Depending on your business, it creates a lot of personal risk for the owner if they are not properly protected. Take this
possible scenario into consideration. You sell a piece of glass to someone, and they use it to illegally ingest a substance
such as meth. He overdose’s and his parents find the pipe and your receipt in his pocket. They instantly see an avenue
to focus their anger, and their lawsuit.
The key here is to start a LLC, LLP, or Corporation (check with your Secretary of State office) and seek funding for the Company
rather than seeking a personal loan. When you are seeking funding THE MOST important instrument in acquiring funding is a
well thought out business plan.
The business plan should include the following:
(Most important section, Short 1-3 pages that gives the lender/investor the key financial projections and
market demand, if you can convince a lender of a profitable business idea in the Executive Summary they will be jumping to
provide you with as much capital as you need)
(Defines the specific demand for your product
in the market)
(Inventory pricing w/ comparisons to similar markets)
(Cash flow analysis and Initial Cost Recovery Timeline)
(When do you call it quits, and how
will you repay the loan if the business goes bust)
The primary purpose of your business plan is to establish credibility and due diligence with lenders, investors, and
business partners. There are any number of other components that can strengthen your business plan, and I would suggest buying
a book on creating business plans if you are seriously interested in pursuing this. Also, it would be wise to consult some
outside small business consultants (check into the small business bureau) speak with an accountant, speak with an attorney,
establish a personal relationship with the City/Town officials, etc.
Credit Unions, Smaller Local Banks, and Private investors are much better avenues with far lower interest rates. Starting
a business is certainly not something you want to jump into without very careful planning and research. But the ultimate rewards
of owning your own business can greatly worthwhile.
One last piece of advice, it would be worthwhile to
audit (take without a grade) a college business class at your local university on small business planning. Couple hundred
bucks maybe, but well worthwhile if you are close to a decent university, with a business program.
Go to http://www.score.org/index.html and in the upper left hand corner, enter
your zip code. On the next screen, you will get information on the nearest SCORE chapter. Call them and arrange for a free
meeting with a SCORE counselor.
SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth and success of
small business nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).
SCORE has 389 chapters in locations throughout the United
States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate
time and expertise as business counselors.