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A very important rule of the game to learn: Any time you want to
raise money, your first move should be to put together a proper
prospectus.

This prospectus should include a resume of your background, your
education, training, experience and any other personal qualities
that might be counted as an asset to your potential success. It’s
also a good idea to list the various loans you’ve had in the
past, what they were for, and your history in paying them off.

You’ll have to explain in detail how the money you want is going
to be used. If it’s for an existing business, you’ll need a
profit and loss record for at least the preceding six months, and
a plan showing how this additional money will produce greater
profits. If it’s a new business, you’ll have to show your
proposed business plan, your marketing research and projected
costs, as well as anticipated income figures, with a summary for
each year, over at least a three year period.

It’ll be advantageous to you to base your cost estimates high,
and your income projections on minimal returns. This will enable
you to “ride through” those extreme “ups and downs” inherent in
any beginning business. You should also describe what makes your
business unique—how it differs form your competition and the
opportunities for expansion or secondary products.

This prospectus will have to state precisely what you’re offering
the investor in return for the use of his money. He’ll want to
know the percentage of interest you’re willing to pay, and
whether monthly, quarterly or on an annual basis. Are you
offering a certain percentage of the profits? A percentage of the
business? A seat on your board of directories?

An investor uses his money to make more money. He wants to make
as much as he can, regardless whether it’s short term or long
term deal. In order to attract him, interest him, and persuade
him to “put up” the money you need, you’ll not only have to offer
him an opportunity for big profits, but you’ll have to spell it
out in detail, and further, back up your claims with proof from
your marketing research.

Venture investors are usually quite familiar with “high risk”
proposals, yet they all want to minimize that risk as much as
possible. Therefore, your prospectus should include a listing of
your business and personal assets with documentation—usually
copies of your tax returns for the past three years or more. Your
prospective investor may not know anything about you or your
business, but if he wants to know, he can pick up his telephone
and know everything there is to know within 24 hours. The point
here is, don’t ever try to “con” a potential investor. Be honest
with him. Lay all the facts on the table for him. In most cases,
if you’ve got a good idea and you’ve done your homework properly,
and “interested investor” will understand your position and offer
more help than you dared to ask.

When you have your prospectus prepared, know how much money you
want, exactly how it will be used, and how you intend to repay
it, you’re ready to start looking for investors.

As simple as it seems, one of the easiest ways of raising money
is by advertising in a newspaper or a national publication
featuring such ads. Your ad should state the amount of money you
want–always ask for more money than you have room for
negotiating. Your ad should also state the type of business
involved ( to separate the curious from the truly interested),
and the kind of return you’re promising on the investment.

Take a page from the party plan merchandisers. Set up a party and
invite your friends over. Explain your business plan, the profit
potential, and how much you need. Give them each a copy of your
prospectus and ask that they pledge a thousand dollars as a
non-participating partner in your business. Check with the
current tax regulations. You may be allowed up to 25 partners in
Sub Chapter S enterprises, opening the door for anyone to gather
a group of friends around himself with something to offer them in
return for their assistance in capitalizing his business.

You can also issue and sell up to $300,000 worth of stock in your
company without going through the Federal Trade Commission.
You’ll need the help of an attorney to do this, however, and of
course a good tax accountant as well wouldn’t hurt.

It’s always a good idea to have an attorney and an accountant
help you make up your business prospectus. As you explain your
plan to them, and ask for their advice, casually ask them if
they’d mind letting you know of, or steer your way any potential
investors they might happen to meet. Do the same with your
banker. Give him a copy of your prospectus and ask him if he’d
look it over and offer any suggestions for improving it, and of
course, let you know of any potential investors. In either case,
it’s always a good idea to let them know you’re willing to pay a
“finder’s fee” if you can be directed to the right investor.

Professional people such as doctors and dentists are known to
have a tendency to join occupational investment groups. The next
time you talk with your doctor or dentist, give him a prospectus
and explain your plan. He may want to invest on his own or
perhaps set up an appointment for you to talk with the manager of
his investment group. Either way, you win because when you’re
looking for money, it’s essential that you get the word out as
many potential investors as possible.

Don’t overlook the possibilities of the Small Business Investment
Companies in your area. Look them up in your telephone book under
“Investment Services.” These companies exist for the sole purpose
of lending money to businesses which they feel have a good chance
of making money. In many instances, they trade their help for a
small interest in your company.

Many states have Business Development Commissions whose goal is
to assist in the establishment and growth of new businesses. Not
only do they offer favorable taxes and business expertise, most
also offer money or facilities to help a new business get
started. Your Chamber of Commerce is the place to check for
further information of this idea.

Industrial banks are usually much more amenable to making
business loans than regular banks, so be sure to check out these
institutions in your area. insurance companies are prime sources
of long term business capital, but each company varies its
policies regarding the type of business it will consider. Check
your local agent for the name and address of the person to
contact. It’s also quite possible to get the directories of
another company to invest in your business. Look for a company
that can benefit from your product or service. Also, be sure to
check at your public library for available foundation grants.
These can be the final answer to all your money needs if your
business is perceived to be related to the objectives and
activities of the foundation.

Finally, there’s the Money broker or Finder. These are the people
who take your prospectus and circulate it with various known
lenders or investors. They always require an up-front or retainer
fee, and there’s no way they can guarantee to get you the loan or
the money you want.

There are many very good money brokers, and there are some that
are not so good. They all take a percentage of the gross amount
that’s finally procured for your needs. The important thing is to
check them out fully; find out about the successful loans or
investment plans they’re arranged, and what kind of investor
contacts they have—all of this before you put up any front
money or pay any retainer fees.

There are many ways to raise money—from staging garage sales to
selling stocks. Don’t make the mistake of thinking that the only
place you can find the money you need is through the bank or
finance company.

Start thinking about the idea of inviting investors to share in
your business as silent partners. Think about the idea of
obtaining financing for a primary business by arranging financing
for another business that will support the start-up,
establishment and developing of the primary business. Consider
the feasibility of merging with a company that’s already
organized, and with facilities that are compatible or related to
your needs. Give some thought to the possibilities of getting the
people supplying your production equipment to co-sign the loan
you need for start-up capital.

Remember, there are thousands upon thousands of ways to obtain
business start-up capital. This is truly the age of creative
financing.

Disregard the stories you hear of “tight money,” and start making
phone calls, talking to people, and making appointments to
discuss your plans with the people who have money invest. There’s
more money now than there’s ever been for a new business
investment. The problem is that most beginning “business
builders” don’t know what to believe or which way to turn for
help. They tend to believe the stories of “tight money,” and they
set aside their plans for a business of their own until a time
when start-up money might be easier to find.

The truth is this: Now is the time to make your move. Now is the
time to act. the person with a truly viable business plan, and
determination to succeed, will make use of every possible idea
that can be imagined. And the ideas I’ve suggested here should
serve as just a few of the unlimited sources of monetary help
available and waiting for you!

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If you are one of these people, here are some practical thoughts
to consider before hanging out the “Open for Business” sign.

In areas zoned “Residential Only,” your proposed business could
be illegal. In many areas, zoning restrictions rule out home
businesses involving the coming and going of many customers,
clients or employees. Many businesses that sell or even store
anything for sale on the premises also fall into this category.

Be sure to check with your local zoning office to see how the
ordinances in your particular area may affect your business
plans. You may need a special permit to operate your business
from your home; and you may find that making small changes in
your plan will put you into the position of meeting zoning
standards.

Many communities grant home occupation permits for businesses
involve typing, sewing, and teaching, but turn thumbs down on
requests from photographers, interior decorators and home
improvement businesses to be run from the home. And often, even
if you are permitted to use your home for a given business, there
will be restrictions that you may need to take into
consideration. By all means, work with your zoning people, and
save yourself time, trouble and dollars.

One of the requirements imposed might be off street parking for
your customers or patrons. And, signs are generally forbidden in
residential districts. If you teach, there is almost always a
limit on the number of students you may have at any one time.

Obtaining zoning approval for your business, then, could be as
simple as filling out an application, or it could involve a
public hearing. The important points the zoning officials will
consider will center around how your business will affect the
neighborhood. Will it increase the traffic noticeably on your
street? Will there be a substantial increase in noise? And how
will your neighbors feel about this business alongside their
homes?

To repeat, check into the zoning restrictions, and then check
again to determine if you will need a city license. If you’re
selling something, you may need a vendor’s license, and be
required to collect sales taxes on your transactions. The sale
tax requirement would result in the need for careful record
keeping.

Licensing can be an involved process, and depending upon the type
of business, it could even involve the inspection of your home to
determine if it meets with local health and building and fire
codes. Should this be the case, you will need to bring your
facilities up to the local standards. Usually this will involve
some simple repairs or adjustments that you can either do
personally, or hire out to a handyman at a nominal cost.

Still more items to consider: Will your homeowner’s insurance
cover the property and liability in your new business? This must
definitely be resolved, so be sure to talk it over with your
insurance agent.

Tax deductions, which were once one of the beauties of engaging
in a home business, are not what they once were. To be eligible
for business related deductions today, you must use that part of
your home claimed EXCLUSIVELY AND REGULARLY as either the
principal location of your business, or place reserved to meet
patients, clients or customers.

An interesting case in point: if you use your den or a spare
bedroom as the principal place of business, working there from
8:00 to 5:00 every day, but permit your children to watch TV in
that room during evening hours, the IRS dictates that you cannot
claim a deduction for that room as your office or place of
business.

There are, however, a couple of exceptions to the “exclusive use”
rule. One is the storage on inventory in your home, where your
home is the location of your trade or business, and your trade or
business is the selling of products at retail or wholesale.
According to the IRS, such storage space must be used on a
REGULAR Basis, and be separately identifiable space.

Another exception applies to daycare services that are provided
for children, the elderly, or physically or mentally handicapped.
This exception applies only if the owner of the facility complies
with the state laws for licensing.

To be eligible for business deductions, your business must be an
activity undertaken with the intent of making profit. It’s
presumed you meet this requirement if your business makes a
profit in any two years of a five-year period.

Once you are this far along, you can deduct business expenses
such as supplies, subscriptions to professional journals, and an
allowance for the business use of your car or truck. You can also
claim deductions for home related business expenses such as
utilities, and in some cases, even a new paint job for your home.

The IRS is going to treat the part of your home you use for
business as though it were a separate piece of property. This
means that you’ll have to keep good records and take care not to
mix business and personal matters. No specific method of record
keeping is required, but your records must clearly justify and
deductions you claim.

You can begin by calculating what percentage of the house is used
for business, Either by number of rooms or by area in square
footage. Thus, if you use one of the five rooms for your
business, the business portion is 20 percent. If you run your
business out of a room that’s 10 by 12 feet, and the total area
of your home is 1,200 square feet, the business space factor is
10 percent.

An extra computation is required if your business is a home day
care center. This is one of the exempted activities in which the
exclusive use rule doesn’t apply. Check with your tax preparer
and the IRS for an exact determination.

If you’re a renter, you can deduct the part of your rent which is
attributable to the business share of your house or apartment.
Homeowners can take a deduction based on the depreciation of the
business portion of their house.

There is a limit to the amount you can deduct. This is the amount
equal to the gross income generated by the business, minus those
home expenses you could deduct even if you weren’t operating a
business from your home. As an example, real estate taxes and
mortgage interest are deductible regardless of any business
activity in your home, so you must subtract from your business
gross income the percentage that’s allocable to the business
portion of your home. You thus arrive at the maximum amount for
home-related business deductions.

If you are self-employed, you claim your business deductions on
SCHEDULE C, PROFIT(or LOSS) for BUSINESS OR PROFESSION. The IRS
emphasizes that claiming business-at-home deductions does not
automatically trigger an audit on your tax return. Even so, it is
always wise to keep meticulously within the proper guidelines,
and of course keep detailed records if you claim business related
expenses when you are working out of your home. You should
discuss this aspect of your operation with your tax preparer or a
person qualified in the field of small business tax requirements.

If your business earnings aren’t subject to withholding tax, and
your estimated federal taxes are $100 or more, you’ll probably be
filing a Declaration of Estimated Tax, Form 1040 ES. To complete
this form, you will have to estimate your income for the coming
year and also make a computation of the income tax and
self-employed tax you will owe.

The self-employment taxes pay for Social Security coverage.
If you have a salaried job covered by Social Security, the
self-employment tax applies only to that amount of your home
business income that, when added to your salary, reaches the
current ceiling. When you file your Form 1040-ES, which is due
April 15, you must make the first of four equal installment
payments on your estimated tax bill.

Another good way to trim taxes is by setting up a Keogh plan or
an Individual Retirement Account. With either of these, you can
shelter some of your home business income from taxes by investing
it for your retirement.

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It’s true that most people are busy, but extra time for some sort
of home-based extra income producing project can almost always be
found. It may mean giving up or changing a few of your favorite
pastimes–such as having a couple of beers with the guys or
watching TV–but if you score big with your extra income project,
you will have all the time you want for doing whatever you what
to do.

Efficient time management boils down to planning what you’re
going to do, and then doing it without backtracking. Start by
making a list of the things you want to do tomorrow, each evening
before you go to bed. Schedule your trips to the store or
wherever to coincide with the other things you have to do, and
with your trips to or from work. Organize your trips to take care
of as many things as possible while you’re out of the house.
take stock of the time you spend on the telephone—and eliminate
all that isn’t necessary.

Whatever chores you have to do at home, set aside a specific time
to do them, and a specific amount of time to devote to them. For
instances, just one hour a day devoted to yard work would
probably make your property the envy of all your neighbors. Don’t
try to do a week’s work in one big flurry. Whether it’s painting
your house, fixing leaky faucets, or mowing your lawn and
trimming your shrubs, do a part of it, or one particular job each
day, and you’ll be amazed at your progress.

Take care of all your mail the day, you receive it. Don’t let
those bills and letters pile up on you. If you’re unable to pay a
bill immediately, file it in a special place that’s visible, and
note on the envelope the date you intend to pay it. Answer your
letters the same day you get them.

Once you start listing and planning what to do, and then carry
out your plans, you’ll find plenty of “extra time” for handling
virtually any kind of home-based income producing project. People
in general may not like routines or schedules, but without some
sort of plan as to what is supposed to be done, the world would
be mired in mass confusion. Laws, ordinances and regulations are
for the purpose of guiding people. We live according to an
accepted plan or way of life, and the better we can organize
ourselves, the more productive and happy we become.

The secret of all financially successful people is simply that
they are organized and do not waste time. Think about it. Review
your own activities, and then see if you can’t find a couple of
extra hours in each day for more constructive accomplishments.

When you begin planning, and then when you really become involved
in an extra income producing endeavor, you should work it exactly
as you have organized your regular day-to-day activities—on a
time basis. Do what has to be done immediately. Don’t try to get
done in a hour something that’s realistically going to take a
week. Plan out on paper what you have to do–what you want to
do–and when you are going to do it. Then get right on each
project without procrastination.

Finally, and above all else, when you’re organizing your time and
your business, be sure to set aside some time for relaxation. Be
sure to schedule time when you and your spouse can be together.
You must not involve yourself to an extent that you exclude other
people–particularly your loved ones–from your life.

Taking stock of the time you waste each day, and from there,
reorganizing your activities is what it’s all about. It’s a
matter of becoming more efficient in the use of your time. It’s
really easy to do, and you will not only accomplish a lot more,
you will also find greater fulfillment in your life.