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Funding your business
By: Developer Shed
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    Funding your business
    by Colin McDougall

    Funding your businessDo you know what to do?Most entrepreneurs are idea rich and cash poor. Like the old adage says, “it takes money to make money.”Obtaining the necessary cash to get your business off the ground can be a challenge. But let’s take a look at the numbers, first. The average startup cost to become an affiliate marketer is $250. This is a small investment compared to a $30,000 cash outlay required to start a franchise. Plus, affiliates don’t have to pay monthly expenses for advertising, inventory, rent, and payroll. But, coming up with the extra money to fund the business can be difficult when you have a mortgage, car loan, and or family to support.

    Going the traditional route with a bank won’t get you very far, considering they don’t like lending money to a start-up business with no history or assets. Before you let the bank’s negative view towards start-up businesses, dampen your entrepreneurial spirit; it’s time to take a personal inventory of your assets. You might actually have the “wealth” to fund your business. Here are some possible funding sources to consider.

    Part time job/part time funds
    Life insurance policy
    401 (k) plan
    Family and friends
    Credit cards

    These all can be tapped as potential sources for business capital. In so doing, you become your own bank. This gives you control over your money. The very control you wanted in the first place, when you decided to be an entrepreneur.

    Take a part time job and use the funds for the new business. If you’re still working at your “real job”, and starting the new venture ask yourself realistically if you have the energy to take on a third job. Superman and Wonder Woman might, but real people can’t work a 60-80 hour work week for very long. The risk of burn out is high, the chances of hurting your health and family relationships with undue stress is also high. In the end you have to ask yourself, are these risks worth it?

    If you have a life insurance policy, you can put it to work, while you’re still around. This might sound morbid, but if you think about it’s not. A life insurance policy provides money to your spouse and family in the event of your demise. What many people might not realize is that you can borrow against the cash value of a life insurance policy and pay it back at a flexible rate, on your terms.

    Remember, the 401(k) from your previous employer, the monthly statements you diligently filed away, the ones likely collecting dust? This is another resource for funding your business. The concept of asking family and friends for money might sound easy considering you have a built-in level of trust and comfort. While this is likely true, they may not understand the concept of risk that exists in your new venture. Think about the dynamics here. If things go well you’re the entrepreneurial hero, but if things go sour, it will put undue stress on the people close to you. Many friends and family relationships end up disintegrating over finances. Ask yourself if this is a risk work taking before you consider turning to family and friends.

    Now take a serious look at your credit card. The one you used to buy the computer, dinner, a pair of shoes or a new suit or dress. Credit cards are a great resource to fund your business and get it off the ground.

    In Entrepreneur’s July 2004 article, “Debt End Ahead”, Jean Burkhart, vice president of Visa business products, said,” Visa estimates that roughly two-thirds of all business purchases made with plastic are still put on personal credit cards.” In this article, Burkhart mentioned that the number of small-business credit card transactions grew by 29 percent last year for Visa.

    Maintain Control over Finances

    Remember being your own bank doesn’t mean relinquishing control. As a new business owner, keep a close watch on the money you’re borrowing. Plan what you are going to do with the money and when you are going to pay it back. Many businesses grow fast and the debts grown even faster. That’s not the place you want to be. A common complaint for businesses owners in this situation is “I didn't have the systems and processes in place to maintain control."

    If you’re going to be a successful entrepreneur, you need to be smart about using the money and have a plan for expenditures, or you'll dig a hole for yourself.Be sure and set a limit for yourself so you know when you should get out in case your business venture is not going well. Don’t borrow more money than you can pay back in a reasonable time period.

    About the author:
    Colin McDougall is a successful online business entrepreneur. You can visit his sites at , and for samples of his successful websites.

    DISCLAIMER: The content provided in this article is not warranted or guaranteed by Developer Shed, Inc. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials. If this is a hardware review, it is not recommended to open and/or modify your hardware.

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