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Although most people hear \u201csmall business owner\u201d and think of somebody who does that full time, many fully employed people run a small business on the side. So do retirees, stay-at-home parents and other people who don\u2019t have another paying job, but only work on the business part time.<\/p>\n
It\u2019s an easy mistake to think those side businesses<\/a> don\u2019t count as a \u201creal business\u201d and will never need outside funding…but it\u2019s still a mistake.<\/p>\n We get it. Why would you invest in a business that\u2019s just a sideline? You invest for the same reasons you invest in yourself to get your regular job: to help you move from the situation you\u2019re in to the situation you want to be in. With your side business, the same reasons apply.<\/p>\n Surviving a Rough Patch<\/em><\/strong> — businesses of all kinds hit slow periods that threaten their ability to stay open. Side businesses can often weather these patches more easily since you don\u2019t rely on it for living expenses. Still, well-timed funding can make the rough patch go more smoothly and<\/em> set you up to capitalize on better times when they arrive.<\/p>\n Maximizing Profits <\/em><\/strong>— every business encounters opportunities to improve their profits. Some examples include marketing media, large sales that reduce the cost of goods sold, and equipment to improve the efficiency of the operation. In many cases, the regular cash flow of a side business never amounts to enough extra to take advantage of these opportunities. A one-time cash influx, though, might.<\/p>\n Filling Orders<\/em><\/strong> — full time businesses often have deep pockets, access to strong credit, or a cash flow cycle that\u2019s reliable. A side business benefits from fewer — if any — of these. This can put you in a position where you have orders to fill, but no funds to buy the parts or goods to make the order. Funding even one time can tip the cash flow scales so you\u2019re always stocked to fill orders.<\/p>\n Firing Your Boss<\/strong> —<\/em> this is the secret dream of many (maybe most) folks who run a side business. They\u2019re looking for the day that business generates enough cash to become their full-time job<\/a>.\u00a0 Truth is, that rarely occurs when you\u2019re viewing the business as a side business. Some funding and extra effort can give it the legs and scale to shift your thinking and make this secret dream and open reality.<\/p>\n Sometimes you can provide the needed funding out of your own coffers (an option often more available to employed people with side businesses than to full-time entrepreneurs). Sometimes you need to find the money elsewhere (see below for more about that).<\/p>\n The risks associated with funding a side business are the same as those with funding a larger operation: what if the funding doesn\u2019t lead to success. This means you\u2019ve put extra money into a side business that wasn\u2019t generating enough money in the first place. With full-time, brick-and-mortar businesses, this kind of thing closes doors.<\/p>\n With a side business, you\u2019re likely to be able<\/em> to stay open…but the lost revenue defeats the purpose of all that extra work. The key is to fund for the right reasons, at the right time, and with the focused attention one would put into a full-time operation.<\/p>\n If you decide to fund your side business, the next decision is how <\/em>to get the funding. There are a few common routes to get the money.<\/p>\nThe Reasons<\/h2>\n
The Risks<\/h2>\n
The Routes<\/h2>\n