| That's not a heck of a lot of money. With the advent of digital home recording, record companies seem to be pickier about what they will consider listening to these days.
Perhaps your best bet is to have your band practice until they have everything down cold, then go into a studio and record three songs for your demo there (I'm not an expert, but I have always been advised to limit your demo to yoru best 3 songs). Have them burn you two CD's, one mastered and one dry (so that you can more easily have it remastered later if you want). Use the mastered version to burn demos with a friend's CDR if you have access to one, otherwise, make tapes from the CD. | 
