Banking and Financing

What Are Your Capital Needs?
One of the biggest mistakes new business owners make is that they fail to adequately fund their new business. Be sure to spend the necessary time deciding what your capital requirements are going to be. Don't forget to include at least 3 months operating expense! Once you determine your financing needs, here are some options you may want to consider:

401K / Retirement
Most retirement plans allow you to borrow against your account. This is a great financing tool because in most cases, the interest you pay on the loan is deposited into your retirement account. You should check with your plan administrator for details.

Home Equity
Your home could be a good source for funding your new business. Interest rates on home equity loans tend to be lower than rates on business loans.

Friends and Relatives
Maybe you have an Aunt or Uncle looking for a great new investment?

Banks
Many banks will make SBA backed loans to new business owners because it reduces their risk. Be aware that SBA backed loans requires additional documentation. You should check with your local SBA office for details on SBA loans. Also, local or smaller banks tend to be more inclined to loan money to a business startup than the bigger national banks.

Angel Investors
Angel investors will tend to invest money in new concepts. They most likely will want a significant equity stake in any business they invest in.

Will you need to accept credit?
In most cases the answer to this question is probably yes. Most business owners quickly realize how vital it is to have the ability to accept credit cards. If you need to process crerdit cards, you are going to need to establish a Merchant Account. Finding a good merchant account is not an easy task, if you perform an internet search you will be flooded with merchant account offers. Be careful to put considerable thought into who you choose for your merchant account as it will have a lasting impact on your expenses.

There are two important factors you need to take into consideration with merchant account. The first factor is the per transaction fee. Most merchant accounts charge a fee for every transaction they process on your behalf. It is usually a flat fee, pay attention to that fee because even $1.00 per transaction could equate into hundreds if not thousands of dollars a month if you have a large transaction count (most retail businesses usually do). The second factor is the percent they charge per sale. This percentage is important because the higher the percentage, the more of your hard earned revenue is taken. Some merchant accounts refund this percentage amount when you give your clients credit card refunds, others don't. Also, some merchant accounts require a minimum montly transaction amount to qulify for their rates, so be sure to read the fine print. Try not to commit to long term contracts with merchant accounts because there is lots of competition out there and you never know when a better deal may come along.