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HOME BASED BUSINESS
Option/Plus
Growth Capital Program

The National Association of Home Based Businesses (NAHBB) believes it has found the reason so many home based businesses fail. It found this evidence after conducting a 1996 survey of members, subscribers and random telephone interviews from home based business owners. The survey found that most home based businesses were started with very little capital and were usually financed from savings, loans from family & friends, equity or personal loans. Even though many of the businesses in the survey had enough capital to get through the start-up phase, most are having a hard time making it in the growth phase. Business owners that were able to qualify for loans to start are unable to get the additional capital necessary to grow their businesses. Many have depleted their savings or other equity funds until they are in debt, to the point where they are unable to grow their businesses. Some of these businesses have now become a liability and are draining the family budget. Some in the study took outside jobs, after initially working in their businesses full time, to earn additional revenues to help support the family and the business. However, they soon discovered that a job provides a fixed income and will not support a growing business.

This study has caused the NAHBB to stop recommending loans for individuals starting a business without a sufficient plan to inject growth capital from a stable outside revenue source, to help finance their business ventures during the critical development stage. Today when starting a small business there are two types of funding necessary one to start and another to help the business grow.

Growth Capital Program
The Option/Plus Program identifies companies that can provide home based businesses with quality products and services. Selected companies provide home based business with discount savings and/or income opportunities. The Option/Plus Program is a comprehensive program that has harnessed the collective buying and selling power of home based businesses. Within the Option/Plus Program there is a discount savings club that allows subscribers to get products and services below regular prices. Each club member is issued an Option/Plus Discount Card that can be used at any Preferred Merchant who is enrolled in the Option/Plus Program.

Growth Capital Funding The National Association of Home Based Businesses is pioneering new small business funding sources called Growth Capital Funding. There are two types of funding now available to home based business owners: growth capital funds and growth capital financing. Growth Capital Financing use traditional means to support the loans such as; credit equity and debts. Growth Capital Funds are earned from supplemental income sources, outside the business venture.

Supplemental income is considered by the NAHBB to be growth capital funds for home managed businesses, because the money is earned from an outside source.

Home based business owners can earn residual and override income from the supplemental income opportunities they choose. However, a supplemental income opportunity must be compatible with their primary business and the earned revenue must be sufficient to meet the needs of the growing business. Unlike debts and equity financing, growth capital funds do not have to be paid back and can be used to help the primary business grow. The major drawback of this type of funding opportunity is how to choose the right opportunity for your existing business.

Traditional methods of funding small businesses are through debt and equity financing, such as loans and venture capital. These loans are usually made using untested projections: therefore, financing a small business is highly risky for a bank. The Option/Plus Growth Capital Program will make it easier for a bank to give loans to small businesses. Most home based business fail or stagnate during the initial growth period.

A primary business must acquire the proper growth funds to sustain it during this critical development period. During the growth cycle, loans and additional capital are unavailable or inadequate to the home based business owners.

Growth capital funds are earned income while growth capital financing are secured with debts and/or equity. Growth Capital Funds are derived from supplemental income sources that is, earned outside the primary business, usually in the form of residual and override revenues.

Target Banking
The NAHBB's Option/Plus Growth Capital Program will include innovative banks and other financial institutions that are creating new ways to finance small businesses. Member business in our Growth Capital Program deposit their money in selected banks and after proper reserves are established they will be able to get traditional loans for their businesses. The growth capital financing pools will allow business members to get short term cash such as a line of credit and normal withdrawals when needed. Banks will be identified in each state for members. Banks that are allowed to participate in the Growth Capital Program must have a clear direction and expansion plans for the use of growth capital funding.

A supplemental income can be used to help secure a loan or line of credit. Once small business owners establish a supplemental revenue source outside their existing business, the banks will be able to base the loan on an additional revenue source and not solely on the revenues generated by the businesses. If the borrower defaults or misses payments they will forfeit the supplemental income due and it will go directly to the bank.

Some banks will allow subscribers to establish special Savings and Investment Pools, which will allow them to learn how to grow their own Growth Capital Funds. After these funds reach a predetermined size, they can also be used to make loans to investment pool members. The Option/Plus Program teaches business owners how to use growth capital funding without going into debt or depleting their savings.