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In today’s marketplace you can have a good idea for a business and that is
where it stops. In the business world we fail to teach alternative concepts
because most concepts are taught are practiced by scammers or people that have
no experience. For example, we are commonly taught that if you need money to
finance a business, you go to the bank. Most potential business owners have no
idea what the bank requires in order to give you a business loan. Mostly it’s
experience in the field of your business, and a business plan.
If you fail to do your homework, and come into the bank prepared, you do not get
the loan and your dream is deflated. There are better ways to do things if you
are willing to do a little homework. The internet has helped with this fact
immensely; it also has helped people to lose their money as well. As always
using discretion is the key to success.
There are some very well know advisers giving good advice on how to start a
business with unconventional sources. Suzy Ormon teaches the concept of
borrowing money from family and using the large resources of credit cards to
give you the capital you need to fund a business. A few years ago this concept
would have been scoffed at. Today it is gaining more popularity. The key is
discipline, if you cannot manage your personal credit card debt, then chances
are good that you would not be able to do it for a business as well. I employ a
slightly different concept of using my Line of Credit offered by my bank that is
backed by the equity in my home. Why you ask? Well for one reason, it’s easy.
Starting a business is usually a struggle, and finding a loan with no or low
expectations offers encouragement. Experience is the key here since your homes
equity is on the line. But if you’re expanding your business or cranking it up a
notch or two, this can be a great alternative. The second reason is my favorite,
I am in control. Not that I am control freak, but it is good to have options. If
I am having a good month and revenue is strong, I pay more towards my line of
credit. If things are tight, I pay my minimum and keep planning. Again the key
is discipline.
If you were smart when you bought your home, or had good timing, you might have
some decent equity in your home. Banks want to make money and are always eager
to offer lines of credit. Most are free of fees and closing costs. It’s
considered a low risk investment for the bank since they have your house as
equity. A good thing to keep in mind is to never borrow the money to use for
payroll. I use the credit to purchase things, machinery or software that makes
me money.
Think outside the box, even if you don’t have a home, getting one can be a goal.
Business takes planning, part of that planning may be figuring out how to own a
home that will give you some leverage.
Ken Schulte is a contributing editor for
http://www.routertabledepot.com as well as an coaching expert for
small manufacturing start up businesses.
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