If your home business is such that you require outside financing to start your business, you will have use some ingenuity in finding funding sources. The most difficult type of funding to acquire is bank financing. Banks, unless you have a very good relationship, have collateral and a high credit rating with a bank, will be most difficult. Your chances may be slim to none in getting any funding from your neighborhood bank. If after applying for a loan at a bank and you are rejected, if you own property or a house, you may be able to get a home equity loan or a line of credit which can be used to jump start your home business.
Other options are applying for a secured loan backed by any current collateral you have(savings, checking account, property) that is acceptable by the bank. Of course during this time of financial recession and the Wall Street Bailout and bank’s freeze on loans, this may be a hard road to travel. If you are able to obtain an unsecured loan, be careful, these type of loans usually come with very high interest payments.
There are another type of loan and they are called “private loans.” And one place to find these type of loans is the internet. Most of these loans are for up to a maximum of $25,000. The downside is that most of these loans come with extremely high interest rates up to around 29%. www.prosper.com is an online service that matches up people seeking loans with private individuals who are will to loan money. When you sign up for a loan on prosper.com, you supply all necessary information, such as your bank accounts and additional personal information as well as agree to a credit check. Then you are allowed to post your loan request(why you need to borrow the money). Private lenders will then bid on your posting, and if someone agrees to loan you the money, you make payments for a specified amount of time at an interest rate determined by the lender. Lenders and borrowers pay Prosper.com a small percentage of the loan amount.
Other businesses that operate much the same way as prosper.com, such as E-Loan, operate as a broker and lender to find business loans, equipment financing and other types of funding.
Another online method that can be used to connect you with knowledgeable people who might be able to help you connect with people who may be able to arrange a business loan for you is to use internet sites like www.linkedin.com and www.MeetUp.com. These two internet sites are useful in connecting your with other entrepreneurs who can offer advice, make introductions and point you to possible funding sources. There are also good business groups on www.myspace.com as well.
And as we know, a well thought out, well developed business plan will take you a long way in impressing potential lenders.
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