It's a common misconception that everyone enters retirement hoping to spend their time relaxing and traveling. And while this is certainly a common goal for many, others want to spend their retirement pursuing some long-held dream. A common dream for many new retirees is to start up their own businesses. However, like every hopeful business owner, they must figure out how they are going to finance it. If you find yourself in a similar situation, below are four funding options that may interest you.
One option is to use your personal savings. Going with this option has some pros and cons. For example, when you use your own savings, you don't have to worry about paying back interest as you would if you borrowed the money. On the other hand, if the business venture doesn't go well, you could find yourself short of cash making retirement difficult. It's important that you don't spend any more of your savings than you're willing to lose.
Even if you plan out your new business perfectly, there's always something that could go wrong and cost you your life savings. Think carefully before you invest your own money into your business venture and make sure it's something you're comfortable with.
A reverse mortgage
Another option to consider is what is known as a reverse mortgage. Reverse mortgages are available to homeowners, making retirees a little more likely to be eligible than those just starting out on their careers. According to All Reverse Mortgage ™, "This type of loan allows borrowers to access a portion of their equity - tax-free - without having to make monthly mortgage payments."
Essentially, you borrow money against the value of your home. Once again, there are benefits and drawbacks to using this type of loan to finance your start up. You should make sure you learn as much as you can about reverse mortgages before deciding if they are right for you.
Bring in outside investors is another common source of financing for new business ventures. With an investor, you get the capital you need to start your business and in exchange, you give the investor a portion of your profits. Investors can be anyone from your family and friends to private investors who are on the lookout for new investment opportunities.
When considering investors, there are a few things you should think about. First, think about your relationship with this person. While having a friend or family member as an investor can make it easier to work with them, money can often complicate relationships. Going with a private investor ensures a more professional relationship, but they can also be a little harder to find.
You should also consider the terms of the investment. Ensure that you are getting enough capital to start your business without giving up too much control. Some investors may want a majority stake in your venture, something you will need to consider thoroughly before agreeing to it. Take your time as investors will become your partners in this new business, so you want to choose the right ones.
Another option is to take out a loan. Loans typically come from either banks or credit unions. With a loan, you'll get the money you need to start your business, but you'll need to pay it all back plus interest. The interest rate you get on your loan is an important number to pay attention to, as even a one percent difference can have a massive impact on the total amount you'll eventually pay back.
To get the best loan rate, try talking to different banks and credit unions. You'll need to go over your business with them and show them your business plan. Find out how much each institution is willing to lend you and at what interest rate. Once you have a few offers, you can compare them against one another and see which one works best.
Choose the funding that is right for you
There's no right way to fund your new post-retirement business venture. You may have more than enough money saved up in your retirement find to live on and you want to spend a small portion of it on your business. Alternatively, you may have some strong professional contacts that you have made over the years that would like to invest.
The best thing you can do is consider all your options and choose the one that is best for your situation. Hopefully, you'll find the perfect funding source and you'll finally be able to start that business you've always dreamed of.
Copyright 2021. Featured post made possible by Daniel Bailey.