Starting a business requires a big amount of money. Thankfully, there are many people and agencies these days which can help you build the capital you need – banks, family and friend, crowd funding and so on.
However, if you do not want to owe anyone anything, you will need to be extra resourceful. Let us take a look at some of your options if you want to fund your startup yourself.
Home Equity Loan
If you own a home, you can avail of a home equity loan. This funding option allows you to borrow money from the part of the mortgage that you have already paid off. Your bank will either extend you a line of credit based on your home’s equity or provide you with a lump-sum loan payment. The amount you can borrow will depend on the value of your home and the amount you have paid for your mortgage. So, you can expect a sizable line of credit if you have a prime property.
Another thing that makes home equity loan attractive is that it has lower interest rates. Not to mention, interest rates paid are generally tax deductible.
Cash-Value Life Insurance
The money you stashed in your cash-value life policy is a ready source of cash. Its interest rate is relatively lower because insurance companies always get their money back. And probably, the best thing about this option is that you are not required to make payments if you do not want to. The principal amount you borrowed and the interest accrued do not have to re-paid. The downside to doing so though is that your loan will be deducted from the amount of money that your beneficiary will receive when you die.
401K Retirement Plan
If you are employed, here’s the good news, you can tap up to 50% of the funds you have accumulated in your 401K without penalty if you follow the right steps and if you have a secured job. This is because if you lose your job, you will be required to pay the loan within a short of period of time (often within one month, but occasionally it can extend to six months). So, make sure check your plan’s documentation to know your options.
No doubt, the safest way to finance your business is to sock away money from your salary until you have saved enough to launch your business. If you don’t want to wait that long, take an inventory of your assets and check which one you can easily liquidate. You probably have more assets than you realize.