As stated previously, you must have a good idea of your personal financial situation as part of the examining the financial needs for your business start up. There are a lot of different options to choose from when the time comes to raise the necessary third of the start up costs, but each of these options must be evaluated for their relative costs. Few start ups get it right and there are many start ups out there that are under-funded. Some are even over-funded which is sort of like trying to start a car when it is in third gear. The truth is, more than a third of your start up capital may come from outside sources other than traditional financial institutions, especially if you have an unhealthy credit history. If the banks are not willing to finance your business venture, there are other sources of money to look to. Let’s continue to examine a short selection of alternative funding sources.
Partnerships are another means for raising start up money, where you bring in a partner who has the funds that you need to open your doors. Use caution when taking on a partner because you will have to give up something in return for that money you receive from the partner. What you give up really depends on what the partner wants, usually you give up some control, profit, and you very definitely give up the freedom of running your own business independently.
Consulting is another alternative source of funding for start up. You can go out and earn that money that you need by becoming a consultant. This is a good plan for entrepreneurs with children because it takes some of the risk out of the start up process. There is never a time where there is no source of revenue. This route requires discipline because it is easy to allow your start up to become dependent on your consulting income, but the advantage is you get word of mouth advertising quite easily through consulting clients. Try to consult in a field closely related to the business you plan on starting. Consulting can be used to develop your product and do market research.
If you own your own home, consider getting a home equity loan. This can be a huge capital funding source for a new business and you can call around and do research to find the lowest interest rate. Make sure to find any hidden costs that you may have to pay at closing. If you use your home for financing you can try to get a business loan using the house as collateral, rather than a straight home equity loan – this will enable you to write off the interest expense instead of using the home equity loan as a personal itemized deduction on your income tax.
It goes without saying that if you have the money in savings; you do not need to raise it elsewhere. But take care when using retirement savings to open a new business, and evaluate your alternatives carefully. Unless you have savings that allow you to use money that isn’t tied up with your retirement fund, it is better to look for funds elsewhere because the opportunity cost is simply too high to risk your retirement.
Posted in 
Tags: 