Acquiring Small Business Financing for Your Start-Up
A Home Business Article Contributed by G. Uma Bennett
Acquiring Small Business Financing for Your Start-Up
Locating small business financing can be a tough job. When you come to the point where you see that the combination of your personal assets aren't sufficient to cover your startup expenses home business, it's time to look around for some additional capital. You can tap into many of the same funding sources considered by other small businesses with the right know how. Starting with where you do your banking. A good credit history can help you qualify for a personal loan to get a foothold on the capital you need for your business.
Talking with Your Banker
When it comes to small business financing, bankers, want to know three things: how much money you want, how you will use the money, and how you will repay it. A business plan should answer these questions and clearly state your goals and how you plan to attain them is your best tool. Banks offer short or long term loans and typically like business owners to cover one-third to one-half of the financing.
A short-term loan is for 6 months to one year, a long-term loan can be from 3-5 years or longer, usually with a higher rate of interest than the short-term loan. Both loans are determined by economic indicators.
The Financing Process for a Small Business
Making your case for small business financing with your bank can be nerve wracking. If your loan is approved, the money will be given in a lump sum or in a revolving line of credit. The bank may ask to "secure" a loan with a hard asset, such as your home and a "personal guarantee, a legal document that makes the signer liable for business debts.
But if your loan application is denied, don't give up, ask your banker for advice on how to improve your odds for future loans and to steer potential investors to you, most bankers know of investors who might be more open to funding your home business.
Business Financing from a Loan Broker
If the prospect of searching for small business financing seems overwhelming to you, you have the option of hiring a loan broker who will, for a fee paid in advance, will take your business plan and circulate it among known investors and lenders. The advantage is that the loan broker will discuss the benefits of investing in your home business venture. The disadvantage is that not all loan brokers guarantee a loan. Investigate the loan broker's success rate, get referrals people who have used the brokers services before you pay any fees.
The Disadvantages of "Plastic" Small Business Financing
When it comes to small business financing, probably every successful entrepreneur has tapped into the instant money power of the credit card to help finance business start-up and expansion. No waiting, you can begin using your credit card the day you apply for it. Almost anyone with a reasonable credit history can obtain a card. But disadvantages are just as real. Most prominent is the high rate of interest you pay for this easy access, which can double that of a business loan secured through a bank.
