Working capital woes: planning ahead ensures that money is always in the till.

Budding entrepreneurs often launch their enterprises with too little working capital, fail to plan ahead to ensure that money is available when they need it or use it up too quickly on nonessential purchases. The best way to avoid this financial bind is to do a proper needs analysis before you even start a business.

First, make a list of your hard assets. Estimate your equipment requirements (furniture, machinery, fixtures, etc.). How soon do you need each item and how do you plan to pay for it?

You'll also need to do an, expense list l that includes inventory and base supplies (i.e., stationery). Add up--from start-up to expected break-even point--what you expect to spend on base salaries and benefits for you and your employees, rent or lease payments, interest on any business loans and advertising expenses.

Next, create a cash-flow analysis statement. This spreadsheet is a breakdown of the actual cash income matched against paid-out cash expenses, which will reveal any shortfall in working capital. Keep these three financial lists separate but add them up (include a fudge factor of 10%). This total will give you an idea of what it will take to get started.

Now, how do you get the dollars you need for working capital? Over the long haul, internal sources such as retained earnings and savings achieved through operating efficiencies will provide working capital. But in the short term you will have to look to outside sources.

Most fledgling entrepreneurs don't have money to lose. If you're fortunate enough to have savings, don't use more than half of what you have stashed away. Earmark the rest for emergencies. You can also borrow money from your 401 (k) plan. In general, these loans can't exceed half of the total amount of the account value. If you own stocks or bonds, you may be able to borrow on margin. This means you pledge a portion of your holdings as collateral. The size of the loan will depend on the market value of the securities you pledge.

If you own your home, you can get an equity loan for a fairly decent interest rate. Of course this is personal resource; failure to repay could mean the loss of your humble abode. It's a good idea to apply for this type of financing before you leave your employer to start your own business. It will help to establish a track record and an ability to repay the loan.

Most financial institutions offer both seasonal and revolving lines of credit. Either one can take care of the valleys in cash flow and can be repaid during the peak periods.

You might even want to consider leasing options or purchasing used items. Don't buy new unless you can afford it. Remember, working capital translates into staying power. The idea is to have the money on hand whenever you need it.