I spent Thursday and Friday in Palm Desert at an Angel Capital Conference and Forum. With the economy the way it is and companies shutting down or downsizing, there are more people who are thinking about starting a business. One of the questions that entrepreneurs had was, “is this a good time to start a business?” A number of people think it is. There are plenty of examples of bad economies being a catalyst for starting businesses.
In my opinion, the motivation may be here, but there are a number of things that will make it difficult. First, is funding. In the past, entrepreneurs had a few options that probably aren’t available to the average person. If you needed up to about $50K, you could open up four or five credit cards with $10K limits and max them out. Credit card companies are being significantly more restrictive. So that avenue is probably not open for the time being.
Many businesses were started using Home Equity Loans, but with home values plummeting and lenders being more restrictive, this is probably not a viable option.
So, this leaves us with using funds from an IRA or Retirement Account. Well, with the markets crashing, these accounts have lost significant values.
Banks aren’t back to lending yet. So, we are left with the Government. Let’s hope the stimulus package and the $700M earmarked for Small Business will have provisions for early stage startups.
I don’t believe that the entrepreneurial spirit has died, and people will find ways of getting their businesses started. It will just be harder.