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A Home-Based Business Online
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Practical home business ideas, opportunities
and solutions for the work-from-home
entrepreneur
Issue 167 : January 13, 2003
Sent to 15,099 Opt-In Subscribers
Editor: Elena Fawkner
Publisher: Fawkner Publishing
http://www.ahbbo.com
Contact By Email
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IN THIS ISSUE
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1. Welcome and Update from Elena
2. Home Business Idea of the Week
3. Feature Article - Financing Your Home Business
4. Surveys and Trends
5. Success Quote of the Week
6. Advertise with AHBBO
7. Subscription Management
8. Caveat Emptor
9. Contact Information
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1. Welcome from Elena
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Hello again and a warm welcome to all the new subscribers
who have joined us since the last issue.
So, you have a great idea for a business and, more importantly,
the know-how to bring it into creation. The only thing you’re
missing is the cold hard cash to get started. What are your
options? Check out this week's feature article, "Financing Your
Home Business", for the answer. It's at segment 3.
The AHBBO subscriber-only 2-for-1 sale is in its last week.
From now until midnight (PST) January 19, 2003, whatever
advertising you order you get the same again, absolutely free,
no limits. This is your chance to get your 2003 advertising
campaign off to a flying start, so don't miss out. Full details
at segment 6.
As always, thanks for reading and I hope you enjoy this
week's issue.
Remember, AHBBO is for YOU! If you have comments or
suggestions for topics you would like to see addressed, or
would just like to share your experiences with other
subscribers, I want to hear from you. Please send
comments, questions and stories to Contact By Email .
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COULD THIS BE THE ANSWER YOU'VE BEEN LOOKING FOR?
Imagine that you dream up the perfect business opportunity to
become involved in. Would it look anything like this?
A. Not over saturated. B. Saves other people money, while
making you money. C. Your customers do the selling for you.
D. Partnership with $2 Billion Company. E. Duplicatable.
Interested? Visit http://www.vartectel.com/biz, or call
(800) 224-1371.
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2. Home Business Idea of the Week - Utility Auditing
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Auditing is not a matter of magic. If you have the patience to
sort through regulatory tariffs and have a keen eye to spot
billing inconsistencies, you can conduct an audit.
UTILITY BILLS
Auditing utility bills has become one of the most popular areas
of concentration for auditors because of the inherent complexity
of billing for utilities. Utility rates are highly confusing because
they differ depending on type of service, volume of usage, and
promotional packages offered at the time of installation.
GETTING PAID
Utility auditors earn commissions, usually around 50% of any
overcharge they uncover. And this is where you may need to
exercise more of your patience. Although utility companies
would gladly settle a verifiable overcharge (relatively quickly
out of court), it may take them up to six months to issue any
refund. This is particularly true with larger utility firms.
COMMISSION WORKS
Most clients prefer to pay auditors on commission basis for
two reasons: no upfront cash outlay, and no risk if the auditor
comes back empty-handed. For the auditor, working on
commission offers distinct advantages: it makes it easier for
them to land clients, and it usually enables them to earn more
than if they would take a basic fee.
MAKING THE SALE
The biggest challenge facing auditors is to get a potential
client to admit that there is a high probability that they (the
client) overpaid for their utilities without knowing it. This issue
is usually not a problem if the client is a small business where
the owner makes all the decisions. However, the executive
committee of a major corporation may feel threatened that
they'll be held accountable for irresponsibly overpaying for
utility.
Your job is to convince your potential client that overcharging
does happen and that it is the job of an outsider auditor, and
not people from within the company, to fix the problem.
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This is just one of over 130 ideas from the new "Practical Home
Business Ideas From AHBBO" e-book. Find out more at
http://www.ahbbo.com/ideasbook.html .
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3. Feature Article: Financing Your Home Business
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© 2003 Elena Fawkner
So, you have a great idea for a business and, more importantly,
the know-how to bring it into creation. The only thing you’re
missing is the cold hard cash to get started. What are your
options?
Assuming you don’t have a ready line of credit, an expansive
bank manager, wealthy relatives or a substantial stash of
retirement savings you’re willing to risk, you’re going to have to
do some serious homework and legwork. Fortunately, there
are a number of sources of finance for the fledgling small business
entrepreneur, at least one of which may be right for you.
SBA LOANS
Available only to U.S.-based businesses (but look for similar
programs in your own country if you’re outside the U.S.), the SBA
(the U.S. Small Business Administration) has assisted thousands
of entrepreneurs start their own small businesses. The SBA
doesn’t issue grants (money you don’t have to pay back) or make
loans directly, rather, it guarantees loans made by private lenders
thereby reducing or eliminating the risk inherent in new business
ventures and making lenders more willing to lend.
The primary consideration for the SBA is repayment ability from the
cashflow of the business as well as “good character, management
capability, collateral and owner’s equity”. You will be expected to
personally guarantee your loan. This means your personal assets
are at risk.
As for the types of businesses eligible for SBA loans, the SBA
imposes the following criteria: the business must be “for-profit” (all
that means is that your business have a profit motive, not that it
have actually generated a profit yet), be engaged in business in the
United States, there must be “reasonable” owner equity (what’s
reasonable will depend on the circumstances) and you are expected
to use alternative financial resources first, including your own assets
where practicable.
The SBA also imposes limitations on the use of loan proceeds.
For example, although the proceeds can be used for most business
purposes (the examples given by the SBA include “the purchase of
real estate to house the business operations; construction,
renovation or leasehold improvements; acquisition of furniture,
fixtures, machinery and equipment; purchase of inventory; and
working capital”), you can’t use the loan proceeds for financing
floor plan needs, to pay existing debt, to make payments to the
business owners or to pay delinquent taxes etc.
As a general rule, loans for working capital must be repaid within
seven years and loans for fixed assets must be paid for by the
end of the economic life of the assets (but not to exceed 25
years).
Interest rates are negotiated between the borrower and the lender
but the SBA imposes maxima which are pegged to the Prime
Rate.
Finally, the SBA charges lenders a guaranty and servicing fee for
each loan approved, and there is nothing preventing the lender
oncharging these fees to the borrower. The guaranty fee for a loan
of $150,000 or less is 2% of the guaranteed amount; over $150,000
but below $700,000, it’s 3% and above $700,000 it’s 3.5%. The
annual servicing fee is 0.5% which is calculated on the then-current
loan balance.
Where the borrower meets the SBA’s credit and eligibility
requirements, it will guarantee up to 85% of loans $150,000 and
less and up to 75% of loans above that amount (up to a maximum
of $1,000,000).
For more information about the various SBA loan programs, visit
the SBA website at http://www.sba.gov.
PRIVATE GRANTS
At present, there are no U.S. government grants offered for small
business. If you're outside the U.S. check with your own
government about the availability of small business grants. You
never know!
Various corporate grantmakers make grants available for small
business though. For more information, visit
http://www.fdncenter.org/funders/grantmaker/index.html .
ANGEL INVESTORS
Angel investors are good souls with a healthy sense of self-interest.
Figuring they can get a higher return if they’re prepared to take a
bit of a risk, they’re also often successful entrepreneurs themselves
and want to give their fellow travellers a hand up.
Think of funding from an angel investor as a bridge or gap-filler
between being a start-up and qualifying for venture capital. The
kinds of dollars we’re talking about here are between about
$150,000 and $1.5 million. Beyond that point you’re in low
venture-capital territory.
The SBA estimates that there are around 250,000 angels in the
U.S., funding about 30,000 companies a year. So, how do you
hook up with one? Not an easy task, unfortunately. It comes
down to networking. Start by talking to professional and business
associates - they will often know someone who knows someone
etc. Also, check out ACE-net if you’re prepared to sell a security
interest in your company. It’s an internet-based listing service for
securities offerings of small, growing companies. The website is
at https://ace-net.sr.unh.edu/pub/ .
VENTURE CAPITAL
You’re in the big leagues now. Generally you’re in the ballpark
of millions (of dollars that is) rather than thousands. Venture
capital firms look for their return on investment from capital
appreciation rather than interest (unlike banks, for example).
They’re generally looking for a return of 500-1,000% on exit.
It won’t surprise you to learn that venture capitalists are particularly
leery of internet-based businesses right about now and not
surprising. It also serves them right. But if you have a solid
business plan and strong growth potential, this could be an option
for you longer term.
One of the common concerns about this form of financing, however,
is that you may have to part with an unacceptable amount of
control over your own business. In return for their risk, venture
capital firms will usually want some control over how the business
is run and a say in business decisions. A venture capitalist will
expect a seat on the board, for example.
It’s important to remember, though, that it’s in the venture
capitalist’s best interests for your business to succeed, so giving
up some control in exchange for outside expertise may well be
something worth thinking about.
To find venture capitalists, get a hold of “Pratt’s Guide to Venture
Capital Sources” for a listing of 1,500 or so including names,
contact details and areas of interest. Of course, you'll find no
shortage of information online as well.
For most readers of this article, your best bet would be to start
out by investigating the various loan programs offered via the SBA
(or your country’s local equivalent). But don’t overlook more
obvious, close to home sources first. If you have family funds at
your disposal (for example) and you’re confident that your
business will succeed (and unless you're confident about that, don't
get into debt with *anyone*, let alone family members), better to
start out slow and ease into outside sources of financing as your
business (and, more importantly, your business’s cashflow) can
support it. After all, Uncle Jack is much more likely to be
understanding about the occasional cashflow crunch than Uncle
Sam.
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** Reprinting of this article is welcome! **
This article may be freely reproduced provided that: (1) you
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Here's the resource box to use if reprinting this article:
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Elena Fawkner is editor of A Home-Based Business Online ...
practical business ideas, opportunities and solutions for the
work-from-home entrepreneur.
http://www.ahbbo.com
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4. Surveys and Trends
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© 2002 Ryanna's Hope
Larry's taking a breather this week. Extracts of "Surveys and
Trends" will return next week. Subscribe using the link below
for the full issue.
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SUBSCRIPTION INFORMATION
Subscribe to "Surveys and Trends" with a blank email to:
mailto:join-ryannas@go.netatlantic.com
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5. Success Quote of the Week
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Life is what happens when you are making other plans.
-- John Lennon
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6. Advertise With AHBBO
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The annual AHBBO-subscriber-only 2-for-1 sale is now on.
From now until midnight (PST) Sunday, January 19,
whatever advertising you order, you get the same
again, absolutely free. No limits. To take advantage
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at http://www.ahbbo.com/advertising.html, place your
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please email me at
Contact By Email?subject=241ad_query.
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8. Caveat Emptor
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Although all of the information presented in AHBBO is
published in good faith, I accept no responsibility as to the
accuracy or otherwise of the information presented. By making
use of the information contained in AHBBO the reader assumes
all risk that certain information may prove to be incorrect.
**I do not endorse any advertisements unless stated to the
contrary. Your money, your decision, your responsibility.**
All advertisements are accepted in good faith. However,
advertisers are solely responsible for the content and
accuracy of their classified advertisements and I give no
warranties, nor accept any responsibility, in relation to any
classified advertisement appearing in this publication. ALWAYS
carry out your own due diligence! Remember, if it sounds too
good to be true, it probably is.
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9. Contact Information
_______________________________________________________________
Elena Fawkner, Editor
A Home-Based Business Online
Contact By Email
http://www.ahbbo.com
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All Rights Reserved