By Kerry Hannon
Adapted from the book: What’s Next?: Finding Your Passion and Your Dream Job in Your Forties, Fifties, and Beyond.)
Who doesn’t fantasize about starting a second career?
Millions of Americans have launched one in midlife. In fact, about 20% of all new businesses in 2013 were created by entrepreneurs ages 50 to 59 and 15% were age 60 and older, according to a study published by the Kauffman Foundation and LegalZoom.
If you want to join them, raising the necessary money can be a stumbling block, however.
But here’s the good news: If you’re in decent financial shape with no debt or very little beyond a mortgage, you have myriad options for funding your startup. Here are 11 of them:
The truth is most startups are funded with personal savings. Before you make a big withdrawal, however, I recommend that you have at least a year’s worth of fixed living expenses (like your mortgage and insurance needs) set aside.
When you’re starting your own shop, you may have to forgo a salary for a few months, even a year, until you gain traction and income starts flowing.
Friends and family.
If you’ll go this route, be clear about the terms and put everything in writing, so no bad blood arises.
When Bill Skees, a former IT pro, needed funding to open his independent bookstore — Well Read New & Used Books in Hawthorne, N.J. — he asked his six siblings for three-year, 3.5% family loans. “At the time I was starting up in 2010, small-business bank loans were hard to get,” says Skees, who raised $124,000 from his family. He expects the money will be fully repaid by the end of 2014.
Banks and credit unions.
Banks are not always easy to crack when it comes to small business lending. It goes without saying that you’ll need a firm business plan and a squeaky-clean credit record to get approved.
Your first stop should be a bank that’s familiar with you or your industry, or one that’s known for having a soft spot for small-business lending.
It’s a good idea to seek out one that offers Small Business Administration (SBA)-guaranteed loans; check the “Local Resources” page on the agency’s website (Sba.gov). SBA-guaranteed bank loans tend to demand a lower down payment, and monthly payments may be more manageable.
That said, a lender will probably want you to show that you have some skin in the game, too. That means you must be able to show that you have capital or equity that you’re prepared to invest into the business.
Angel investors and venture capital firms.
Getting financing from them can be a high-wire dance. But if you can do a little soft-shoe and have a great idea and terrific business plan, these types of investors will back you in exchange for equity or partial ownership. If this route interests you, check out the SBA’s Small Business Investment Company Program.
Economic development programs.
There are a range of development loan programs out there, but finding one you can tap might take a little sleuthing and you may need special certification to qualify. For example, if you’re a woman, you might consider getting your firm certified as…