I have this feeling that in 2017 you’re going for it! You got the great idea, you have the passion, the sound business plan, creative branding and the perfect market to sell your product/service. Now all you need is some start up capital!
There was a time when getting a small business loan was not that difficult of a task, unfortunately that’s no longer the case. I vacillated with how much I wanted to involve lenders when I started my business because I knew how they were tightening their belts and making loans very challenging to acquire.
LET ME INTERJECT A THOUGHT RIGHT HERE
Okay, I realize that most entrepreneurs starting a business don’t even need to consider a bank loan at this point in the process so know that the following information may not be a path you need to take. But there are those who will need to leverage their business concept to raise funding.
So what’s a small business owner to do? Well thankfully there are still a few options to consider so your odds of success will go up dramatically.
LEVERAGE YOUR DAY JOB. If you haven’t walked away from your full time gig yet then use it to your advantage. Lenders today want to see a secondary source of income, ideally one that is capable of repaying the loan. So any consistent income to show the banks is a huge plus in your favor.
But if your only source of income is generated from the business for which you are seeking the loan then it’s going to be tough (but not impossible) to qualify. Just be prepared to pay higher rates.
GO MICRO. In addition to leveraging your job you should also leverage the right type of lender. As a small business you have a great chance of qualifying for a Microloan from the Small Business Administration (SBA).
Over the years these programs have been known to issue thousands of loans to start ups. Loans can range up to $50,000 with the average loan around $13,000. There are about 200 of these institutions across the United States. Check out a list of Micro Loan companies here.
MAINTAIN EXCELLENT RECORDS. Here’s a surprise statement – before anyone will give you a penny you will need to show the necessary qualifying information! I know, that’s a no-brainer but I’ve helped those who thought just because they had a great business plan that the money would get thrown at them.
Unfortunately that rarely happens so to put the odds in your favor you will need to include hard copy information like income tax information, pay stubs, credit history, a sound business plan, documented business expenses and revenue as well as other indicative data.
USE COLLATERAL. This is the old adage of using what you have to work in your favor. This means you must be prepared to put up something of value to get a portion or the entire desired loan. What if you don’t have a lot of assets you may ask?
Well, that may make it a little tougher but not impossible, you may have to lean more heavily on other parts of the process and be willing to pay a little higher for borrowed money. Just remember, if you have a sound business system or a good idea the money will find its way to you.
GET CREATIVE. Today they are more avenues to fund your business ideas than ever before. So the big banks and microloan companies don’t work for you, no problem, just get a little creative. You may need to seriously consider going in a different direction with funding your business.
You could consider getting in front of local investors and pitch your company like you’re on Shark Tank. Also there are companies out here like KIVA who helps entrepreneurs fund their dreams through community loans. Let’s not forget about GoFundMe, KickStarter and other venues to help raise money.
Becoming a small business owner is not easy but it’s worth it. Unfortunately, securing funding stops a lot of entrepreneurs before they get started. The good news is you don’t need a lot of seed money to jump-start that business but you do need a solid plan, the right financial/legal structure and a lot of hard work.
Your Money Mentor