Home Business Financing

The financing needs for home business ventures vary greatly. Some businesses can be started with a few hundred dollars, but there are those that may require thousands of dollars. You could choose to invest your own money or seek funds from an external source, or you may choose to use both.

If your intention is to obtain finance from an external source, you should be prepared. Before you approach anyone for finance, ensure that you have the following available.

? A clear, well prepared, detailed business plan

? Obtain a personal credit report to avoid any nasty surprises

? Any other documentation that you think the investor or financial institution might require, such as bank statements, address verification and personal identity documents

Personal Funds

If you intend funding your business personally and you have sufficient savings in the bank, you are ready to go. If you do not have enough funds available, you should consider getting rid of unwanted items that you probably will never use.

Do not use your children?s education funds or any of your retirement funding. There are too many risks involved with this and if your business fails, you will not be able to make up that fund again.

Small Business Administration (SBA) Loans

This is a U.S. government funded agency that offers small business support. The loan programs are available via private money lenders, but are guaranteed by the Small Business Administration.

Bank Loans

It is possible to obtain a personal loan from your bank. There are advantages and disadvantages linked to this type of loan and you should do your homework before you make an application. A personal loan holds you personally liable for the amount of the loan and this puts your assets at risk. This could affect your family if your business fails and you own your home. The bank will have the right to attach your home. In the event that you have a partner involved in your business, the bank may have the option to attach your assets if it carries a larger value.

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Micro Lenders

If you have made application to your bank and been rejected, you may be able to obtain funding from a micro lending organization. These are non-profit organizations that offer small loans to small businesses. There are certain criteria you have to meet to qualify for this type of loan.

Credit Cards

This is not a suitable option to fund your business. It should only be used as a last resort. The interest rates are extremely high on credit cards and your credit limit may be reduced without prior warning from the institute that holds your account.

This form of financing can be used if you require equipment to start your business as it is an easy option to obtain the tools to make money. If you use this option you should ensure that you repay the amount as soon as you are able to as the interest will not justify the cost.

Finance for your home business should ideally come from your own pocket. If you intend starting a business that is capital intensive, you should do suitable calculations to ensure that you do not end up with debt you are unable to repay.

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