How to get loan for a home-based business
Starting a home-based business can be profitable! Although Financing such a business can be challenging. Before getting started, It’s important that you have an iron clad idea, some material, investors and long-term planning. This article outlines the process of getting things handy on getting a loan for your home-based business. Without further ado, let’s get started!
- Maintain a Good Credit Score and clear off red flags
It’s necessary to pull off your credit report and make sure that you have good credit! If you’ve got a poor score, chances are that the lender will not grant a small business loan. A credit score of above 720 FICO score is best — and it should be ensured before filling out any applications. The Red flags that may lead to disqualification includes maxed-out credit lines, excessive trade lines of more than four revolving accounts, few judgments or bankruptcies and charge-offs.Ensure clearing off all your negative credit before applying for financing.
2.Optimize for the lender’s perspective
Collect all documents and do a self-analysis. Try putting yourself in the lender’s shoes to decide the credit risks involved. The Positive attributes that a successful business loan borrower must have are – strong assets (house, investments), a line of existing investors, a strong cash-flow from any existing business/ career, and most importantly a unique business idea with clearly defined customer market and goals.
3.Do a research on lenders
You can research lenders on the government portal of Small Business Administration (SBA). There’s a lot of information that can be taken from that portal. Here the government isn’t a direct lender but is responsible for contracting with private lenders to dispense government-approved small business loans. However, the prospective lender is supposed to abide to the government’s guidelines and the lender could see for a profitable loan after passing through the application verification. Present recent personal bank statements, any business bank statements and a detailed one-page report on the prospects of the home-based business, the customers and the roadmap for long-term sustainability and growth.
4.Be patient, prepare yourself for adventure
Think on the safe side. It’s better that you apply two or three SBA-sponsored lenders for the loan and subsequently land to one. Check if you have copies of all documents, a clear roadmap, not forgetting the inordinate amount of patience to make things work. Be prepared that sometimes applications can languish within weeks of application of business loans. It’s also important to be flexible in your conditions for a loan.
5. Be strategic
It may take time but ensure that all your approved loan offers meet your original needs.Check the copies of the approved small business loans and then compare if it meets the final terms to your original idea. Keep a check of your business loan carefully- Is the capital sufficient to fund your start-up home business, is it possible to pay your monthly payments ? Is your business idea still viable?
For instance, you need to be prepared for any last minute changes or revisiting your business plan if there’s already another competitor trying to penetrate into the market. At that point of time, you should be wise enough to revisit your plans before further loan funds.
Haave any questions to ask? Contact experts at Fincomienzo to get your answers clarified.