I’ve been developing a series about becoming your own boss, and this is part 5 in that series. The information is based on an article from MSN, but I’m pulling in information from other locations as well.
Step 5: Raise Money
Now that you have a solid business plan that outlines how much capital you need, it is time to find it. Here’s what our article suggests:
* Limit the amount of your own money you put into the business to minimize risk.
* Steer clear of using credit card debt because it is expensive.
* Go to a bank first. If your credit score is 680 or higher and the loan is for $50,000 or less, your chances of being awarded the loan are good.
How about taking a loan from a friend or relative? MSN provides a warning:
If your credit history is too short, friends and family may be your best shot. But tread carefully: Set the loan up like a formal business transaction that explicitly states when it will be repaid.
If you’re afraid of damaging the relationship when a person feels a handshake is a sufficient agreement, say to this friend your accountant needs to ensure everything is documented. The article also suggests CircleLending as a resource for person-to-person loans.
Another option is the popular-on-the-internet Prosper.com, which offers ways to borrow money from multiple lenders. Many bloggers have written about their experiences with this service as both lenders and borrowers. The best way to peruse the multitude of articles is to search pfblogs.org for “prosper.com.” Also, check out this article about Prosper.com on Salon.
Updated February 10, 2011 and originally published May 30, 2006.