Starting from the confines of your home does not entail a bulk of costs and certainly does not weigh heavily on your pocket. However, assuming the role of an entrepreneur is not an easy job, at any level. Along with the tedious task of acquiring a customer base, home-based business owners also need to manage finances.
Without the kind of assets huge startups have under their belt, home-based owners need to really look around to tap their funds.
Along with scouring appropriate financiers, there is an array of things home business owners must look into before plummeting into a full-fledged business.
- Tax laws are stringent and incur hefty penalties so make sure you do not evade any. Inform the relevant authorities about your untaxed earnings to avoid the risk of penalty later.
- You must take a quick look at your property deeds before you begin to use your home for business purposes. Most property deeds include a paragraph related to business use, banning this practice, especially if you reside on a large estate. Make sure you are aware of the clauses to avoid incurring additional costs as fine.
- In case you’re working in a rented home, it is mandatory to confer your business plans with your landlord to avoid any legal issues later. If your home-based business does not cause any damage to the property, most likely your landlord will have no objections.
- It is also advised to get in touch with a planning consultant before you render any ‘material changes’ to your home to transition it into an office to avoid getting in trouble with local authorities.
- Consult a specialist broker to have a ‘business use’ clause added to your insurance. It might cost you a minor premium but will cover the insurance of your business contents along with the existing contents of your home.
After having dealt with the checklist above, home-based owners can then look towards feasible financiers, depending vastly on the kind of business they wish to commence and the state they reside in.
1. The US Small business administration (SBA) offers a ‘Microloan Program’, a financial plan to cater to small businesses, individuals and home-based business owners. They provide microloans of up to $50,000, a reasonable amount to kick start your home-based business.
2. Home-based owners usually do not commence with large sums of capital so leasing as opposed to buying equipment might be a more feasible alternative.
These business owners can acquire the facilities of Equipment Leasing and Finance Association (ELFA) that provides finances aiding businesses to grow. Instead of expending considerable amounts of money in one go, leasing allows you to submit monthly payments while utilizing the necessary equipment to further your business.
3. Home-based businesses tend to require minimal capital and can thus look towards bootstrapping as a financing option. Working best for businesses with enough starting capital, bootstrapping means using the profit you generate to continue your business processes.
It rules out the possibility of incurring large debts and allows you to concentrate on acquiring a broader customer base, and consequently greater profits.
4. Borrowing money from friends and family also works for home-based businesses. Since you do not require the significant cost of a place to start up at, you can acquire the remaining cost by borrowing the minimal amount of money you need from friends and family.
In order to keep things professional, establish a lucrative interest rate. Dealing with friends and family might be more feasible because you do not require large capital to begin with, and in case you cross your deadline, there is no detrimental risk involved.
5. A common financing option for home-based businesses is using home equity lines. A home equity line of credit, usually termed HELOC, is a loan where you’re borrowing against the available equity in your home and keeping your house as collateral.
While this method is economical, it entails a huge risk of losing your home in case your business fails.
6. Once the business is up and running, you need payments in a timely manner as that is most likely your only source of income.
When making a purchase to large businesses, home business owners usually have to wait up to 30-60 days to acquire that payment, hampering their finances.
To avoid delayed payments, home-based businesses can look towards small business factoring programs that finance your slow-paying invoices. Instead of waiting to receive the cost from your customer, you can acquire immediate and reliable funding from this service.
In today’s world, home-based business owners are growing at the speed of light. With lucrative opportunities available, entrepreneurship is taking a high. With the birth of this extensive market, relevant financing options have opened up to nurture these home-based businesses.
Choose the option best suited to your business and kick start your home-based business today!
