Creative Business Financing (CBF)
It has been said that creativity is the mother of all invention. Now, whether creativity is a “mother” in the world of business financing is worth discussing. We say worth discussing because a majority of people focus their energies on the trotting on the beaten path of sources of business financing and yet they may be in a position to seek numerous alternatives that are available to the keen and informed business eye
Here are some of the options of creative business financing tips you should consider.
Consider the plusses and minuses- Credit cards can be a very effective way to finance startup business if you choose to keep your day job while you start your company. They are easily available form of capital that most people have at their disposal. Many credit companies will be happy to raise your credit limit anytime you need it. However, sweet as it may sound, you should create a payment plan to ensure that you know where your credit card payments will come from each month and how much you can afford to repay each month.
Do some comparison shopping
It is very important to check out the latest credit cards rates available in different sites like bankrate.com to confirm the bank rates or credit union rates. Do a comparison and see whether you qualify for the best rate.
Credit cards can be the most convenient way to creatively finance your startup business if you negotiate for a good interest rate, understand and avoid fees, manage your credit score and have a very solid payment plan.
Use of lump sum payment from your previous employer to fund a start-up business can be one of the best ways of creative business financing.
Retirement Funds
This option has the most red flags attached to it compared to the others. If your retirement benefit plan has a good package for you after contribution from you and your employer, then it is advisable invest using it. Make sure you get good advice on withdrawal and usage to avoid taxes and government penalties on such withdrawal. The law permits the use of Individual Retirement Accounts (IRAs) to invest in a business with no taxes, no penalties and no need for loan repayment on funds that are withdrawn legally.
Mortgage refinancing and home equity loans
Any reduction in the mortgage debt means an opportunity to use the grater equity for investments. This can be a creative business financing in the sense that a business owner can borrow more using the same security.
However, some banks will refuse to release equity in your home loan if they detect that it is going into high risk revenue of a business startup.
Accessing equity in your home through a loan is creating a new debt. The advantage is that the interest you pay on home equity loan is tax allowable (deductible).
Whether you are already a business owner or a startup of a new business, the first thing than you should think about is the best and less the costly way of obtaining finance. Have a very close look at the various options available and compare them with your business plan. It may not be the only way but is surely is an important way.
References:
|
