Startup Financing For Small Businesses

Startup financing for small business is necessary and hard to acquire.  Financing the startup of a business is a particular challenge during tough economic times, as small business startups need money when money for starting up is hard to find.  During these challenging economic times, it is difficult to obtain startup financing from traditional business financing sources; particularly for small businesses, which are considered a high risk for business failure.

However, fueled by a growing unemployment issue (caused by shrinking businesses and lay-offs), individuals are following their dreams and opening a small business.  If their business idea is perceived to be very strong and if they have a unique product or service with a good strategic plan, they might be able to get traditional business start up loans. If there is a perception of risk, those entrepreneurs need to find an alternative method of raising startup funds.

Traditional business financing includes commercial lending organizations, banks and government financial programs. These organizations provide loan products, operating lines of credit, equipment leasing and asset financing, and more. But, due to current global financial market conditions, it can be challenging to qualify for this startup financing (lending criteria has tightened as most traditional lending institutions want a high level of security and low risk) and it can also be challenging to get cash-strapped lending institutions to disperse business start up loans, asset financing, or operating funds promised.

One alternative to traditional financing is to see if you can interest an Angel investor in providing an investment in your business.  Angel investors typically charge higher interest rates and are in for a short term period; they want an exit strategy within a specified period of time (therefore they will want their money back, with interest, quickly). Angel investors are often interested in the high tech or biotech industries; or other high reward (and also high risk) industries.  To attract Angel investors, your business needs to have strong and fast growth potential, a talented management team, a compelling business plan, and well priced equity. Angel investors usually look for up to 50 percent equity in the business; this is really dependent on the business proposal and the investment amount.  You typically give up some control when you develop a relationship with an angel investor.

Another alternative is to find a strategic partner or to build a strategic alliance that allows your business to reduce its cash and/or startup financing needs. This also means a loss of control over the business; and partnerships can end up like marriages, in divorce.  Yet another alternative startup financing is bootstrapping.  Bootstrapping is financing a business startup or business growth through non-traditional methods. Bootstrapping is about raising funds (for example, to start a new business), without startup capital.  If you plan to startup a business that has a significant investment in capital equipment, consider asset financing.  Asset financing will provide a loan for equipment that you buy to operate your business.

For new business owners, that might mean working several jobs to raise cash.  Or revising your plan to start your business with less money, or fewer products or services.  Consider leasing furniture, computers, sharing office space and administration staff.  Make sure you carefully consider your cash flow needs and do a cash flow projection for at least a two-year period.  Cash flow management is a way of reducing startup financing needs; effectively manage your cash flow by managing receivables, payables, inventory, and short term debt (in other words, increase incoming cash and reduce outgoing cash). 

Some other non-traditional business financing methods might include:

  • use of credit cards;
  • second mortgages on the entrepreneur’s home;
  • equity loans, secured by personal assets; loans from key suppliers;
  • partial pre-payments or progress payments from large customers;
  • and/or loans from family, friends and associates.

For small business owners, obtaining the financing to startup your business or to keep it operating is usually a challenging experience. Before you borrow the money you need for startup, ensure that your business can support that level of debt and can repay on the lender’s debt schedule.  You need to have a strong business plan and be able to present a strong business case to your lenders.  

Financial lenders will assess your knowledge, your capability, and your business proposal. You will likely have to put up personal guarantees for the money you need; this means you have to have assets to back up your guarantees. Unfortunately, not all prospective business owners have the credit rating to qualify with their lending institutions. Business financing and business start up loans are serious endeavors.  You will owe a lot of money and if your business doesn’t succeed, your money and your lenders’ or investors’ money will be gone.

Choosing the Right Christian Based Business – The P and E in Your SHAPE

The reason why many Christians fail in business or become unhappy even when they succeed in a particular Christian based business is often due to the fact that they did not choose the right Christian business opportunity that is in tune with their God-given S.H.A.P.E. (S.H.A.P.E refers to your Spiritual gifts, Hearts desires, Abilities, Personalities and Experiences).

This article will discuss the ‘P’ and the ‘E’ aspects of your S.H.A.P.E as it relates to choosing the right Christian business opportunity. Every diligent Christian must aspire to be in the Will of his Creator in all things, including his business

Recognizing The PERSONALITY FACTOR in choosing the right Christian business opportunity:

It must be recognized that God deliberately gave each and every one of us a unique temperament and personality. There is definitely a reason why God did not mass produce human beings with the same personality traits. God created a variety of personality traits so that He can use each and every one of us in different ways in His Kingdom and in the kingdom enterprises He wants us to run for His glory.

Too often we make the mistake of judging some personality traits as good, while we judge others as bad. This attitude is wrong. We know that everything God produces was good, and therefore every creature of God, regardless of their temperaments must be inherently good. However, many times the good purposes God intended in creating a particular person with particular traits are often perverted to other purposes or uses that He never intended.

Our personality is crucial to selecting the right type of Christian based business. There are businesses that are most suited to somebody with an extrovert personality, while other business opportunities call for people with introvert personality. For instance, it would be a mistake for an introvert to choose a Christian business opportunity that would require him to talk to people, persuade people, or entertain people. Likewise, it would be a mistake for a person who is not comfortable in the presence of strangers or crowd of people to choose a Christian business opportunity that requires him to deal with strangers and crowds all the time. Many are not experiencing fulfillment in their businesses because their vocations are inconsistent with their temperament or personality.

The relevant questions to consider in this area are: Are you outgoing or reserved? Do you like to work with people or just by yourself? Do you take spontaneous decisions or do you have to think deep before you decide on issues? Are you aggressive or passive? There are many good tests out there, that will help you to clarify your personality traits and it will be worth your while to check some of them out.

Applying the EXPERIENCE FACTOR in choosing the right Christian Business Opportunity

The Scriptures makes it clear that our experiences are never random. They are often pointers to where God wants us to go or what He wants us to do for Him. For the aspiring Kingdompreneur, a very close examination and analysis of past experiences, pleasant or otherwise, is also critical in determining the business God created him for.

Paul made this clear in the book of Romans, when he said “And we know that all things works for the good of those who love him, who have been called according to his purpose. (Romans 8:28). This suggests that God has a good purpose for everything that happens to us and it would be wise for one to examine where he has been and where he is in order to determine where God is sending Him. God is too good and organized to waste an experience. No matter how painful or worthless an experience may appear to us, Our Father is always looking to make it work out to our own good, if only we are smart enough to see it.

God wants us to use our pain, sorrows and joys to help others who may end up in similar situations. The Bible tells us that God sometimes allows us to go through some difficult trials and circumstances for His own purpose that may not be clear at the time. After he has comforted us and given us a testimony in those trials, he expects us to use those same experiences in our ministries and enterprises to bless other people.

As Paul beautifully put it in one of his letters to the Corinthians, Our Father and the God of all comfort often “comforts us in all our troubles, so that we can comfort those in any trouble with the comfort we ourselves have received from God”. (2 Cor 1:4). Therefore, when we go into businesses or vocations, we are more likely than not to be in the will of God if we take into consideration what God has taken us through in determining the type of enterprise we will engage in.

For example, people who have survived a painful experience in their marriages will do well in businesses ministering to troubled marriages. Same way, those who have survived painful experiences with regulatory bodies like IRS, Social Security etc will thrive in a business that provides consultancy and advisory services to those who may be going through the same experience.

The relevant questions to consider while considering our past experiences as a guide to choosing our businesses include “What has God taken you through?” “What special experiences have you suffered or enjoyed?”. The useful experiences God wants us to consider before deciding on our choice of business enterprise may vary from individual to individual. They include spiritual experiences, family experiences, employment experiences, painful experiences, educational experiences, and Church or ministry experiences.

Once you have considered your SHAPE, you must recognize that God wants you to:

a) Discover it

“For by the grace given me I say to every one of you: Do not think of yourself more highly than you ought, but rather think of yourself with sober judgment, in accordance with the measure of faith God has given you.” (Romans 12:3)

We must make a clear-headed effort to discover all that God has deposited in us and apply it in choosing the right Christian based business for us. We must consider, without emotion, the unique abilities that God has blessed us with and how that will complement any Christian business opportunity we choose.

b) Accept It

“But who are you , O man, to talk back to God? Shall what is formed say to him who formed it, ‘Why did you make me like this?’ (Romans 9:20) Does not the potter have the right to make out of the same lump of clay some pottery for noble purposes and some for common use?”

Since there is nothing to be gained by questioning our Maker, it is wise to accept who we are and look for options in putting them to the best use in our Christian based business. There is no point in wishing and dreaming for the the gifts other people have. Rather you need to celebrate your unique personality and use that as part of the barometers to check out any Christian business opportunity.

c) Develop it

“For this reason I remind you to fan into flame the gift of God, which is in you through the laying on of my hands. For God did not give us a spirit of timidity, but of power, of love and of self-discipline.”(2 Timothy 1:6)

God expects you to discover your talents, to accept them and to ultimately develop them for the purposes of your ministry in the kingdom, which certainly include you Christian based business.

See You At The Business Mountain Top!

Affiliate Marketing – A Global Business on a Shoestring

Affiliate marketing business is an ingenious model of small business with huge leverage.

Merchant and marketers leverage on each other’s strength to cover their weakness. In the end, both win.

Affiliate marketing has its advantages and disadvantages.

If you are considering starting a small business, and are looking for one which requires little capital, it is good to do some research and comparison between affiliate marketing and other forms of small businesses.

The purpose of this article is to give you an overview of this online business as compared with an office job or other business:

1. Low Cost Business

Most people are worried about incurring high capital to start a business.

Affiliate marketing is one business that you can truly start with a shoestring and yet have global reach. There is cost involved in joining an affiliate network. The only cost you will incur is in setting up your own website, which is almost negligible compared to other business.

2. Inventories Not Required

In other businesses, especially the traditional ones, managing the production and inventories is the most stressful and costly part of business. Human and financial resources are needed to take care of this part of business to ensure continued support and alignment with the sale and marketing function.

In the case of affiliate marketing, it is a clean business. There is no production, and no inventory to manage. Your business involves selling of information and knowledge. It is a true-blue knowledge business.

3. Unlimited Income

Depending on your skills, the earning potential is literally unlimited.

You are only limited by your ability to sell. The core skill for this trade is information marketing.

Your earning wouldn’t be hurt by raw material cost, production disruption, inventory cost, and any costs associated with material handling of physical product.

The beauty of the business is: It can run on auto-pilot after the initial set-up stage and continue working for you tirelessly like the genie of Aladdin Lamp.

While other businesses needs on-going operating expenses to keep the business running, this business enable you to leverage your knowledge a thousand-fold with one-time effort and generate a stream of long-term income.

4. Worldwide Business

With affiliate marketing, you are effectively having a global business.

Unlike traditional businesses, your market is not limited to your city or even your country. It doesn’t depend on location, and hence does not have the problem of rising rental cost when business is good.

At the click of the mouse, you can have access to a global market of 1.46 billion online users. The requirement is to set up your website (the cost of which is a tiny fraction of rental cost in traditional business) and master the skills of internet marketing.

5. Risk

As an affiliate marketer, you are not required to make any capital investment to start you business. This makes it a virtual risk free business. If you fail, or rather quit before you succeed, all you stand to lose is your time.

With no capital involved in starting the business (except for some marketing expense for promoting the affiliate product), it offers the lowest burn-rate among business ventures. This means a significantly longer sustainability period and hence a higher success rate.

6. 24-Hour Sales

It is a business that leverage on technology to work for you.

Your business is global in nature, self-running 24-hour a day. At anytime, there is always someone in some part of the world actively surfing and looking for your product offerings. Your business is literally opened round-the-clock, making money for you even when you are sleeping.

One Salient Point Though:

Despite all the advantages listed above, affiliate marketing is a notoriously competitive business with lots of scams and hypes to lure those with a get-rich-quick mentality.

Success in affiliate marketing belongs to those who take the business seriously, plan it out meticulously and execute the plan relentlessly.

Like any worthwhile business venture, it takes lots of patience, focus, knowledge, hard work and determinations to become successful in affiliate marketing.

If there are any risks involve in this business, they are within your control.