Financial Resources Financing Your Business On A Shoestring Tip! Many who were unable to obtain financing from any other source have successfully bootstrapped their way to business success. Starting a business does not always require a large initial financial investment. Careful and creative management of currently available funds can go a long way towards providing needed capital. A disciplined person possesses the potential to become a financially successful entrepreneur. The key to financing your business with little initial cash outlay is to become your own banker. Realistically, you should have some amount set aside for start-up expenses. For example, let's say that you have $2,500 to invest in starting your business. Calculate upcoming major expense items and set aside a certain amount for each one. Think of that item as having its own line account. You may want to go as far as to set the money aside in a specific envelope. Plan to use these funds for the designated purpose only. The amount may not be enough to cover the full cost, but it is a start. You must now determine how you will raise the rest of the required amount. Perhaps, a major start-up expense is a piece of equipment that costs $3,000. You have set aside $1,000 for this outlay in your calculations. What are possible ways to acquire this item? Maybe you can purchase the equipment with a $1,000 deposit and work out a payment plan. Or, possibly you can negotiate a lease agreement. The goal is to initially not spend more than you have set aside, with the plan to repay the balance of this debt from future income. As your allocation of initial funds for expenditures method becomes more sophisticated, begin to add accounts. Set aside envelopes for major future expenses. As the business makes money, add incremental amounts to the envelopes. Slowly, you will approach having saved the full amount needed to cover those expenses. Continue to tackle upcoming costs in this manner. Tip! As opposed to bank financing, purchase order funding does not rely on your company’s financial strength. Rather, it relies on the financial strength of your customers. When the business receives income, it must be allocated to your outstanding expenses. Add to those envelopes and do not renege on these allocations. This is where discipline comes into play. When you put money into a future expense envelope, those funds become dedicated to that item. You've become your own banker by setting up individual savings accounts for each expense. You are now also in the position of taking on a bank's function of lending money. If you are saving for a large future upcoming expense, you can borrow from that account to cover a more immediate expense. Because you are borrowing from yourself, you save the added expense of finance fees or interest. Again, it requires discipline to return borrowed funds to their designated purpose. On the other side of the coin, you must develop and stick to a strict payment plan for all outstanding debt. This applies to both paying off creditors as well as replacing money borrowed from an envelope. When you systematically work at it, debt will eventually disappear. Tip! In purchases of small businesses, the primary source of equity capital is generally the personal savings of the buyer of the business. Few buyers, however, have enough personal savings to finance the purchase of a small business without any debt financing. I once began a business with $12,000 outstanding debt in addition to my start-up expenses. An arrangement was made with the creditor to pay off the debt in installments of $500 a month for two years. With careful planning and sacrifice, I was able to meet this commitment as well as grow my business at the same time. The secret is to control your debt, not let it control you. Tip! Business Financing Mistakes (4) - Poor Payment Management. Written by Brenda Weathers Hargroves, small business coach and author - Brenda's consulting firm, Business At Hand, is located in Lutz, Florida. Her mission is to share successful methods for implementing and operating a small business or social entrepreneurship venture. She offers individual/group entrepreneurship coaching sessions, small business workshops/seminars and encourages book signings. To contact Brenda for assistance call (813) 962-8918 or send an email to businessathand1@hotmail.com. To purchase her book, The Heart and Soul of Entrepreneurship, or for more information about her services visit her website at http://www.businessathand.biz Tip! It seems once everything else is figured out, then a business will try to locate financing.