Financing: DIY

Yesterday we spoke to communities, encouraging them to build coalitions to support entrepreneurs, by sharing our experience. We'll keep you updated on our progress.

But most entrepreneurs will have to secure their own financing. Two types of businesses need funding: existing business and business ideas. If you just have an idea, you will need to self-fund until you have cash flowing. Venture capitalists do still occasionally fund raw ideas, but that option is like winning the lottery. Don't plan on it.

Following are some options that are commonly used.

Credit card: this is highly risky. If your business fails, you still have to pay off the card balances, and that might take several years. That puts a strain on the business owner, and on any family relationships. But many successful businesses have been built this way. This is a recommendable scheme for SOME situations. 

Secured loan: you can use your home, your savings account, or your company cash flows to secure loans. This is less risky, but the downside is greater. If the business fails, credit card-financing means belt-tightening; personal real estate-secured financing means losing your home.  

Person-to-Person loans, some examples of which are:

Kiva.org

P2PFinancial.ca

Prosper.com

The Nauvoo Commuter philosophy encourages what is called bootstrapping. You use your own resources to start out, then use cash flows to fund growth. When your business has proven it works, then banks will talk to you (if you need a larger loan to scale your operations up.) You won't be the first person to try this. You won't be the first person to succeed this way. 

If you won't invest your own personal savings in your business, how can you expect the bank to invest? If you won't invest your own personal savings in your business, then what will you invest in: will you leave it in the bank, which means investing it in other people's businesses? If so, you don't believe in yourself or in your idea. 

Just remember to continually assess risk. 

Financing: WIP

Yesterday we mentioned community coalitions, and left the concept hanging. Here is what our community is doing to help entrepreneurs.

We are building an entrepreneurship education system for youth, to help them build local businesses, which is not a new idea. But our system will assist students with the whole process, from idea formation to funding.

Our town here is to small to handle this project, so we have joined with some really smart people in Carthage, and together we will roll this out to the whole county. We're creating a coalition of private and public organizations, focusing on the people within those organizations.

Included in the coalition are banks, grant experts, those familiar with USDA loan options, educators, education administrators, and successful entrepreneurs.

Note: this is still a work in progress. 

Financing

The wannabe entrepreneur usually complains about one thing: money. "I've got a great idea/business plan/potential innovation/ but I need funding. And banks are not lending these days."

I've heard this many, many times.

In the current environment, we offer two possible suggestions:

 - Move forward without funding. We call this bootstrapping.
 - Rely on community coalitions that help you find funding.

We'll talk about both of these options.

The new, new economy

The model of business that we have operated under for a century or more is that the firm’s purpose is to lower costs by increasing efficiency. As much as possible, firms safeguard information on how they do this.

Perhaps the new era heralds a different purpose for the firm. Now our responsibility is to increase knowledge, and by synergizing it with the knowledge produced by others we multiply our knowledge. The whole world benefits.