Finding Capital for Your Home Business
A Home Business Article Contributed by Cassandra l. Keller
Finding Capital for Your Home Business
Have a terrific home business idea, but need some capital to get it off the ground? Finding capital is one of the most common and basic business activity today. It is not always an easy task to complete, and can often be frusterating and complex, but with a little planning you can raise the money for your home business in a smooth fashion.
Finding the Money You Need for You Home Business
When searching for money for your home business, there are several sources to take into consideration.
Personal savings is the primary source of capital for most new home businesses. These funds come from the entrepreneurs savings and personal resources, including credit cards.
Friends and relatives may also be able to provide a source of capital. Many home business owners turn to these individuals for financial assistance.
The most common type of funding is borrowing from banks and credit unions. To do this, you will need a well-developed business plan.
Another way to gain capital for you home business is to seek out angel investors and venture capital firms for assistance. Investors and firms can help expanding businesses in trade for equity or partial ownership of the venture.
Other Sources of Capital for Your Home Business
Some other ways to fund your home business are through customer financing, employee stock ownership, factoring accounts receivables, home equity loans, purchase order financing, and strategic partnering state-specific economic development programs.
Borrowing Money for You Home Business
If you plan to borrow money to start your home business, be sure to go prepared. Banks sometimes shy away from lending to small business owners because they pose the risk of inexperience. However, if you show them you are properly prepared, they may take that into consideration as well. To do this, you must be organized. You will have to know how much you need to borrow, why you need that amount, and how you plan to pay the lender back.
There are different types of business loans to review as well. The two basic types are short-term and long-term loans. A short-term loan generally gives the borrower a year to repay the debt. A long-term loan is longer than a year, but less than seven years. Real estate and equipment loans, however, can last as long as 25 years.
Writing a Loan Proposal for Your Home Business
If you wish to request funding for your home business, you will need to compile a loan proposal. A proposal should represent yourself, the business and your financial needs. Your proposal should include the business name, names of principals and their social security numbers, the business address, amount of loan requested, and the purpose of the loan.
You will also need to include a business description, management profile, market information, and financial profile with your proposal.
As part of the financial profile, you will need financial statements, personal financial statements and information regarding any collateral you are willing to pledge as security for the pending loan.
