Funding Your Business

To get started in business you will need to make an investment. A professional designer needs professional tools, and they are not cheap. You will also need some basic office equipment and furnishings. You might be able to get some of what you need second hand. I recommend buying your software new. You plan to make money using the programs, fonts, and other software, so it is ethical to pay the creators of your tools. You also have access to technical support and upgrades as a licensed user. I wouldn't buy a computer that is more than 2 years old. (Personally, I buy a new one every 4 years or so.) Graphic designers are power users and need to have the most processing power that money can buy to be able to work efficiently. Also, hard discs crash eventually. Even if you are fully backed up, a crashed computer is a major business catastrophe. (And if you're not backed up, well, you can imagine.)

You can pay for your startup costs with savings or by borrowing. Sources of loans are friends and family, banks, and credit cards. If you borrow from friends and family, your relationship with them will change. They might even believe they have a right to give you advice or receive free services. Proceed with caution. Banks are another source of funding. If you want to borrow from a bank you will have to write a business plan. (A business plan is a great idea no matter where your funding is coming from.) Credit cards are extremely useful, but make sure you can make the minimum payment each month, and never be late. The fees and interest are harsh if you ever miss a payment. I use a credit card for ongoing expenses, and have used them for capital investments as well. Like your checking account, designate a credit card for business only and do not mingle with personal expenses.

The interest you pay on business loans is tax deductible. So is your business equipment. (See taxes.)

Business debt is different from consumer debt. In business, you are using money to make money. If you are charging for your services correctly, your investment will pay for itself and generate a profit. Being in debt can be stressful. However, as long as you are making a reasonable payment towards principal every month, you are doing fine. About every 5 years you will need a new computer, so pay enough every month to have your loan paid off in 5 years or less.

Managing credit wisely is extremely important for the small business owner. A good credit rating gives you access to loans at a lower interest rate. A bad rating means you will pay a higher rate, if you can get a loan at all. Every business has ups, downs, and emergencies. During downs and emergencies, having access to credit can save your business. Credit is a bridge to the up times when you are able to repay.

If you can grow without borrowing at all, that is commendable.