There many ways to find money to get your startup business funded. For some startups, debt financing makes the most sense. When borrowing money for business, the most important thing to remember is to do your due diligence and make sure you understand all of the terms and conditions contained in your loan agreement. Use the following information and guidance to find the best business loan for your type of new venture startup.
Fund Your Startup Using Your Home Equity
If you are a homeowner with sufficient home equity, you can leverage your primary real estate asset to quickly get the working capital you need. Typically, banks will permit existing homeowners to borrow a certain percentage of the difference between their mortgage balance and the present value of their homes. Before taking out such a loan, be aware that a home equity loan is basically a second mortgage that may or may not come in the form of a revolving credit line.
Credit Industry Sources of Funding
Business loans tailored to the specific needs of the borrower are a staple of the emergent non-bank financial services industry. In contrast to banks, non-consumer credit providers understand business and are more comfortable lending to the principals of new venture startups. LoanBuilder.com is one such direct lender. Certain lenders can provide qualified borrowers with funds to expand a business, purchase inventory and equipment, meet a payroll, pay tax bills, and spend on marketing as well as other expenses that reflect prudent business management.
Peer-to-Peer Lending Sources
Peer-to-Peer lending websites exist to bring together borrowers and private individuals with surplus capital to lend. Such sources permit you to potentially borrow $35,000 or more from complete strangers while doing very little paperwork. While such loans are for your business, it is you who will be personally liable for repaying the debt. Interest rates associated with peer-to-peer lending arrangements tend to be a bit steep when compared to traditional credit sources. Moreover, credit standards for this type of funding tend to be higher. Apply for this type of loan only if your personal credit score is near the top of the range of average borrowers.
Building Business Credit
In addition to your personal credit score, your business may also have a credit history of its own. Business credit scores assist lenders in the evaluation of the creditworthiness of a particular business. According to Experian, a global information services group and well-known credit bureau, your business credit report helps lenders determine whether or not your business will pay its bills on time. If you have or intend to get a business credit rating at some point in the future, it makes good sense to regularly check the report to verify that all information contained in it is correct and up-to-date.
Securing sufficient working capital remains one of the biggest challenges an entrepreneur can face when launching a new business. Because they are used so infrequently, small business startup loans continue to be a source of confusion for many. Taking to heart the wisdom found in the foregoing summary of new venture debt options will improve your odds of having a smooth startup launch.