A home-based business can make it a lucrative and fun way to earn a living. However, financing such a business can be difficult. It is important to have a solid idea, collateral, investors, and a long-term strategy for your home-based business before you apply for financing.
1. Get a copy of your credit report. Any potential borrower with bad credit will not be granted a small-business loan. Before applying for credit, you will want to have a good credit score of at least 720. For information about how to get a free copy of your credit report, see Resources.
Excessive trade lines (more than four revolving accounts), judgments, and bankruptcies are all red flags that could disqualify you from a business loan. Before applying for financing, make sure you have cleared all negative credit.
2. Take all your documents and perform a self-analysis. Consider yourself as the lender and assess your credit risk. A successful borrower of business loans has strong assets, such as a house and investments; existing investors (either venture capitalists or angel investors); strong cash flow from an existing career or business; and a unique business plan with a defined customer market.
Also read: 7 Simple Steps To Getting A Business Loan
3. You can find lenders through the Small Business Administration (SBA), a government website. For more information about the SBA guidelines, see resources. The government is not a lender directly, but contracts with private lenders to offer government-approved small business loans. The government has established guidelines that prospective lenders must follow.
However, the lender will still be looking for a profit-oriented loan and will review your application carefully. You must provide personal and business bank statements as well as a one-page report detailing the main thrust of your home-based company, potential customers, and your plans for long-term sustainability.
4. For a small business loan, you should apply to at least two or three SBA-sponsored lenders. You should have copies of all documents and a clear idea of the loan amount before you submit your application. Sometimes small business loans applications can take weeks to be approved due to underwriting.
You should be open to changing your loan conditions. You may be reluctant to initially secure the loan. However, a lender might require that you collateralize assets, especially if you are applying for your first loan.
5. Ensure that you are satisfied with all loan offers. Compare the terms of any approved small-business loans with your original idea by obtaining copies of all approvals. You should ensure that the capital you need to start a home-based business is available. Also, be sure you have the ability to pay the monthly fees and verify that the business idea is still viable.
If another business owner has already entered the market that you were hoping to enter with a similar business idea, it would be wise to review your business plan before you accept any loan funds. You can accept the loan if your customer market seems to be still available. If your business plan is at risk due to the new venture, you can refuse the loan and return it to the drawing board.
If you choose to opt for a personal loan to fund your business, comparing offers is essential. www.NowLoan.co.uk offer loan matching for people with bad credit and they allow you to find the cheapest lender most likely to say yes to you without affecting your credit score.