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Personal savings as startup finance

Tapping the personal saving is one of the many alternatives one you have to fund your business. You may fund it depending on the resources available to you. So here are a few points which come in handy when you use personal savings as a source of your funding

1. Keep $5,000 in the bank
A good thumb rule for you would be to have at least $5,000 in the bank at all times. This is not only good for you but also for your business. This is because no matter how great your business concept is, there's a decent chance that you'll need a sudden infusion of cash at some point in the first 24 months of opening your doors. Reasons could be many ranging from dealing with a problem, such as unexpected bills or legal work, or to fund an opportunity, such as a new client who won't pay you up-front.

2. You could borrow from your 401k in a limited manner.
Borrowing from your retirement savings is not such a bad idea. Most plans allow you to borrow up to $50,000, or 50 percent of the value of the account, whichever is less. This is penalty-free, unless of course you don't pay the money back. You will need to pay back interest to your own 401k account at a competitive rate set by your plan administrator so you can replenish the loan without losing the capital gain. Also this kind of borrowing isn't at all uncommon and may be a smart solution in your case. These 401k loans are documented carefully, so this is the type of entrepreneur-to-business loan that usually gets repaid by the business, rather than typical entrepreneur-to-business loans that often get forgotten or forgiven

3. Use low interest credit cards and manage them
You should be able to use a credit card effectively. As long as you can avoid building up a balance on your card and paying exorbitant interest rates, there's nothing wrong with relying on credit cards to finance your business expenses.

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