How to self-finance your startup or business

Every business needs money at some point in its life time. The notion that you can start a business without money is somewhat of a fallacy. Sure, you can start a business without any of your money, and use someone else’s, but at the end of the day you are still using money to get your business going. If you are just getting started with your business, you most likely don’t have any sales yet, and asking friends or family members to invest may not be an option. The business is too early in its lifecycle to acquire professional funding from investors which leaves it all on you. The conclusion that you are now going to draw is that you will have to self-fund this business; now you need to figure out how to do it.

So what are your options? Let’s discuss a few.

If you’re a home owner and have equity you can see about taking out a home equity line of credit. This will provide you with a lump sum of cash that you can use to launch your business and hopefully there is enough there to float you until you start to generate your own sales. Please take into consideration what that debt will cost you and be sure to factor those increased payments into your overall financial picture. When acquiring any loan, affordability is going to be key. Banks have already shown that they will give loans even to those who are unable to afford it, so it will be your own responsibility to recognize what falls within your income range.

If you have a retirement (401k or IRA) you can look into cashing those out as well. Just be sure you are willing to accept the penalties imposed on early withdrawals from these accounts. Sometimes it’s simply not worth it to take that hit, however if you’ve done your homework and believe strongly enough on your business idea, it may be worth it to you.

If you have good credit, you can float yourself using credit cards until sales pickup. Be sure to shop for the best interest rate possible and make sure you can afford more than your minimum payments on those cards when you utilize them otherwise you will never get them paid off.

If these aren’t viable options you can get a second job to help fund your business venture, although this won’t leave much available time for you to work on it, or downgrade your current living expenses in order to free up income for you to use on your business. Even if it’s an additional $200-$500 per month, it may make all the difference in the world during your beginning stages while you try to get things going. Sometimes that’s all it takes to build something great and if you believe in yourself and the business idea it will be well worth the sacrifice. It’s better to try and fail, then to live your life with regret for not ever truly knowing if your business idea could have been a huge success.