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21.5 Funding Sources for Your Home Business

Funding your business is simple not easy. True it is easy to get money when you have a traditional business. You will find it hard press to get the banks to give you a loan for your affiliate, network, direct sales, or internet marketing business.

If you are a licensed professional like a real estate agent, insurance agent, or certified financial planners good luck on traditional funding sources.

This guide will give you 21.5 ways to funding your home business. Looking to raise between $500-$10,000? Then this is for you. You may want to offer top-tier products and get paid higher commissions. But you don’t have the money to invest in your business to offer top-tier services. I give 21.5 ways to fund your business.

Here are 21.5 ways to fund your business:

Quick Funding Sources

1. Personal Savings: The simplest way to fund your home business. You are investing your personal savings into a cash flowing business that will give you mega returns. You must think like this to succeed. You are not spending your savings you are investing it.

2. The 3 F’s: Family, Friends, and Fools. It’s tricky borrowing money from family and friends. Especially if you have a history of starting and quitting businesses. If you have borrowed before and failed to pay it back you are up a creek. Then then are fools. There is someone out there who will give you money. I have raised over two hundred thousand dollars from friends, family, and fools.

Be sure to draw up a written agreement saying when you will pay the money back. Offer a high interest rate so the person will not feel like a “Fool” when they are giving you their money.

3. Credit Cards: Use your credit cards to get started. This is easy when you need less than $300 to start your business and becomes difficult when you want to sell top-tier products that pay higher commissions.

Use your credit cards or someone else. This is where the 3 F’s come in again. I started my company, gave my friend 5% equity, and had her get business credit cards. I then borrowed $5000 for my internet marketing business. It took me 18 months to pay her back but now she gets her car note paid every month plus a nice dividend check at the end of the year.

4. Short Term or Payday Loans: If you have a job you may want to try short-term or pay-day loans. You can borrow up to $2500 with some of these institutions. This is high risk and make sure you are in your home business for the long haul. Their interest rates are atrocious.

5. Personal Lines of Credit: use your personal lines of credit from your bank. I prefer to use credit unions because they are a little more lenient and offer better rates. Plus they have favorable repayment terms.

6. Personal Assets: Borrow against your home, car, or stocks. Borrow enough to start your business and keep it running. Borrowing against your assets will keep you committed to your business.

7. Insurance: Cash out your insurance. This is how many entrepreneurs start. Check your policy’s conditions on you cashing out.

8. Your Retirement Accounts: You can borrow from your 401k plans or IRA’s. Just make sure you borrow enough to cover 3-6 months of business expenses. Most people only borrow enough for the start-up. They forget about marketing and fixed monthly costs.

9. Your Job: This is a slower process and sacrifices have to be made. Need to invest $5000 for your home business? Then save $500 for ten months. Saving a portion of your job income is a smart move because you will not owe anyone and your bills will still be paid. Plus you will have the time to learn your business.

Creative Funding Sources

10. Your Customers: Yes, your customers. You can pre-sell items to fund your business. I promoted marketing system before it was even launched. I sold a new blogging platform before it came to the market.

11. Partnered Up: When I started my real estate career I did not have the money for my license, Realtor dues, or investing. I partnered up with agents and sent them my clients. I got a referral fee. I took finders fee on distressed properties. This ides works well in certain niches.

12. Boot Strapping: You only invest the money you make from your business. This may be the only way to raise funds for your business if you have poor credit, no friends, or family who will lend you a dime. You may have to sell small items and upgrade when enough sales come in. The advantage of this is you are learning while you are earning.

13. Sell Your Crap: Yes your crap that stuff you don’t need anymore that is taking up space. I have had several members of my team sell their cars, furniture, clothes, and other items to fund their home business. They used eBay, Craigslist, Back Page, and garage sales.

14. Mobile Advertising: Turn your car into a moving advertisement. Some companies pay up to $300 per week. You are driving anyway might as well get paid.

15. Sell Your Body: No, not like that. Sell advertising space on your body. Options include wearing signboards, t-shirts with company logos, or temporary or permanent tattoos.

16. Windfalls: Use your tax refunds, lotto winnings, settlements, and gifts. You can expand your business every year with your tax refunds.

17. Medical Research: I have a teammate who raised money by participating in medical research projects. This may be extreme but he got his money and has a profitable business. Search online for medical research projects in your area.

Non-Traditional Lending

In my membership site there is a training that teaches you to raise $500 to $10,000 in 30 days or less. Here are the funding source we teach:

18. Crowd Funding: is the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. You can use crowd funding resources GoFundMe, Fundagreek, and Fundly.

19. Peer-to-Peer Lending: is the practice of lending money to unrelated people, or “peers”, without going through a traditional financial intermediary such as a bank or other traditional financial institution. This lending takes place online on peer-to-peer lending companies’ websites using various lending platforms and credit checking tools. Sites like Peerform can help you with this process.

20. Investor Loans: Lending Club and connect borrowers and investors. Borrowers get their funding and investors get a nice return on their money. Please check out these sites for more information.

21. Micro Financing: Micro Financing is a form of financial services for entrepreneurs and small businesses lacking access to banking and related services. Mission-driven lending organizations give micro-loans (between $500 and $50,000) to businesses not eligible for traditional bank funding.

21.5 Prayer: When all else fails pray that you will get the divine wisdom to raise the money you need. In fact this should have done this first.

You now have 21.5 funding sources. You can raise money for your home business. Take action on these funding sources and excel in your home business.

Top 3 Reasons Small Businesses Fail

Before You Say “I Do”

Before you say I do, before you make the investment, before you hang the sign, before you set up the company, there is something that you should know. Small businesses are similar to a marriage – no one goes into the venture thinking that it won’t work out. Yet a significant portion of small businesses fail. According to the Small Business Administration, as many as 30 percent of small business startups fail within the first two years of the honeymoon – and up to 50 percent within the next three years. Do the math and you’ll come up with a staggering 80 percent failure rate among small businesses within the first five years. The odds are stacked against you, but our business model is based entirely on helping small business owners maximize growth. To avoid the pitfalls that cause other businesses to fail, you’ve got to understand what business failure is, the reasons why small businesses fail and what it will take to be part of the remaining 20 percent that achieves success.

Just like someone whose marriage has ended in divorce, failed small business owners often blame anyone but themselves. They look for factors outside their control as scapegoats for the downfall of their business endeavors. They blame the economy, the government, their partners or their employees, just to name a few. If you dig a little deeper, the real root of the problem can often be revealed in a lack of business acumen, inadequate resources or insufficient capital. Without exception, these issues are ultimately the responsibility of the small business owner.

Lack of Business Acumen

Making the transition from an employee to a small business owner can be extremely difficult. The disciplines that you have developed as an employee are totally different than what you will need when you step into the owner’s shoes and start running the show. The reality is that many owners’ expertise lies in accounting, law, medicine or some other discipline unrelated to day-to-day operational concerns. Don’t assume that you can just open a business and find clients or patients lining up outside your door. It takes skill and experience to drive business your way. Identify the areas where you lack expertise and look for consultants, partners, professional services or employees to fill in the gaps.

Inadequate Resources

For small business owners, relationships mean everything. The right relationships result in a strong foundation, but incompatible or incomplete teams translate to inadequate resources. What team resources can you leverage to balance your own strengths and weaknesses? Too often, new business owners attempt to do it all themselves. This strategy may work in a one-man operation for someone whose goal in life is to only work by himself, for himself. Unfortunately, it’s an ineffective strategy for running a full-scale business. Instead, you need the right team and the right advisors. One of the most powerful tools you can use to increase your chances of success is to learn where to turn to get the right resources to fit the needs of your business. That won’t necessarily mean consulting with your best friend or hiring a former co-worker. Your selection process should extend beyond friends and family. Looking for the lowest price may also not be the best decision-making criteria. The truth is you get what you pay for. Locating and utilizing the best resources possible is one of the keys that will differentiate your future between dissolution and success.

Insufficient capital

The number one reason why marriages fail is because of money issues, and small businesses are no different. The amount of capital available to you at the time you establish your new business is a critical determinant of the success or failure of your business. Simply put, your available capital is the sum of your cash, lines of credit or trade credit for the business. For most start-up businesses, the costs incurred within the first two years far outweigh income – except in the case of acquiring a business that provides income on day one.

One of the largest and most common problems is muddying the line between business expenses and personal expenses. Separate your personal life from the business. Resist the temptation to remove cash from business accounts to satisfy a shortfall in your personal budget. While it’s true that the business should provide income to the owner, too-frequent personal withdrawals cause undue hardship. Plan withdrawals that are sufficient to maintain your household needs and stick to the plan.

In order to flourish in business, you must be accountable to yourself, your employees, your family and your clients. You must be able to grow right along with the growth of your business. If, as a small business owner, you take the same “’til death do us part” commitment pledge taken by a newlywed, and commit to sticking it out through thick and thin, you will increase your chances for success. Don’t give in to the temptation to wander off and explore the next, newest thing. Focus and commit to your business and eliminate failure as an option.

Valuing a Business for Sale – An Imperative Guide

I often get asked for a “rough idea” of what a business is worth.

It’s an interesting question, but not one that can be answered in any meaningful way without drilling down into the specifics of the business because in the real world, the valuation of a business has many variables including industry types, differing market sectors and individual levels of profit and risk that make any ‘prophecy’ of business asset valuation as reliable in outcome as taking a trifecta bet at a race track.

This is particularly true in relation to a privately owned small business valuation whether the business is incorporated as a private company or operates as a sole trader.

Apart from their annual Tax Return, privately owned businesses in Australia, are not obliged, to lodge financial reports with any statutory body or publish any details of their activities in the public domain.

With publicly listed entities (companies listed on a stock market) there is more data for a business valuation company to analyse in the form of share prices, price to earnings ratios, historical performance and annual reports. Comparisons can be made between these indicators to determine a range of valuation metrics.

Private businesses, however, are as different as fingerprints – no two businesses are the same because they are generally ‘built’ around the needs of the business Owner. Business analysis and valuation of private businesses must therefore, in addition to a study of the financials, include a detailed Risk Assessment and take into account the Return on Investment that the business makes for the Owner and the Cost of Capital to buy the business.

What to Look at When You Want to Value a Business for Sale?

Commonly, many SME (Small to Medium Enterprises) business asset valuations focus on the ‘Return on Investment’ (ROI). This is usually expressed as a percentage (%) and is a measure of the Risk to an Owner versus the Return. For a privately held business in Australia this should be between 20% and 50%. The closer to 20% the more ‘secure’ the business investment – the closer to 50% the more ‘riskier’ the investment.

A business valuation report that demonstrates a ROI under 20% indicates that it would be unlikely to generate an investment (or a Bank would not lend the funds to purchase) – quite simply the return would not be enough (because of the liquidity – or ease of conversion to cash) to warrant the investment and a return of over 50% would indicate that there are significant risks which would be outside of the comfort zone of most investors and financiers.

As a general rule, private businesses and the valuation of companies in the private space tend to be based on historical financials with the valuation of intangible assets based on the adjusted net profit (before tax) – called EBIT (Earnings before Income Tax)

Adjustments are made to the Accountant prepared financials to ‘add back’ any expenses to the business profit which are discretionary to the owner(s) personally, plus ‘book’ expenses like depreciation of P&E and any abnormal ‘one off’ expenses like a non recurring bad debt to arrive at the real Net Profit (before tax) of the business.

It is multiples of this Net Profit, tempered by the Risk profile of the business and the ROI percentage which will determine the Value of the business.

But whilst most people ask for a private or corporate business valuation, what they really want to know is the PRICE.

Value and Price can be two very different numbers.

What is the Difference between ‘Value’ And ‘Price’ when You Want to Value a Business for Sale?

In the valuation of companies where the reason for the valuation is for the re distribution of shares for a Management Buy In, the price conclusion must relate to the market (is the sales market for this type of business up or down?) so that a base price can be determined at that point in time even though there will be no actual “sale” of the business.

Similarly, in business valuation for divorce where there could ultimately be an external transaction to sell but in some cases one party wants to retain ownership of the business and buy the other party out. In this case both parties want to know the ‘Fair Market Value’ of the business so they can settle even though the business is not actually being sold.

In essence, ‘Value’ can be entirely based on hypothetical theory whereas ‘Price’ in the true sense can only be based on “what the market will pay”.