Ask The Money Coach

Archive for the ‘Small Business’ Category

Q: I am interested in trying to own my own business but don’t want to use loans. What types of grants are out there and how do I get my hands on them?

A: We asked small business expert Melinda Emerson, author of Become Your Own Boss in 12 Months to answer this question:

“It’s a good thing you don’t want to use loans to get your business started because banks do not lend money typically to start-up businesses. You need to be in business for two to three years to qualify for even a line of credit. Unless you win a business plan contest or inventors competition for the most part there’s no such thing as finding a grant to start a business.

Related articles

• Why Startups Surged During the Recession (usnews.com)

No, I don’t recommend taking $14,000 from your retirement accounts in order to pay off that business credit card. I would be wary of doing so for three reasons. First, you are medically retired, so you will not likely have any source of earned income for the rest of your life. Frankly, $90,000 is not a lot of retirement income to live on until death. You could live another 30 or 40 years. Also, if you sell some of those retirement assets, you’ll have to be capital gains taxes on them. Sure that’s just 15% (and possibly as low as 5% for people in the two lowest income tax brackets). But I want you to realize that your money will be taxed, meaning you may have to give over to Uncle Sam as much as $2,100 of the $14,000 you’re considering cashing in. Lastly, I’m not convinced that you can’t pay off this debt over time by making some adjustments to your budget. I know that $24,000 a year is not a lot to live on. But have you considered if you can cut any of your existing expenses (namely any luxuries you may be spending money on) and using that money instead to knock out the business credit card debt? I just don’t want you to tap into an already modest retirement nest egg and later regret not having that money to fall back on if times get even tougher or if you need the money for other purposes later in your retirement.

Congratulations on launching your business. The search for financing is a constant dilemma facing entrepreneurs. Read this article for some ideas.

http://askthemoneycoach.com/2009/03/best-place-to-find-grants-loans-and-financing-for-entrepreneurs/

Also, see this post on special resources for minority and women-owned businesses:

http://askthemoneycoach.com/2009/03/additional-help-for-minority-and-women-owned-businesses/

Congratulations to you and your business partner on the pending opening of a cosmetology school. I know you are looking for space to open your school and are working with limited funds. You mentioned finding a 3500-square foot space, but also said the roof has water spots and that the building would require a lot of work. I can’t tell you specifically want a fair price for a lease would be because I don’t have enough information about your situation. However, I can give you some pointers for how to make a smart decision about any space you lease. First, find out what the going market rate is for office space in the region you are considering.

Obviously, leasing space in, say, Manhattan, is more expensive than leasing space in Minneapolis. So a good working knowledge of the local commercial real estate market is critical. Also, find out the details of what is included in your lease. Does is just cover a monthly fee for the use of the space, or would the lease price also cover one or more other expenses.

In commercial real estate terms, you will hear people describe your lease as either a “net” lease or a “gross” lease. If it’s a net lease, that means you (as the tenant or the lessee) have to pay for things like utilities, or other costs. If it’s a gross lease, then all expenses are included in your base rental charge.

Another key term to know: will your landlord (the lessor), try to make your payments based on “percentage rent”? This refers to them charging you all or a portion of your rent/lease fee based on a preset formula that its tied to the amount of sales you generate in your business. If you have a lease that involves percentage rent, think long and hard if you’re willing to give up a certain percentage of your revenue in this way.

Lastly, to know if a lease price is fair, you must also factor in every single element of the lease. For instance, a lease that gives you free parking is more valuable than a lease that requires tenants to pay for parking. You should also know whether you would be responsible for certain other expenses related to maintaining or improving the “common areas” of a building in which you are a lessee.

There are lots of grant programs available in the U.S. for a host of things – from helping to pay college tuition to aiding non-profit agencies providing social services and community-based programs. You didn’t specify what types of grants you are seeking, so let me point you in the right direction of a few resources.

To learn about student loan grants and options to help pay for educational expenses or pay off student loan debt, read this post, and check out of this item and this article too. They’re about government resources to pay student loans.

For information about grants for first-time homebuyers, read this information.

If you are seeking information about grants for business owners, read this article.