Work for Yourself@50+: Funding Your Business
Put your plan into action on blackboard with pile of dollars
Here’s what you should do before you ask for money
If you already know how you want to work for yourself, there’s probably one enormous question in the front of your mind: How will I get together enough money to get started? For many people, the first answer that comes to mind is, “I’ll get a loan.” Before you go the bank, however, it’s important to ask yourself: “Have I done all I can to minimize the need for a loan?”
Is there another way? Alternatives to consider before you go into debt
Many entrepreneurs starting out feel they need to ask for a lot of money when services they need exist in their local community free of charge. Knowing what services are available in your community can be the difference between going into debt and starting your business with no debt whatsoever.
- What’s out there that’s free for you. Every community has a network of business support specialists who can help you find free resources and provide business assistance at no cost. Some of these services are even tailored to fit the needs of those who are 50 or older. To find resources near you, use the SBA zip code tool.
- Fellow businesses can be your friends. Many businesses work together or barter services to create a mutual benefit. This can be an exchange of services (often called “time banking”) or even finding areas of collaboration that can lead to mutual benefit and financial savings. In Buffalo, there is a startup clothing store that shares its space with a self-employed tailor, who benefits by having affordable to space to work, but also brings his own clientele to shop in the clothing store.
- Find your local incubator. For brick-and-mortar businesses, one option is renting space in a small-business incubator, where you start your business at a small scale in a supportive environment with smaller risks, and eventually graduate to your own space.
To learn more about other no-cost support networks for your business, download the Work for Yourself@50+ Toolkit or visit the Work for Yourself@50+ workshop website to see if there’s a workshop in your area.r no-cost support networks for your business? Download the WFY toolkit to get some more great ideas, or call about a workshop in your in area.
Other preparations before your loan
Even after pursuing many avenues to decrease your need for additional funding, you may find yourself still needing a loan. Programs like Work for Yourself@50+ will help you understand and prepare for applying for a loan, but there are a few things that you can do beyond the business plan to make sure your application is desirable and your chance of repayment is successful.
- Do you have a “time budget”? Community lenders often like to see that an entrepreneur has thought about when they are going to use the funding, not just how much they plan to use. Even after finding a good source of funding, it could take months before you have the cash in hand, so it’s important to budget your spending realistically.
- Have you created a personal budget? Many profitable businesses can go under when their revenues are taken to fund emergency living expenses. Having a written down personal budget will reassure funders that their funding will only be used for the business.
Financial alternatives to debt
Many people think the only way to put money into a business if they have limited resources is to go into debt, or use retirement savings. That’s not true! Options like an IDA (Individual Development Account) will match an amount of your savings toward a small business. Not only will this equity provide you more flexibility, but it also shows funders you’ve researched all of your options on how to commit yourself to your business.
Know who you’re asking from
There are many different types of funding available for small businesses, and knowing what type of lender you are talking to will increase your chances of finding the right funding for you. Capital investment is the funding that friends and family and other individuals lend toward the success of your business. Business loans or a business line of credit are loans that you can receive from a traditional bank. Finally, if that seems too daunting, Community Development Financial Institutions (CDFIs) are small business development organizations that exist in every community and can help entrepreneurs who are starting out secure small-scale loans.
If you’re not sure which source of funding may be right for you, download the Work for Yourself@50+ Toolkit to learn more about the pros and cons of each type of funding.
Remember, you don’t have to have an enormous amount of money and have everything perfectly lined up before you start working for yourself. Using a lean start-up model, you can “fail fast and fail small” so that you can hone your business skills more efficiently and succeed in your goals. There are many ways to get your new venture off the ground; planning ahead will help you choose the right path for you!
Blogger profile: Bryana DiFonzo is the Community Development Director for Westminster Economic Development Initiative, Inc. in Buffalo, New York. WEDI participates in AARP Foundation’s Work for Yourself@50+, which offers workshops and practical advice about self-employment.