Financing Your Mompreneur Business
Where to look for business financing when you're ready to get your business started
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Many wannabe entrepreneurs don't move forward with their business idea because of the fear of raising business financing. Don't let fear stop you! If you have a good idea and a well-thought plan, then there's a way to make it work, and it may not be as hard as you think.
In fact, there are more business financing opportunities for female entrepreneurs than ever. Maybe that's because there are more prominent women business owners than ever. Unfortunately, even with this increase in funding options, mompreneurs still have a disadvantage-they're often thought of by investors and lenders as less committed and less likely to stick to their business plan because of the pull of family. But even though you'll face some obstacles on the road to business funding, you'll be glad to hear there are definitely options out there for financing your business, some traditional and some more creative. Just remember, if there's a will, there's a way.
Chances are to raise money, you'll need a business plan. If you don't yet have one, don't feel intimidated by the project. It's just a matter of charting out how much you expect to make and spend and detailing how you figured this out.
When it comes to the financial side of your plan, it's best to be conservative and increase your expense calculations and decrease your projected revenues. Investors will also want to know why your business is unique and how you plan to beat out your competition. Your business plan should also show your experience and your passion for the proposed business. (You can get business plan samples and guidance on writing your own plan at Entrepreneur.com.)
Once you've completed your business plan, you're ready to search for funding. There are basically just two types of investments: debt and equity. With debt funding, someone loans you money and gets their money back plus interest. With equity funding, you sell part of your company in exchange for the investment. Be careful with equity funding! It's easy to give away a percentage of something that's currently worth nothing. But if your company turns out to be worth a million dollars, that $10,000 investment you got was probably not worth 10 percent of your company. Also, equity funding means partners. In one way or another, equity investors are a part of your company.
So how will you get your money?
The first line of business financing is usually a personal loan--you loan yourself the money. This can come in the form of line of credit on your house, your savings, even your retirement account. The benefit of a personal loan is that you retain total control of your business. The downside is, there's a big risk involved. Are you willing to risk your family's personal assets? Chances are, it'll be hard to find a bank or investor to lend you any money if you're not willing to take on some risk yourself.
Even though it's not usually advised, many mompreneurs choose to finance their companies using their credit cards. It's hard to resist the low-interest (or even no-interest) incentives that are in your daily mail. But while rates may start low, they inevitably creep up and spin out of control. If you go this route, proceed with caution and be sure to move your money when interest rates spike. No matter how successful the business, it'll be difficult to catch up if interest rates are sky-high.
The next route for mompreneurs to take tends to be borrowing from friends or family. It makes sense: You know them, and they believe in you. If you decide to pursue this option, be sure to do it legally and with the proper documentation. Are these people able to afford the risk? Will they need to be paid back right away? How would you feel if you couldn't re-pay the investment? Experts agree that you should consider getting the financing in the form of a loan instead of equity as it could later affect your attempts to raise financing from professional investors.
Need still more money? Then it may be time to approach outside investors or banks. Consider getting professional (and free) advice from someone at SCOREabout how and who to approach. This is also when you'll want to take advantage of that strong relationship you have with your local banker (you do have one, right?). Local banks are often easier to get a loan from than large, commercial branches.
Next on the funding list are angel investors and venture capitalists. Both of these sources are looking for a higher return on their money than they can get from traditional investments. They're more likely to take a higher percentage of your business than other investors (more like 25 percent) and retain tighter control. An angel investor is more likely to have experience and interest in your industry whereas the venture capitalist will invest in any venture that looks promising.
You should also consider investigating government programs. There are a variety of loans you could consider. For instance, the SBA has a program called SBA Express where you can get up to $150,000 without all the paperwork associated with traditional SBA loans. And you get an answer within 36 hours. In fact, there are many special opportunities for women and minorities. Visit the SBA sitefor more information.
Here's my final advice to you: Remember, that in the eyes of a lender, you're simply a businessperson looking for financing. So make your presentations professional and don't show up with child in tow. You'll need to prove that you're serious about your business and that you can juggle work and family.
Learn from other successful women business owners about how they accomplished their goals--it's best to learn from others' mistakes so you don't have to. No matter which route you take, take your business seriously. Be committed, be passionate, and stay true to why you want to accomplish success in your business.