QUESTIONS AND ANSWERS
By Mark McKeller

Q. I want to start a home based computer business, but I don't have enough cash to buy it. What other ways are there to finance my business? Michael P., Atlanta.

A. There are several ways to finance your business without using your own money. In fact, many people choose to finance their business purchases, even if they already have the necessary capital. One way to get needed funds is to get a business loan from a local bank. Most banks will require that you provide collateral to back up the note, especially if you want the money for a start-up business. The collateral requirement is rarely waived unless you have sufficient operating history or assets in your business.

Another relatively common way to finance a business is with a lease, especially if your business is one that involves equipment. Ask the company representative who is selling you the business if they have a leasing source available to you. If so, the source will already be familiar with the business you want to buy, making the process of getting the lease approved much simpler than if you approach a source unfamiliar with the business you are buying. Leases generally carry higher interest rates than bank loans, but do not have collateral requirements. You simply pledge the assets you are buying against the lease agreement.

Unless you have already established a relationship with a local bank for your financing, the easiest and most efficient way to buy your business may be to use credit cards. In these days of "easy credit", getting five or ten thousand dollars of credit on one or more cards is not difficult, assuming your credit history is sound. Cards afford several advantages over conventional loans or leases. First, using them is quick and simple. Even though they may carry higher interest rates than loans, there is no application process, and the time you save may wipe out the effect of any real interest savings of getting a loan. This is especially true if you expect proceeds from your business to allow you to pay off the debt quickly. Many credit card companies will offer you very low "introductory" interest rates that will apply for several months. Second, when using credit cards, your monthly payments may be much lower than they would be with a loan. This is especially important in the early stages of your business development. Third, credit cards in effect provide a collateral free loan, since no security is required for their use.

Ask your attorney or accountant about other options that may be available to you in your area. Also, ask about the tax ramifications of different options before deciding how to finance your business. If none of these options are suitable for you, then you may want to approach family, friends or other business people in your community for the money. If you have a sound business concept and are committed to it, you may be able to attract a financial partner. Be prepared to share ownership with your investor; few individuals are willing to take a financial risk for you without getting an ownership position in return.