Light Your Fuse Now

Have you been thinking about launching a company?  Finally, current economic conditions are conspiring to offer you the best environment for a business start-up. Current conditions are as favorable for start-ups as any time we’ve seen since late 1982, the year we were just beginning to emerge from a deep and prolonged recession and enter a 20-year expansion that was interrupted only briefly in 1991.

Our present environment looks even better than 1982, as interest rates are lower, and the job losses during our recent downturn were not nearly as devastating as 1982, when the jobless rate hit 10.8 percent in October, a dreary number that still holds the post-Depression record for unemployment. More people are employed now and they’re paychecks are relatively higher thanks to productivity gains over the past couple decades.

Here are the reasons why the present moment is great time to start a company or expand your business:

The long-stretch between recessions. The best time to start a company is during the bottom of an economic trough. When you begin at bottom, you get the longest possible stretch before your fledgling company has to weather it’s first recession. Starting a business during a long stretch of good times increases your likelihood for success.

Low interest rates. We’re now experiencing the lowest rates we’re likely to see for many years if not decades. This means money is cheap, and cheap money means your start-up costs will be lower. Whether you’re financing your start-up with a second mortgage on your family home, through a Small Business Administration loan, or simply by maxing out your credit cards, the result will be a lower-cost start-up than would have been possible two years ago or likely to be possible two years from now.

Companies are getting ready to buy. American businesses large and small have kept tight purse string during the past three years. In order to produce profits in a down economy, they have laid off workers and frozen or cut most of their budgets, which means it’s been very hard to sell business-to-business. That is just starting to change these past few months. And since companies have held off on their buying, they have pent-up needs that will drive a new round of robust purchasing over the next few years. If you’re planning to sell to business, you’re entering a new healthy market.

Consumers never stopped buying. If you sell to consumers, this downturn hasn’t been bad at all, since those with jobs kept buying and fewer jobs were lost than in past recessions. Things will just get better from here. As the job market tightens over the coming years, wages will begin a new round of swelling and more jobs will be created. For those companies selling consumers, the market is beginning a new period of growth.

The one caution: employees will be hard to find and you will have to pay them higher relative wages. The only dark news for start-up entrepreneurs or business expansion is the tightening job market. Right now, it still looks gloomy, but that is about to end. Already, the economy has begun to create new jobs, and that trend will be acerbated in the coming years when the baby-boomers begin to retire.

The boomers will be replaced by a smaller work force, which will put higher demand on employees. This will present a challenge to small companies as they try to compete for workers. Your best bet to combat the strains of a tight job market is to seek creative ways to outsource needs such as bookkeeping and payroll. Difficulty in finding cheap employees is a small price to pay, since it comes with the good news of fatter consumer wallets.

All if these positive elements add together to give the entrepreneur the best possible chance at business success. It will be many years, perhaps decades, before we again see such a positive environment for business launches.

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

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:

1. 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.

2. 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.

3. 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:

4. 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.

5. Angel investors. While most angel investors, such as those you'd find through sites like http://www.ace-net.org/ and http://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:

6. 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.

7. 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.

Why don't more people start their own business?

If you answered, "lack of funds" you're right on the money.

In various ways, money - getting enough to start the business and worry about not making enough money to replace the income and benefits from a full-time job - is one of the biggest deterrents to would-be business owners.

Nevertheless hundreds of thousands of individuals start businesses each year. How do they do it? Where do they get the money to get started? Here are ten solutions for startup funding for a micro-sized business. Some are nearly risk-free. Others involve significant financial risk and should be used with caution.

1 - Start part-time. If you need a steady source of income to meet your financial obligations (and keep your family covered by health insurance) start the business as a part-time venture. Don't quit the day job until the part-time business has a steady flow of customers and profits.

2 - Start the business from home. You can start your business for much less money if you don't have to foot the bill for office space and utilities for an out-of-the-home office. While you may not want to advertise the fact that you work from home, you will have plenty of company. According to the findings of a US Census Bureau study of small businesses, nearly half of all businesses in the US are home based.

3 - Get advance commitments for work. Line up one or two sources of business before you take the plunge. Former employers, if you left on good terms, are often a source of start-up work, or sometimes funding. Big companies that can send you their overflow work or small jobs that they don't want to do can also provide the initial stream of work and income.

4 - Get a part-time job. Work part time and save up your earnings until you have enough money to start the business. Or, as an alternative, work part- or full-time in your own business and take a part-time job to supplement the income from your new business.

5 - Live frugally - and invest the savings in your business. You don't have to live like a pauper or waste hours searching for 50 cent-off coupons to live frugally. A few simple changes may save you $200 a month or more.

Depending how much coffee you drink, for instance, making it at home or in the office instead of buying it at Starbucks or Dunkin Donuts could save you $10 or $15 a week.  Bringing your lunch to work instead of ordering it out could save you another $15 or more a week.  Eating a home-cooked meal instead of bringing home fast foods or eating out on week nights could possibly save you another $20 or $30 a week.  Turning your thermostat down a degree or two during the heating season, and turning it up a degree or two when you have the air conditioning cranking away will save you significant amounts of money during the year.  If you're determined to save money, you can probably find a lot of other ways to cut back on your spending.

6 - Use a credit card. Using a credit card - if you have good credit - is the easiest way to get money to start a business. Equipment, suppliers, advertising and postage (for mailings) can all be purchased with a credit card. And if your credit card gives you a line of credit, you can give yourself an instant loan (up to your credit limit). But using a credit card to start your business bears some significant risk, too. If you're not careful you can quickly run up a huge credit card bill - a bill you'll be responsible for paying whether your business is successful or not.

7 - Apply for a home equity line of credit.  Some banks offer home equity lines of credit that let you borrow up to as much as 85% of the appraised value of your home.  Depending on the value of your home and what you still owe in other mortgages, that can put a significant chunk of money at your disposal for starting your business. The downside: you're putting your home at risk. If the business fails and you can't repay the loan, you could lose your home.

8 - Apply for business loan instead of a home equity loan. Information you'll need to give the bank  includes the: purpose of the loan, projected opening-day balance sheet (new businesses), lease details, amount of investment in the business by the owner(s), projections of income, expenses and cash flow, signed personal financial statements and your resume. You may also need a formal business plan. (If you’re trying to get funding to grow a business you've already started, you'll also need business financial statements for the last three years, and information on receivables, payables, and outstanding debt.) Don't be surprised if the bank turns you down, though. Banks are often leery of lending money to startups.

9 - Ask Your Bank About an SBA-guaranteed loan If the bank turns you down for a business loan, ask them if they'll consider your loan through the SBA guaranteed loan program.  If they agree to do so, they'll forward your loan application and credit information to the nearest SBA district office, for a decision.

10 - Borrow from family and friends. Family and friends are a frequent source of funding for small businesses. But remember, you have to live with your family for a long time - and you probably want to stay friends with your friends. So don't borrow from unless you have a business plan  and have done enough research to know there is a market for what you want to sell. Be sure your plans provide a way to also pay interest on the money borrowed from family and friends.