Usually, a business must have two to three years of solid financials before a money lender will consider lending money. Often, a strong personal credit record is needed from start-up. Some lenders offer business loans specifically for start-ups, making the process easier than it was ten years ago. To stand the best chance of securing funds, there are certain things to keep in mind:
Homeowners have a built-in history of borrowing, and possess a large asset which can be used as security. Start-ups are considered high-risk, so lenders have to rely on your existing assets to pay back the debt in the event of default.
The level of borrowing you can secure is usually determined by the amount of security you can place against the loan. A home is usually the biggest asset a person or a family owns. In a business, there may be more than one person applying, which means person should list assets as security in order to garner the highest possible loan.
Items that are considered assets include cash, property, stock shares, bonds and vehicles. The higher the value, the more that can be borrowed. Do not overextend yourself, as you will become liable to lose each asset used as security.
Keep old tax returns to demonstrate your good income history. If it is shown that you are a capable earner, that does make the lender less cautious.
If the lender sees exactly where the money will be going, they can better decide if your application is viable. An application in which the total is itemized is more likely to be approved.
Brian Solomon is a Web Editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To see more of his articles, please visit Brian Solomon’s columnist page.
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