Virtual Entrepreneur

Ideas For Financing A New Business

April 30th, 2008 | Author: MrsMoney

MarketWatch:
You’ve just been laid off from your job. Or perhaps you’ve been offered an early-retirement package. In either case, you’re not ready to stop working but don’t want to go back on the 9-to-5 treadmill. It might be time to start that business you’ve been dreaming of for years.

But to get your operation up and running, you’ll need money – how much depends on the type of business you’re pursuing.

According to the Global Entrepreneurship Monitor, a research group, the average cost to start a business in the U.S. was $70,200 in 2005. While that’s not exactly pocket change, it isn’t a king’s ransom either.

Consumer Reports suggests these 6 potential sources for seed money:

1. Personal assets. For many people, this is ideal for several reasons. Money held in a bank account, money-market fund or brokerage account is readily accessible and you won’t have to pay any interest or fees to get it. But it’s not a perfect source. You might put other goals – a college education for your kids, say, or a comfortable retirement – at risk by using money you had saved for those purposes. So set a limit on how much of your assets you’re willing to risk and stick to it.

2. Home equity. Arranging a home-equity loan or line of credit is usually quick and inexpensive for qualified borrowers. A line of credit is flexible; you take the cash only when you need it. A home-equity loan has a fixed schedule for repayment. Both types of home-equity debt generally carry lower interest rates than other forms of borrowing. In early March 2008, a $50,000 home-equity line of credit had an average variable interest rate of 5.18%. Interest costs might be tax deductible within certain limits. However, home-equity debt puts your home at risk if your business fails and you can’t pay back the loan.

Full article.

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