Do Business Well

You may have ideas in your head, a business plan in your briefcase, and reasonable expectations that clients will soon be on your doorstep. But, if you don’t have financing, you are not ready to do business. Those who expect to be taken seriously in a home business must manage their money with care and skill.

Money — borrowing it, collecting it, and managing it — is instrumental in any business’s success. Planning and familiarity with basic financial principles make all three steps easier. When you formulate your business plan carefully detail all anticipated expenses for starting up your business. Be sure to include the initial cost of licences and permits, furniture and equipment, decorating and possibly remodelling your work area. Then, figure out what it will cost to do business on a monthly basis. Remember, you will have to carry these costs during that early period when your business is not yet profitable. As a rule, experts suggest having enough capital in reserve to cover your starting costs. as well as the basic cost of business operations for at least three to six months. Remember that you must also allow for personal living expenses. If, on the other hand, you do not have that much money on hand, you’ll need to borrow.

Borrowing basics

Entrepreneurs who need to borrow large sums of money are required to submit a detailed business plan and a loan request application that outline aspects including projected financial information and information relating to business ownership. The prospective home entrepreneur who is just starting out and who doesn’t need to borrow all that much money should apply for a personal loan.

Before financial institutions will lend you money, whether the loan is large or relatively small, they look for indications that you are a good credit risk. They review your credit history, analyze your current assets and liabilities, check current conditions in the market-place, and review the general outlook for your chosen industry. They determine whether you have sufficient collateral or security to back up your ability to repay the loan.

Other evaluations are more subjective:

1. Does your business plan reflect creativity and hard-nosed business sense?
2. Do you convey a professional business attitude?
3. Do you seem capable and trustworthy?

The answers to these questions can make a difference, so it pays to rehearse your presentation carefully. It also pays to go prepared. Bring along your neatly typed business plan, as well as a personal résumé), financial statements and profit forecasts. Have your loan application form filled out in advance.

Commercial banks and building societies are good sources of capital, but don’t overlook other sources — you might also consider loans from friends and relatives, and in the form of home mortgages and personal savings. Perhaps you can borrow against your life insurance policy. Approach your local Small Business Development Corporation for advice.

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