Entrepreneurship Booms In Bad Times

August 19, 2009 By

People who might never consider going into business during good times, turn to entrepreneurship during bad times. The reasons are many, but they include a desire to take control of one’s destiny. There are numerous reasons that a person who has been laid off might find the timing just right for a new business during a down turn. While credit is tight, funding a startup in a bad recession costs less than in good times, due to the ready availability of labor and bloated inventories. It is true, however, that without a job or proof of income one can’t get access to ready credit, like payday advance loans, so planning the transition from employee to business owner is very important.

Get Your Capital In Place

Startup capital is needed to get going the first few years. Right now, the economic climate is so rough that without proof that an existing business has the cash flow and income to repay a loan, the credit won’t be extended. There are some small business loans available through the Small Business Administration (SBA), but many new entrepreneurs choose to fund their businesses either with their own savings or venture capital.

Where To Look For Cash

Severance packages or retirement accounts are typical sources of cash for a startup. There are penalties to withdrawing income from a certified retirement account, so that is often a last resort. Other places to find startup cash can be hard money lenders, angel investors, or even family and friends. Drawing a home equity line of credit used to be a favorite way to finance large purchases, but has lost favor for several reasons. Houses have lost value in equity across the nation and it puts your house at risk, should you default on the loan. Having a great business plan to show prospective investors can make a better impression when trying to obtain funds for a business startup too.

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