Borrowing Trouble

Considering a loan? Look at your options.

Before incurring onerous debt likely to plague your bottom line for years, askyourself if getting that loan is really necessary. Could you start your newbusiness with personal savings? Would liberal credit terms from vendors helpcarry your existing business through downturns? Might improved cash flow beenough to fund expansion?

Fact is, most small businesses are funded by savings, leaving owners with noloan repayments, no partners, no one to share profits with and no exorbitantinterest to pay. But if you absolutely must look elsewhere, ask friends andrelatives to help with start-up capital. Or investigate borrowing against yourretirement plan (if you're currently employed), stock-market holdings,life-insurance policy, certificates of deposit or home. (Be aware that ahome-equity loan is risky; in a worst-case scenario, you could lose yourhouse.) Other options:

Economize. Slash start-up expenses to meet available funds. Forgo movinginto an office or buying new equipment. Use your existing vehicle, furnitureand supplies. Need tools or materials? Buy used or lease.

Conduct business from home. If you must have an outside location,negotiate for lower rent and leasehold improvements.

Need professional services? Look into trade-outs or time payments.

Do you buy from outside vendors? Arrange in advance for volume discountsand just-in-time (JIT) delivery. JIT reduces inventory and the need for storagespace--plus, you don't have to pay for materials until they're delivered.