Congratulations on your decision to start a new business! You’re about to embark on a remarkable journey of growth and self-discovery. Unfortunately, growth and self-discovery seldom happen when everything is going fine. You’re likely also facing some tough decisions and a lot of hard work.
Use of Personal Asset
Getting a business loan is possible for brand new businesses, but most lending agencies want some proven track record of what your business is doing and how profitable you are (or are likely to become.) If you’re just starting out, there’s no track record.
Finding the Money
Rather than trying to qualify for a business loan, you may choose to tap your personal asset or borrow from friends and family. If you need to fund your start-up out of your own pocket, instead of drawing down savings, consider taking a secured loan against what’s in your account.
Borrowing from Yourself
If you’re not a great saver but will do anything to pay your bills on time, you’re an excellent candidate for borrowing against your own savings. Once you pay off the debt, the savings are still yours, and you still had access to the money you needed to start your business.
Borrowing from Others
If friends and family can help and want to help you launch, great! Be sure to be very up front with them in terms of what you’re doing with their money. Also, make sure that their loan payment is first in line when you schedule your bills. Money, friends and family can be a volatile mix, so keep them informed and keep them paid up.
Credit Cards
Seek out credit cards with a low interest rate or a long term 0% interest option and use these to fund your business in the early months. Be ready to pay these off or roll them before the interest gets punitive. This is likely a better option than borrowing against your 401(k) at the very beginning, but keep an eye on the calendar to avoid paying interest on the debt.
Not A Great Saver?
If you find yourself out of money by every pay day, it may be time to change up how your think about:
- your job
- your goals
- your possessions
- your legacy.
Why Start A Business?
Starting a business means you work for yourself. Being self-employed offers a lot of flexibility; you can work 24 hours a day if you want to, but this isn’t sustainable. What’s the end goal of being your own boss?
If your current job is unpleasant or unsatisfying, you could choose a simpler option. Find another job. If your goals are to make more money, you could go back to school and retrain.
Starting your own business will take up most of your current energy and all of your money for a time. Are you ready to live without extra spending cash for a time (maybe a long time?)
Finally, what do you want to leave behind? Do your business goals have anything to do with your family?
None of these points are to talk you out of your goals. This is a decision to be celebrated! But it’s also a decision that will push you into new and uncomfortable places. Figure out your why so you can be prepared when things get rocky.
Final Thoughts
Tapping into savings or borrowing against your own credit rating will make it possible to start your business. Be sure to make your loan decisions before your savings are depleted and keep your personal lenders paid up!
