How to Finance Your Business Startup and Expansion

You retired from your job at 55 and you’re getting bored. You want to work again. You weren’t really ready to hang up your hat, even though you thought you were. Working for someone else was oppressive; working for yourself is rewarding. How will you finance a business startup and expansion, however? Yes, you have plenty of nest egg to last you well into your Golden Years, but you don’t want to risk it all.

How to Finance Your Business Startup and Expansion

Personal Financing

Despite your desire to protect your nest egg, you will have to invest in your own business. This is necessary for two reasons. One, nobody will finance your venture 100 percent, much less do you want him or her to because that makes he or she the owner. Two, investors want to see you put your money where your mouth is before they’ll put their money where your mouth is. If you aren’t willing to invest in your own idea, why should they? You will need to tap into that nest egg a little.

Don’t fret, however, because there are plenty of other ways you can get the funding you need for your startup and eventual expansion costs. One personal way to get your hands on some funding is to take out a reverse mortgage on your home. If you aren’t upside-down in your mortgage, you can contact a company like American Advisors Group to see about a line of equity against the value of your home. In most cases, you can use this money for whatever you want.

Once you and your spouse pass on or are ready to leave your home, the deed transfers to the financial institution, i.e., if you take out an AAG Reverse mortgage, AAG gets to sell your home and keep the monies. This pays off the equity line you used to finance your business expenses, and this is only one way you can “bootstrap your assets,” as financial experts call it. You can also sell valuable assets, cash out liquid assets, and borrow against your existing lines of credit.

Alternative Financing

Don’t finance the entire venture yourself, however, if it takes too much of your retirement savings. There are alternative ways to secure funding for your business startup and/or expansion, as well. Your family and friends have been there for you through thick and thin, and it’s possible they might like to help you realize your life-long dream. Offer them incentives, such as a small stake in your company. If you know someone who is an expert in what you want to do, his or her advice will be invaluable anyway.

Other options include angel investors, crowdfunding campaigns, grants, and SBA microloans, and each of them comes with their own advantages and disadvantages. Angel investors are wealthy people who invest their money into new business ventures in exchange for a financial and management stake. This works well at first, as an angel can offer crucial strategies that ensure your success. Ultimately, however, you might want to own your business without any partners.

Crowdfunding works just like the Go Fund Me campaigns you keep getting from your family members and friends. It raises money for your business startup or expansion costs through donations. The only caveat is raising all the money you need. Grants do not need to be paid back, which is a huge advantage, but the money must be used as designated by the issuer. Finally SBA microloans work the same as traditional loans but often offer lower interest rates and longer terms.

No matter the options or options you choose, write a comprehensive business plan first to see how much you need and how you will turn your business into a success. All investors will want to see it before they consider financing your dream.

Posted in: Finance