Business Direct Loan
Once you have your business plan ready, you can start to think
of a business loan. attitude in mind what is point out in the
preceding article, every lender knows the risks that a new business
implies. So, this risk will have to be shared, in the form of
the stipulation of some asset of yours, whether private or dedicated
to the business, to show confidence in your own project.
Very few loans will be granted on the business plan alone, however
brilliant it may appear, so bear this in mind and place your car,
truck, a piece of land, whatever it may be, as collateral from
the very beginning. Don't wait for the lender to ask for it.
If a small business borrower wants the lowest rate, this will
usually be found in a short-term bank loan that has recall/balloon
terms and other generally undesirable features. Although this
type of loan might have the lowest rate, it will not necessarily
have the "best" rate. The lowest-rate loan typically
involves the worst terms, not the best terms, even though the
interest rate might look appealing. Here is a suggested definition
of what constitutes the best rate for a business loan: the "best"
rate is one which is associated with business loan terms that
are not detrimental to the long-term financial health of the commercial
borrower's business.
The first source you should consider tapping is your own investments
and funds. I'm a huge fan of self-sufficient when it comes to
business because it doesn't make you in charge to others should
the business fail. The bad thing is that it if things do go under,
it will be your money that goes down with the ship. If you're
not willing to risk your own capital you certainly shouldn't be
willing to risk anyone else's. After tapping their own savings
and money, many entrepreneurs turn to friends and family for help.
This works well for some, but here's the creed I live by: by no
means have a loan of money from anyone you have to eat Thanksgiving
banquet with. nobody causes tension in a family like lending money
that is never paid back. And notice I say "lending money"
rather than investing money. Venture capitalists invest money.
Your relatives lend you money. They will expect it back sooner
or later even if they say they won't. memorize, when a loved one
invests in your business they are emotionally investing in you.
It would be tough to tell mom and dad that their favorite son
lost their life savings because his business went down the drain.
I financed my first business on credit cards, which was an incredibly
stupid thing to do given the fact that my business could have
failed and left me with thousands of dollars in credit card debt
that would have taken until the year 2099 to pay off. It worked
out in the end for me, but if you decide to finance your business
on plastic keep in mind that you will be paying extremely high
interest rates on the money you've borrowed and unless you hit
it big you will be paying for that money for many years to come.
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