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Posted: 2005-12-13 / Author: Joseph Kenny
Small Business Loan BasicsMany 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.
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