How Did You Fund Your Business? What Methods Would You Recommend For Others?
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OPM. the key to building your business is in Other Peoples Money. There are trillions of dollars out there to fund any thing you can imagine. The key is finding the right situation for you and your business. Considering that a good mutual fund returns less than 10%, and the stock market is up a whopping 3%. Investors and private citizens are looking for better options and venture capital can return huge dividends. Using your own money or credit is fine if you are in the position to do that, but most are not. It is also risky, bet wrong and loose your credit rating and your personal assets, no matter the structure of your operation. If you have noticed as a new business you are basically signing personal guarantees on everything you finance from your rent on your location to small business loan, even with the SBA, you will have a personal guarantee, which will hold up in collections, in spite of your corporate protections. This is why most entrepreneurs end up with bad credit. There are plenty of options for every situation when it comes to business loans, find the right one. Always start with your bank or a reffered Broker, who will work for you not the lender.
This makes sense, and is good advice for many people, I believe.
However, I would personally rather owe myself than owe creditors. I have never bought anything on credit, if you can believe it. I'm not wealthy. I just plan ahead. Not buying on credit means I've also never had to pay back interest on anything.
I do remember a meeting with one extremely wealthy entrepreneur in Jamaica a few years ago. He told me if I started a business and wasn't willing to risk my personal credit and assets, then it's not a business I truly believe in or have the skills for, and not one I should be in.
I think that's a bit drastic to look at business in that way, but I also think he makes a good point.
I worked a full time job, I moonlighted after work and weekends starting my first business, it took 3 years of working 80 plus hours a week before I had the working Capital in place and all my equipment paid for before I was able to quit my Job. Even though it was hard and almost lead to a broken home I was persistent and with in a year focusing all my efforts on my business I tripled my initial size. By growing like this I was able to buy equipment as I went and remain debt free. I started my second business funding it with the money from the original business by loaning the money to the second business therefore paying myself back. I ended up with in 10 years of having 2 companies that were totally debt free employing 11 employees in one and 4 employees in the other with an office assistant for each business. so I employed 17 people. The sad part is when I sold the business I gave the business model and the structure to the guy who bought it. I stayed on with him for 90 days to teach him the ins and outs. He lost the business within 3 years and had to close it down because he borrowed so much money against it. So even if you give someone all the tools to be successful the plan and trained employees in place doesn't mean they will be successful. He failed because he failed to plan had no sweat, blood or tears in the game. Daddy left him a trust fund so he never understood the value of money or hard work, life was a big party to him. He overdosed on Cocaine a year later.