Small Business Credit and Financing : Seed Capital
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Most of us would love to start and run a business
— if someone could promise us that we could do it without risking a
thing financially! But there are tactics associated with small business
credit and financing that can help give you the greatest chances of
success as you launch your new company:
The less money you require to start a business, the less financial
strain you’ll feel. Growing your startup business organically may take
more time and sweat equity than if you just had, say, $1 million to
start it! But at least with bootstrapping, your own financial risks are
minimal. Plus, you don’t have to take on other investors or sign a
contract with a bank for a loan. Instead, you create a contract with
yourself for achieving entrepreneurial success.
Treating your start-up like a side job could be your best insurance
against financial gaps as you start your business. For financial
security, there’s nothing like continuing to draw your regular paycheck
as you build your entrepreneurial dream during your off hours.
Continued regular income also can provide some seed capital if you can
redirect some of your personal spending toward your business and away
from leisure or savings for awhile.
Follow this simple equation:
It’s unwise to sink more money into starting your business than you
could survive losing. Don’t launch your business expecting to fail –
but make sure that if you lose everything you put into the venture, you
can survive financially. Remember, the majority of business startups do fail.
And if yours does, you’ve got to be able to pick yourself up, dust
yourself off, and continue to live your life – maybe even in
preparation for your next startup!
Use every resource: Make sure you’re accounting for all the possible ways that you can get some dough to boost your business to viability. Try to raise your credit limit in anticipation of using credit cards for your business launch;
the higher ceiling may come in handy. Tap into your home equity for a
loan. If you’re a boomer, it may be easier than you think to withdraw
some funds out of your pension or 401(k) stash. If you’re a good and
responsible citizen, you can probably obtain a small business line of
credit at your local bank, or a small business credit card. Just make
sure before you go in that you’ve got a solid credit score, a thorough
business plan, and a convincing case.
Visit friends and family: They’re good for more than just being a part of your cell-phone plan: Friends and family can be a great source of seed capital.
Don’t ask them for more than a few thousand dollars, and then only
after you’ve invested every reasonable resource of your own. Treat the
whole process professionally: Whether you’re hitting up your old
college roommate who recently won the Lotto, or kindly Uncle Fred, you
want to acquire their enthusiasm for what you’re doing. Present them a
business plan just as you would a banker or angel investor. Put
everything in a written contract to avoid indigestion the next time you
have dinner with them.
Fit it with your life:
Make sure that your life plan and your desired lifestyle can survive
any possible outcome with your business. Set a goal for cash flow and
other financial measures at six months into the business, or at one
year, and set up a “decision tree” ahead of time for how you’ll respond
at that point. If you haven’t achieved what you planned, you may have
to take “Plan B” measures.
Our Bottom Line
of the most successful entrepreneurs have started a business with the
least in their pockets. But they followed financial strategies such as
bootstrapping to make their entrepreneurial dreams come true, and to change their lives. You can do the same thing.