SolveYourProblem
Article Series:
Start
A Home Business
Get
a Loan For Your Home Business
by Jeff Cohen
Very few people can afford to start a business
using nothing but the money they’ve got lying around in their
bank accounts. For most of us, we’re going to need to get a
loan before we’d have anywhere near enough money to invest
in our start-up.
Your Credit History
You might not have realized that your credit history was going
to count here, but it does. This is where all those late credit
card payments come back to bite you in the butt. The better
your credit history, the more likely a bank is to lend you
money, and the better the rate it offers will be.
Bank Loans
Banks usually have someone whose job it is to go through applications
for business loans. These people have seen a thousand business
plans, and they know what they’re looking for.
Take along all your plans and any other supporting material
you can put together. Make sure you present yourself at your
most professional. Act like the most sensible and level-headed
person you’ve ever met. This is, essentially, a job interview:
the bank is interviewing you and your business to try and figure
out whether it would be a safe place to put their money. Remember
that they’re just like every investor, lending you money with
the expectation that they will get it back, plus interest.
Secured Loans
Of course, you’ll probably have a much easier time persuading
a bank to lend you money if you put up something of your own
as collateral in case you can’t pay the debt back. Some dodgy
banks would really like you to secure your business loan on
your house, since they know that the failure rate of start-ups
is high and they’d really like to get their hands on it. Be
cautious, in case you sign your life away. It is almost never
worth starting a business if you can only get secured loans
as you’re tying the business’ fortunes too closely to your
own.
Government Loans
As part of the push to support small businesses, there are
now many government bodies that will offer no-interest or low-interest
loans to small businesses, a category which includes home businesses.
The government lot will obviously be even more picky about
your business plan, but it’s still a good option to have available
to you. Even better, these loans will often come with free
help and advice from the agency that issues them, as well as
all sorts of booklets and leaflets telling you the technical
details of getting started.
Credit Cards and Overdrafts
These forms of debt are a very bad idea as high interest rates
are borderline criminal. Whatever you do, do not finance your
business with personal debt. You’ll have to make a massive
profit just to pay back your debts, and it’s unlikely that
you’ll manage to both pay them off and have enough money to
live. If you can’t get a loan, try to find other investors
instead.
Friends and Family
Friends and family can be a surprisingly good source of loans
to help start businesses, especially if they’re in the same
industry themselves – they’ll be more than happy to help you
get a foot on the ladder. You might be able to persuade someone
to give you the money at a good rate of interest, or even to
act as a ‘sleeping partner’, financing half of everything while
leaving you to run it all.
Be aware, though, that many friendships and families have
been ruined by failed businesses. I had a friend who went around
raising thousands from everyone he could think of to start
a magazine of his own, only for it to crash and burn by the
second issue. Be warned.
Keep Trying
If you get turned down for a loan, keep trying (preferably
at different banks). You should revise your business plan each
time, and try to get as many people as possible to read it
– the more people who see it, the more ideas and suggestions
you can hear. If your credit rating is fine, then the problem
has to be with the business plan: fix it, and you’re set. Good
luck.
# # # # # SolveYourProblem.com : 2007
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