If you have a home-based business, you know the freedom of not having to sit in traffic to get to the office or working in your pajamas at 1:00 in the afternoon. However, you also know some of the challenges. These include the fact that your life can become dominated by your business and that getting financing for a home-based business can be extremely difficult. Yet it is not impossible and here is a quick overview of how to successfully finance your home-based business.
1. Have a Plan
Granted, you don’t need to have a 300-page business plan for your home-based business but it does help to have an idea of where you are going and what you need to do to make it happen. This sort of soul-searching will give you a ‘north star’ and importantly will let you know when you are going off course.
Some key points to include in your plan are a couple of paragraphs on your value proposition, your sales plan, and your operations plan. This will help you to focus on your customers. After all, they are key to how you can make money.
Having a plan for your home-based business is a good start, but you need to put it into action. This includes having sales and financial forecast and to have reports on the financial position of your company. These documents will not only help you to better manage the finances of your home-based business, but they will also be vital when you seek financing.
Don’t look at forecasting and bookkeeping as a time sink. Instead, set up a process to help you manage these tasks easily and effectively. In some ways, it can even be automated, such as an invoicing process which is already tied to your accounting software.
3. Get Connected
It might be hard to believe but there are a lot of resources out there for small businesses. These include local training or development centers, the Service Corp of Retired Executives (SCORE), the Small Business Administration (SBA), and even your local chamber of commerce.
I realize time is your most vital asset when running a home-based business, but taking the time reach out can help to give you a different perspective. Another advantage of reaching out is that you might meet new customers or investors and at a minimum, it is nice to come up for air every now and then.
4. Local Banks
Getting a working capital loan from a bank has become harder in recent years. However, that doesn’t mean that they don’t have other options to help you finance your home-based business. One of the simplest options could be a checking account with a no, or low, fee overdraft protection. Granted this form of finance can be expensive, but that doesn’t mean that it shouldn’t be overlooked.
Another way in which a bank can help a home-based business is by offering credit cards to your business. Again, this can be a high-cost form of capital. But if your business’ cash flow works in a way that you can afford to pay off the balance every month, then having a business credit card help you better manage expenses without risking your personal credit.
5. Alternative Finance
Now, this is where things really start to get exciting. Did you know that alternative finance for small businesses is the fast form of business lending in the country? The biggest reason for this is that it has become nearly impossible for a small business to get a loan from a bank.
While banks are closing their doors, alternative finance companies have jumped into the breach by offering working capital loans, inventory loans, and business lines of credit among other options.
Besides the different programs, many of these lenders are better equipped to understand the peculiarities of running a home-based business. As such, they are not just looking at the collateral your business owns or your cash flow. Instead, they are willing to work with you to set up a repayment plan which makes the most sense.
Don’t assume an alternative lender will give you a million-dollar loan – they probably won’t. However, they will be able to give you a $10,000 loan when banks wouldn’t even look at your request. As such, they are filling a vital need in the market. Just remember that you will need to repay your loan, so only use short-term loans for short-term needs.
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- 12 Tips for Getting Your Bank Loan Approved
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- How to Raise Money to Finance a Franchise