Regardless of the type of home business you hope to start, it is going to take money and for start up cash, many people will need a loan to get going. It also doesn't matter how viable your business appears on paper and how the success is spelled out in your business plan, your personal finances will play a huge role in your ability to obtain a new business loan.
Finding a loan to fund expansion of an existing business is tough enough, but finding money for a new start up may seem downright impossible after the first few lenders turn you down.
It is a common thought in the new business market that the only way to get a loan to start a business is to prove you don't need the money. It is perhaps this paradox that prevents many people from seeking a business loan, but the reality is that loans are available for the right reasons, provided you can show the ability and a history to pay back the money.
When applying for a business loan, a quality business plan will play a key role in gaining approval, but more importantly will be your personal financial history. If you walk into a lender with a lousy credit rating that will pretty much equal your chances of getting the loan.
While you may treat the business finances with more respect than your personal finances, the bank probably won't see it that way. Having your personal financial house in order before applying for a business loan will help move the application process to the next level.
Most banks will also want to know your personal commitment to the business, often equated to the amount of equity you can devote to the business. Unfortunately, there is no place on the application form for sweat equity so promising to work seven days a week, 24-hours a day will have no weight on the loan decision.
If you are going into business with another person, your combined finances may be acceptable to get the money you need.
If you own your own home and have come equity built up, it may be acceptable as collateral for a business loan, or you may have better luck refinancing the home loan and using the equity for your business start up funding.
Remember, that once you are committed to the business, it will probably be your only source of income and you will need money to meet daily personal and business expenses until the business starts producing cash.
Taking out loans on credit cards to start a business is rarely a good idea, as the interest rates are typically higher and if you fail to meet a payment there will most likely be late payment fees as well as the potential for over limit fees, greatly increasing your cost of obtaining the start up loan.
Godfrey Thaxter is a Marketing Consultant who provides
articles, tips and resources to help new online marketers
get started right with their internet home business.
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