Most Home-Based Businesses Start for Less Than $5,000

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A new report from CreditDonkey.comshows it takes less than $5,000 for most home-based business owners to get up and running.

The research, which details where small-business owners got their startup capital, found that while the average cost of starting a home-based business was $25,000, 39 percent of owners said it took less than $5,000, with another 25 percent not needing any startup financing at all.

According to the report, small-business owners needing money turned to a number of sources, such as:

• Personal/family savings – 60 percent
• Credit cards – 10 percent
• Business loans from a bank – 7 percent
• Home equity loan – 4 percent

In order to get up and running, CreditDonkey says there are several expenses entrepreneurs can expect to pay, including legal fees and licenses, marketing, supplies and equipment, insurance and professional and merchant services.

While it might not take much money to get started, the report shows most home-based businesses don't generate much money, either, with 57 percent bringing in less than $25,000 a year.

For those looking to take the plunge, experts at CreditDonkey.com offer several tips for aspiring home business owners:

• Bill and receive payments as quickly as possible, and follow up on overdue accounts in order to keep the cash flow moving.
• Have customers pay by credit card to help reduce the chances of default.
• Don't use a business credit cardto finance large startup expenses. Instead, use them for smaller purchases, such as supplies and equipment.
• Make sure enough money is being set aside for all tax obligations.

CreditDonkey is a credit card comparison website that based its research on statistics and information from the U.S. Small Business Administration, the Office of Advocacy of the U.S. Small Business Administration and the U.S. Census Bureau.

Chad Brooks is a Chicago-based freelance writer who spent 10 years working as a newspaper reporter before working in public relations. You can reach him at chadgbrooks@gmail.com or follow him on Twitter @cbrooks76.