7 Places to Find Startup Money

This is mostly for our US friends but it might be worth checking out options in your own country.

Think you’ve exhausted all your money-raising options? Think again. Here are seven alternative ways to fund your home based business.

By Paul and Sarah Edwards
Source: http://www.entrepreneur.com/article/80674

While the old saying “It takes money to make money” has some bearing on starting a home based business, how much money it’s going to take depends on the kind of business you’re starting. But before thinking about how to fund your home business, you have to determine how much you need–and that may not be as much as you thought.

For example, the startup costs for some home businesses–like cleaning services, daily money management and pet sitting–are quite low, costing in the hundreds of dollars to launch. Other businesses–like medical transcription, private investigating and mobile pet grooming–will cost $10,000 or more. And neither of these estimates includes living expenses, which you’ll need to take into account when calculating your startup costs if you don’t already have a job to cover those costs.

The most common sources of startup funds are tapping into your own piggy bank, retirement funds, insurance policies, employee severance package, a loan from a family member or friend, credit cards or a home equity loan. If you’ve already considered or drawn from those sources but still need additional funds, here are some other types of wells you might be able to draw from:

First, think about assets or resources you own or are entitled to, such as:

• Taxes. While still employed at a job, you can reduce withholding taxes by changing your number of allowances. Each additional allowance on a $1,000 paycheck is worth about $20; on a $2,000 paycheck, $25. So you can unlock an instant cash stream by increasing your allowances in line with the deductions you expect to have available when you file your annual income taxes. Simply follow the instructions on the IRS form or consult with a tax professional for more information. Calculate these at www.dinkytown.net/java/Payroll.html.
• Collectibles. For almost instant cash, you can sell collectibles you’ve acquired yourself or through an inheritance. This could be anything from your childhood comic book collection to your great aunt’s silver tea service, so check your attic! You’d be surprised what people will pay money for, so don’t overlook things you might just consider “junk.” Auction sites like eBay, as well as sites specializing in the type of collectible you have, make it easy and inexpensive for you to get a good price for your belongings.
• Disability help. If you’re disabled, you may be eligible for a program that provides you with counseling, classes and capital with which to start a business. Check with your state’s Vocational Rehabilitation Agency to determine what it offers. You can find your state’s agency by checking the Social Security Administration’s website.

Second, you may be able to tap into:

• SBA loans. Probably the loan program most suitable for home based businesses is the SBA’s Microloan Program, which is administered through local non-profit community lenders. The average microloan size is about $10,500, but loans can be for as much as $35,000. When this program was started, loans were character-based, that is, they didn’t require collateral. Most programs now require some type of collateral, as well as the personal guarantee of the borrower. You can find the agency administering these loans nearest you on the SBA’s website.
• Angel investors. While most angel investors, such as those you’d find through sites like www.ace-net.org and www.businesspartners.com are interested in companies that already have a track record, if you have a hot, innovative idea, you may be able to interest a well-to-do person in your community, like a doctor or a group of doctors, to invest in your venture.

Finally, you may be able to line up prepaid work so that your customers can help finance your startup. For example, you can:

• Get deposits on contracts you line up. This might be in the form of a purchase order on which you may be able to get a bank to advance your funds. Or, if you’re a service provider, such as a professional speaker, it’s common to require and get half your fee in advance from clients. This can also be done if you have a product your customer will be reselling, giving the customer confidence that they’ll get back the money they pay to you upfront with something they believe their customers will gladly pay for.
• Barter for the products or services you need. For example, if you provide lawn-care services, you may be able to get printing, web design or equipment you need by your trading your own business’ services.

When it comes to funding your home based startup, thinking creatively could help you achieve your financial goals.

Authors and career coaches Paul and Sarah Edwards are Entrepreneur.com’s “Homebased Business” columnists. Their latest book is The Best Home Businesses for People 50+. Contact them at www.workingfromhome.com.

Why I Don’t Want the Recession to End Yet

We could use some more time to understand what went wrong with our economy, and to get Wall Street back in proper perspective

By Dov Seidman

Everyone is asking the same questions: Have we hit bottom yet? When will the recession end? When will things go back to the way they were?

As a chief executive, I’m as eager as anyone to put the recession into the past. A growing economy benefits everyone.

But now that there are signs of recovery, there’s a part of me—and I’m reluctant to admit this—that doesn’t want things to get too good too fast. I think we could use some more time to understand what went wrong with our economy.

That’s because I’m not sure we’ve fully absorbed the lessons from this difficult, painful, and troubling time.

Saving for the Future

To be sure, we’ve learned some things. We’ve begun to save for the future instead of spending money we don’t have. We’re more wary, as we should be, of people selling us investment products that sound too good to be true. And we’ve learned that no company is too big to fail. Size alone does not guarantee long-term survival. To the contrary, the aggressive pursuit of scale—whether it’s more revenues, profits, customers, or stores, or a bigger market capitalization—tempts companies to lose sight of the values and principles that lead to true sustainability.

If we return to business as usual too quickly, we will miss the opportunity to create the new habits of thought and behavior that we need to build sustainable economic growth.

One place to start is by restoring Wall Street to its proper role in society, which is to serve investors, entrepreneurs, and companies. For the past couple of decades, America’s best and brightest college graduates and MBAs flocked to Wall Street. And they did so for a simple reason: They could get rich quickly.

As Simon Johnson, a professor at Massachusetts Institute of Technology’s Sloan School of Management, reported in The Atlantic, between 1948 and 1982, average compensation in the financial sector ranged between 99% and 108% of the average for all domestic private industries. On average, Wall Street bankers made just a little more than executives elsewhere. Compensation in financial services began to climb in the mid-1980s, and in 2007, it topped out at 181% of pay elsewhere.

Financial Balloon

Wall Street’s profits grew rapidly, too. During the market slump of the 1970s and early ’80s, the financial sector never accounted for more than 16% of domestic corporate profits. By the 1990s, banks and insurance companies were capturing between 21% and 30% of U.S. corporate profits. During the 2000s, the figure topped 40%.

By then, the investment banks were focused on “innovation” and “financial products,” including the structured finance products, collateralized debt obligations, and credit default swaps we’ve heard so much about. While some of these creations were well intentioned—mortgage debt was pooled, in theory, to reduce risk and enable more people to buy their own homes—much of it was overly complicated and intended to enrich the bankers at the expense of their clients.

In the rush to create new financial “products,” banks lost sight of their core mission. In truth, their role is to safeguard the financial resources of their customers and to help allocate capital to productive uses in society. In the future, bankers should worry less about their own “innovation” and more about supporting the real innovations of entrepreneurs and others who create tangible value. Wall Street is supposed to be in the financial services business—that is, the business of serving others.

A society that has too much of its energy, smarts, and capital flowing to Wall Street is, by definition, underinvesting in the rest of the economy.

In the future, let’s focus on the traditional strengths of the American economy. Here are three things we do well:

1. We produce trust better than other societies.

The U.S. economy has prospered because we respect the rule of law, contracts, intellectual property, and transparency. That’s why it’s so painful when trust is betrayed. By rebuilding trust, America will attract the capital and the people we need to thrive. Banks will again lend, investors will embrace risks and entrepreneurs will dream big—but only after trust is restored.

2. We solve problems by deploying the forces of capitalism.

While government policy is important, businesses built the railroads, created the automobile industry, enabled global communications, and generated the growth in personal wealth that, even now, after the housing bust, allows about 67% of Americans to own their homes. We need our best and brightest today to devote themselves to our big problems: the environment, health care, and education. Business can help lead the way. Many companies already are—look at Wal-Mart’s commitment to sustainability or GE’s new effort to help deal with the cost and availability of health care.

3. We create real value from values.

We do our best when, instead of pursuing short-term success, we are inspired by values. Most great businesses are driven by values. By that, I mean that they are other-directed; they focus on the needs and wants of their customers, workers, and communities. Just as important, they go about their business in a principled, consistent and transparent way. Examples abound: Google (GOOG) with its drive to organize all of the world’s information, Walt Disney (DIS) with its desire to entertain families, UPS (UPS)with its goal of enabling global commerce to thrive.

These are among the big ideas that we can take away from the global economic meltdown. They’re about more than spending, saving, borrowing, regulating, or reading the fine print in an investment prospectus. Business leaders need to have a thoughtful conversation about these ideas—and that will take time. Let’s get started now.

Dov Seidman is the founder, chairman and chief executive officer of LRN, a company that helps businesses develop ethical corporate cultures and inspire principled performance, and the author of HOW: Why HOW We Do Anything Means Everything…in Business (and in Life). LRN recently announced the acquisition of leading green strategy firm, GreenOrder.

Original Blog Post: http://www.businessweek.com/managing/content/jul2009/ca20090717_780752.htm