cards? 3 Supplies and Equipment This may be as simple as a computer with an internet connection, office supplies or costly machinery. Sources: CreditDonkey U.S. Small Business Administration Office of Advocacy of the U.S. Small Business Administration U.S. Census Bureau CreditDonkey