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Small
Business Loan Basics
by:
Joseph
Kenny
Many people
who wish to start their own
business need an injection
of financial capital at the
beginning of a business; the
main source of funding for
entrepreneurs is business
loans.
Let's take a
look at what you should
expect if you plan to apply
for one.
First of
all, you should know that
most lenders have their
doubts when it comes to
lending money to a
first-time business owner.
You're considered a high
business risk at this point,
and you should go in to your
loan negotiations armed with
a few advantages. Of course,
the ideal option is to run
your business for a few
years, even just out of your
home, and turn a good profit
before approaching a bank
for a loan.
That shows
that you have the ability to
make money and that your
business won't flop before
the Open sign shows up on
the door. But if this isn't
possible, if you need the
cash before you can begin at
all, then chances are you
will need to offer some type
of collateral. Collateral
can be anything from your
car to your home and
everything in between.
Depending on the size of the
loan, you may require some
pretty hard assets for
collateral. The lender is
not interested in whether or
not your business will make
money, aside from the extent
that will allow you to pay
them back on time. They
simply don't want to lose
out on the loan, and so
you'll have to find some way
to back yourself up.
Backing up
your loan with assets, if
you have them, is a good
route - provided you have
enough confidence in your
financial situation to
ensure you are not going to
lose your collateral. If you
don't have enough assets to
stand in for your loan,
another option is to find a
cosigner. Chances are you
won't get as much cash as
you would if you had the
assets. But having someone
with good credit who is
willing to sign onto your
loan and promise to pay if
you don't can be the factor
that gets you through the
door. This is a good way for
friends and family who
believe in your business to
help you get it off the
ground, even if they don't
have the money to loan you
up front.
When it's
time to borrow, do some
comparison-shopping among
banks and credit
associations, and don't stop
until you find the lowest
interest rate possible.
You're already gambling a
lot here- minimize the
amount you will have to pay
back by doing your homework
and choosing the company
that offers you the best
deal. If you can't get
enough to cover your
beginning business expenses,
consider borrowing part of
the cash from a friend or
relative if you can, or even
asking for investors, such
as customers who believe in
your business, to help out.
Don't accept a high-rate,
high-risk business loan just
because it offers you the
biggest amount.
The small
business loan: The first
step in a long chain of
financial events. If you
take the right step, it
could be your leap into the
business world.
About The
Author
Joseph Kenny
is the webmaster of the loan
information sites
http://www.selectloans.co.uk/
and also
http://www.ukpersonalloanstore.co.uk.
At the Personal Loan Store
you can find all the
different loan types
explained |
