Funding

Some businesses cost more to operate than others. Online businesses are cheaper to start than retail stores, but even low-cost start-ups will have some operating expenses. So if you don't want to go broke before getting out of the gate, you need to figure out where your money's coming from.

According to The Unofficial Guide to Starting a Small Business, most businesses fail because they are undercapitalized, or in other words, they run out of money. You can avoid this by planning your finances well, so that you have the money before you need it. Even if you think you don't need much to get started, you might need money down the road as your business expands and you need to find more retail space or hire some employees.

Here are a few options for financing your dream:

• Personal Savings

You've probably heard at least one story of a business that started in someone's garage or home office on a shoestring budget only to be sold a few years later for millions. This kind of success is possible, but it's more likely that you'll succeed if you have more saved than you think you'll need to start your business. While it's smart to save as much as possible to finance your business, it's also smart to put enough aside for you and your family to live for a few months, especially if your household is depending on your income to survive.

• Gifts or Loans from Family/Friends

Many women-owned businesses start out this way. But even if your dear sweet mother is happy to lend you whatever you need because she believes in you, it's smart to write everything down so that no misunderstandings ensue. If you have a business plan, it can give Mom some reassurance about how she'll be repaid.

• Suppliers

There are ways to get other companies to help you out. Suppliers can help by investing in your company or by working out an extended payment plan to help you over a rough patch.

• Home Equity Loans/Lines of Credit

Let's face it, this one's risky, especially if the collateral is your house. But this might make sense for you if you don't have another way to get cash (and if you actually have equity in your home). If the potential for gain outweighs the risk, your property is appreciating, and you can get a good, stable interest rate, it might be worth considering in some situations.

• Bank/SBA Loans

It's probably easier to get a loan from a bank you're already dealing with--one that's familiar with your credit history, and if you already have a personal relationship with someone at the bank, that's even better. SBA is another great source for small businesses.

• Private investors
  

If you want to find someone who believes in you, first you have to track that person down before you can explain your fabulous idea. Use your network to find out if anyone you know happens to be buddies with cash to invest, or see you can find a local venture capital program or meeting in your area. But, to throw a cold dose of reality your way, getting funding from private investors or venture capitalists is more difficult than other types of funding.

• Retirement funds

Your 401 (k) is another personal source you can tap into, but make sure you weigh the risks. You probably know you'll get penalized for taking money out before it's time, and that once that money's gone, you may end up with no money for your golden years. But, if your business is successful, it could be a very smart decision.


If you're thinking that none of these funding options sound like great ideas, you have other options as well. You may want to ease into your business gradually or get other people to help you. Have you considered:

• finding a business partner (or more than one!)
  
• starting your business part-time
• working part-time while you start your business
• living off a spouse's income while you get started
• turning your current employer into a client

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