Starting a business from home can be a lucrative and fun way to earn money. The financing of such a venture can be a challenge, but. Suppose you are considering making an application for financing for a home-based company.
In that case, it is essential to have a solid plan that you have collateral or investors (in some instances) as well as a longer-term strategy to achieve success.
How to Get a Loan to Start a Home-Based Business
Get a copy of the credit score.
A lender isn’t likely to approve an unsecured business loan to anyone with low credit scores. Your credit must be in good shape with a score of 720, or a higher FICO score is the best before you fill out any credit application. Find Resources for details on how you can get an instant copy of your credit report.
Some red flags that could make it difficult for you to obtain a business loan are a maxed-out credit line, overly-large trading lines (more than four accounts revolving), bankruptcies, judgments, and charges. Be sure to get rid of your credit that is negative before applying for credit.
Take all your documents and perform an analysis of yourself.
Imagine yourself in the shoes of a lender to determine how solid a credit risk you pose. The positive characteristics of a successful business loan holder include solid assets (house and investments) as well as already existing customers (either the venture capitalists or angel investors) as well as a strong flow of cash from an existing company or another job, and an innovative business concept with clearly defined customers market.
Find lenders to research on the federal government’s Small Business Administration (SBA) website.
Find resources about SBA guidelines. The government isn’t an individual lender but rather has agreements with privately-owned lenders in order to offer small business loans that the government approves to customers.
The prospective lender has to follow the set of government-approved guidelines; however, ultimately, the lender is looking to make a profit on the loan and will review your application carefully. Make sure you submit a bank statement of your own, bank statements, and a precise one-page summary of the core of your business based in your home with its customers who are likely to be interested and your suggestions to sustain your business over the long term and grow.
You can apply to three or four SBA-sponsored lenders for a modest business loan.
Before you fill out the application, be sure to be armed with copies of your documents with a clear concept of the loan amount and a lot of patience. Sometimes small business loan applications are sat for weeks in underwriting.
Be flexible when it comes to the conditions of a loan. For example, although you might not initially wish to guarantee the loan, however, the lender might require you to secure an asset, especially when it’s the first time you’ve taken out a business loan.
Check that all loan proposals approved match your original requirements.
Take a copy of all small business loans, and then check the final terms with your original plan. Be sure that the amount of capital will be sufficient to fund your new home-based business.
Be sure to have the funds to pay the monthly installments and be sure that your business plan is still feasible. If, for instance, another business owner has been in the market you thought of entering with the same idea, it is advisable to review your business plan prior to accepting loan funds.
If you believe your customers are present, then proceed with taking the loan. If, however, your business plan is at risk due to the changes in your company, it’s better to reject any loan and return to drawing up a new plan.