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Capital Ideas

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Perhaps the most important thing to remember about start-up capital is that it doesn't all have to come from a single source. Successful entrepreneurs often tap a variety of financial sources to help make their dreams come true. These include:

*Current salary.
Squirrelling away portions of your paycheck today can help fund your own business tomorrow. If you're already past the planning stage and are ready to launch your new venture, consider moonlighting, or cutting back your full-time job to part-time to ensure you'll have some steady funds rolling in until your business begins to soar.

*Friends and relatives.
Think about borrowing the start-up funds you need from close friends and loved ones. If you do, be sure to put everything (interest, terms of repayment, penalties) in writing to avoid damaging personal relationships, in case something inadvertently goes wrong. Borrowing money from people you know typically results in lower (or no) interest rates.

*Bank loans.
Entrepreneurs typically find banks reluctant to finance start-up ventures. The key to obtaining small-business bank loans frequently involves getting the loan guaranteed by the Small Business Administration (SBA), which assures the bank making the loan that it will ultimately be repaid. You should be aware, however, that the SBA is more likely to guarantee a loan for someone who has been in business awhile than for someone just starting out.

*Home equity loans.
The key to obtaining a home equity loan, clearly, is actually owning a home of your own so you can borrow money on the part of the mortgage that you have already paid off. The bank will either provide a lump-sum loan payment to you or extend a line of credit based on the equity in your home.

*Retirement funds.
If you've got money stored up in a retirement savings plan offered by your employer, you may be able to get your hands on some of it in the form of a loan. Consult the plan's documentation to see if this is an option. If it is, you'll likely be allowed to borrow up to half of the amount you have in the plan.

*Credit cards.
Because of the high interest rates (often 18 percent or more) associated with them, credit cards are not an ideal source of start-up capital in all situations. But if you need to get your hands on some instant cash for equipment or inventory, and expect fairly immediate financial returns so you can pay off their balances quickly, credit cards can turn out to be quite handy in moments of need.

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