A strong financial base is important to the success of a new or expanding business. Plan your cash flow carefully.
Business owners looking for startup or expansion financing are finding banks more cautious about lending in 2008. Lenders are looking for those with sterling credit, a good track record and a well-thought-out detailed plan on how much money they need, how they’ll use the cash, when they’ll pay it off and what they’ll do if something doesn’t go according to plan.
» The Basics
A startup or early-stage company has little chance of getting a significant bank loan. SBA startup loans, for example, are typically limited to $10,000. Where will the money come from?
A few ideas:
If you aren’t confident enough to put your savings on the line, no one else will likely invest in your venture either. That means cashing in your stocks, selling the boat and even taking a loan from your retirement account, if necessary.
• Credit cards
While financial advisers wince at the idea of using plastic to fund your business, the truth is that many small companies charge their way through the first year or two of operation. If you use this option, get several cards with low interest rates and read all the terms and conditions carefully. Watch due dates, make every payment on time and be prepared for an interest-rate hike, even if you have an excellent credit score.
• Store credit
Retailers may make it easy to furnish your office with no money down, no interest or payments for a year. Make that store’s gimmick work for you, but prepare for the day when the bill comes due.
» The Next Steps
After you’ve tapped the “easy” money, try these sources of capital.
• Home equity
It used to be easy to use a home equity loan or line of credit to get tens of thousands of dollars. With declining home prices, those days are gone for most Floridians. For longtime homeowners who have excellent credit, it is still an option.
There are no listings and few databases for private investors.
To find them, look for groups that work with investors, or “angels.” Talk with friends and business associates, industry insiders in your specific field and “true believers” in what you are doing.