What Does it Take to get your First Business Loan
Tue, 06/03/2014 - 2:06pm | by monicadear
Commercial Loan Tips for the First Time Business Owner
All of us, at one time or another, will contemplate the thought of becoming our own boss. Unfortunately, only a handful will have the guts to actually do so.
One of the biggest reasons why many aspiring entrepreneurs fail to bring their dream to life is lack of funds. What many fail to realize, however, is that there are a number of financial institutions and investors who are willing to back you up if you can prove to them your worth as a potential business partner.
To help you in your quest to jumpstart your own business, we have put together all the things you need to know to get your first business loan.
Business Loan Basics
Loans operate in their own system where the debtor agrees to loan a borrower a specific amount of money in which the borrower will consent to pay back along with the accompanying interest fees at a pre-determined time. There are generally 2 types of loan: a commercial loan is given by a financial institution and a private loan where the money is borrowed from a private individual.
One of the first things that you will have to understand in taking out a business loan is that all lenders will look into one thing, your capacity to pay them back. Apart from looking into the intricacies and potential of your proposed business, these financial institutions will also focus on your credit history and assets to assess if you are indeed viable for a business loan.
Other Ways to Get Financial Support
1. Investors – if you are someone with a less than attractive credit record or if you are having qualms about shouldering interest fees then you might want to consider looking for investors to partner with. Unlike borrowing from a lending company where they will have no stake on your business, asking an investor to help you out gives them a right to share in your profits.
2. Home Equity - you can also get additional funding from a home equity line of credit (HELOC). Typically, you are able to borrow up to 75% of your total home equity by taking out a 2nd mortgage.
3. Life insurance Policy – if you have a life insurance plan then you can also take out your policy’s allowable cash surrender value. The good thing about this is that it gives you more leeway to decide on your repayment plan.
4. Retirement plan – you can also make use of your 401 to borrow money. As per federal laws, you can loan yourself up to 50% of your invested benefits or $ 50,000, whichever is the lower value. The good thing about this type of loan is that they come with a lower rates of interest, but you are mandated to repay your total loan in a matter of 5 years.
5. Grants – if you want to get free money then you will have to work extra hard to qualify for a grant. When approved, you will be required to work closely with your grant maker throughout the duration of your business. This includes submitting progress reports and submitting to regular audits.
The options for getting enough financial support to fund your startup are there. The only thing stopping you from realizing your goals is your desire, so take action.
As a writer for TruckertoTrucker.com, a website that helps businesses look for a commercial truck for sale, Bryan regularly speaks with owners making their first company vehicle purchase such as these Freightliner semi-trucks.