Small Business Builder: Creative Financing

$8,000 in personal credit from three credit-card companies at 3.9, 8.9 and 17 percent.

According to the business plan, Artemis still needed about $15,000 to reach his $60,000 goal. He reduced the cost of the garage by doing more of the work himself than originally planned and by building in phases … delaying installation of plumbing and air conditioning, for example, by at least a year.

He and Theodora searched for ways to cut their household expenses. By careful budgeting and judicious belt-tightening, they shaved more than $4,000 off their expenses over a six-month period. Against Randall's advice, they went without health insurance for two months.

Pay Promptly, But Not Too Promptly

Randall became the young entrepreneur's advocate because he was impressed by Artemis's enthusiasm, energy and willingness to work hard and make sacrifices. Among his advice to Artemis:

Empty your personal savings account and pay off high-interest debt.

Pay your bills on time, just before payments are due. Once you've established a good payment record, ask for credit-limit increases on low-interest accounts and pay off bills with higher interest rates. Try to get credit issued in the business's name. Keep personal and business expenses separate. Building a responsible financial history and keeping records professionally will help you obtain more favorable financing when you want to upgrade or expand.

"Network" with suppliers and others in your industry. Dealing with people who like and trust you not only makes doing business pleasant, it can save money and open doors.

Track your income and expenses meticulously, using small-business accounting software to record transactions and schedule payments, including quarterly tax deposits. (Such software, naturally, doesn't eliminate the need for an accountant to help with strategic and financial planning.)

Incorporate. In the state where Artemis and Theodora lived, their small corporation qualified for favorable group health-insurance rates. The corporation could pay 100 percent of the family's health-insurance premiums, and the payment would be 100-percent tax-deductible. (For tax year 2001, the IRS allows only a 60-percent health-insurance deduction for the self-employed.)