The common goal for everyone to start a business is to generate money. However, you must have enough funds first for you to officially begin venturing in a business. Money is the most necessary and important resource to complete your acquisition.
The common goal for everyone to start a business is to generate money. However, you must have enough funds first for you to officially begin venturing in a business. Money is the most necessary and important resource to complete your acquisition. If you are in a dilemma where to get it, here are three sources to help you:
Getting a Bank Loan
Perhaps the most formal way to get the money you need to start the business is to apply for a bank loan. Banks have various loan programs that could accommodate based on your needs. In the United States, the most popular loan programs are the SBA 504 and 7A lending programs.
To ensure security, banks have set strict rules for the loan applicants. You will be subject to a scrutiny and banks will assess you rigorously.
As an aspiring business owner, your business experience will be carefully evaluated. You will ease the process of getting an approved loan if you can show that you have a good grasp in general business matters like accounting, small business and overall business planning, and others. Any relevant qualifications you possess will also be helpful.
Another thing that the banks will consider is your personal credit record. For every loan applied, the bank will ask for a collateral like business assets. They will ask you to sign a personal guarantee and pledge that the declared asset will serve as a collateral.
In case you are new in the business industry and you haven’t had any record on running a business, the bank may require you to show a detailed business plan. This should specify all the strategies on how the business will work, systems on how you will spend the loan capital and expectations on the investment returns. The process of getting a loan may seem too daunting or overwhelming. Nonetheless, once approved, you can now be ready to start your business and generate your own income.
Acquiring an Angel Investor
If it is too much of a hassle for you to prepare all necessary documents needed for the bank to approve you for a loan, you may tap your family or friends. This may be an individual or a group who will initially provide or fund the capital you need. Compared to banks, your angel investor/s has/have flexible terms of payment depending on your relationship. They may not be particularly alarmed by any high-risk factors in the deal like a bank would be as long as they see that the business has a potential of succeeding. You have to ensure that you and your angel investor have a good legal agreement in place. You also have to understand that this kind of borrowing money can be tricky and risky. A wise decision must be made.
If you find yourself in a difficult situation to get a conventional loan probably due to poor credit, then seller financing can be your solution. Seller financing can be a complex process, but it has a number of advantages. It is a real estate agreement where the seller handles the mortgage process instead of a financial institution.
Sellers are often more flexible than a bank in the amount of down payment. The process is also faster and could be possibly done and settled within a week. You need to note that a proportion of the sale price is often about 50%. In some instances, if the seller has faith in you to offer financial support, they will fund for you.
Doing a business requires patience and discernment most especially when it comes to handing money. You have to calculate your risks properly in order to avoid losses and generate more money so you can pay for the loan.