Financing Your Home-Based Business

While there are some businesses that can be started with modest funds, most home-based businesses require, at the very least, a small amount of working capital. You may need to purchase your own equipment, insurance, and/or inventory to start your business. In the meantime, you will still need to incur living expenses, even if your new business is not making money yet.

There are many ways that you can finance your home-based business. Before you start raiding your retirement fund, however, take some time to plan out what you intend to spend on your new venture. It is a good idea to map out these expenses ahead of time to ensure that you will not get in over your head.

The obvious place to do this planning is in your business plan. Creating a business plan will help you to figure out the amount of start-up capital you will need and to plan for your future financial needs. For more information on this process, check out the AllBusiness.com Business Plan Center and, in particular, the article Financial Plan Section of a Business Plan.

Once you complete your plan, you will have a better idea of the type of funding you will need. Below is a list of the most popular sources of funding.

Commercial banks. Commercial loans are attractive because they do not require entrepreneurs to turn over equity or company control. But paying off debt can be difficult if you are not making a profit. You may not have access to bank loans if you have no relevant experience or collateral. If you are looking for $100,000 or less, you can often get an unsecured loan based on your personal credit history. You can also obtain a secured loan against any personal assets you might have.