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How To Raise Capital For Your Home Business

Jan 25, 2008
The lack of capital is one of the most common reasons why home businesses fail especially during its first six months of operations. According to studies, more than 50% of start-up businesses which do not have ample capital do not make it past the first six months of operations. Don't let yourself fall into that position. If you are one of those people who are planning to engage into home business, it is therefore very important that you have enough money to sustain your operations for the next six months. To help you raise the much needed capital for your home business, here are some tips for you.

Borrowing From Banks

The most obvious source of capital is the bank. Unfortunately, not all banks are really happy to lend you money especially if your business is still starting up. To convince a bank that you can generate enough profit from your business to pay off whatever loan is given to you; you need to come up with a sound business plan, projected financial statement, marketing plan and financial management plan. A business plan is very important because banks want to which direction you want to take your business so you need to give the bank a clear idea of what you want to do. If you can show the bank that your business do have potentials, there is a possibility that the bank will give you that much needed capital. Take the time to put together the most impressive business plan you can.

Another way to get a loan from the bank is to put up collateral for the loan. If you have some real estate properties, you may use these real estate properties as security for the loan. However, you should be careful about mortgaging your home just to get enough capital for your business. According to experts, there are literally thousands of people out there who have lost their homes after their business endeavor flopped. Since there is a big possibility that your business will not do well during its first few months and that there is a really big possibility that you business will fail, it is not really a very good idea to use your home as collateral for your business loan.

Borrowing From Friends And Family Members

Since many banks are not really very keen on granting loans to start-up businesses, borrowing from friends and family members can be a good alternative. If your parents have some extra money, ask them to loan that money to you for a certain period of time and for certain terms. For instance, you may negotiate a loan from them payable within one year. The good thing about borrowing money from friends and family members is that you will most likely get some money without having to mortgage anything. However, once you get a loan from friends and family members, you should make it a point to pay the loan promptly and diligently. Always remember that you could lose the trust and confidence of that friend or family member if you do not honor your obligations to them.
About the Author
Mark Stewart frequently writes on topics in the home business and Internet marketing industry. Finally learn the truth about how you can launch 6 streams of automated affiliate income streams in just 24 hours. For more information visit: Home Based Business Ideas
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