Acquiring Funding for your Home Business

Acquiring Funding for your Home Business

First, make sure you're prepared. If you're approaching a bank for the first time, you need to have a business plan and a well-prepared business loan request. Other things they'll ask for are financial statements, projections for the business and a repayment plan, plus collateral.

Arrange these documents in a neat, easy-to-read way. Everything you present is a reflection of the way you'll run your business.

Banks also want to see that the business owner is investing in the venture. If you aren't already or aren't prepared to invest in your business, seeking a loan from a bank is probably an unrealistic choice.

Luckily, the Small Business Association can pick up some of the slack. They offer two types of loans suitable for home-businesses: the Microloan and the Basic Loan.. For both, lenders can apply for up to $35,000. The Basic Loan offers more flexibility, allowing lenders to use the funds to pay off debts and acquire property as well as acquire capital and purchase supplies.

There are other options, too.

Some banks, governmental organizations and business groups offer microloans based on character and management ability rather than credit history. These loans range from as small as $1,000 to $25,000, so there's probably one that suits your needs. As an added bonus, these microloans can sometimes serve as a springboard toward larger loans because they help establish your company's creditworthiness. After a few years of making good on a microloan, a bank may be more inclined to listen to what you have to say.

Grants may also be an option or your business franchise. There are lots out there and chances are there's one just right for your business. There may be some tough competition, though, and grant requirements are strenuous, so be prepared to put your best foot forward If you're highly organized and have a tough skin, this could be the right route for you.

If loans via the traditional routes aren't working, don't discount your friends and family - or your customers. Plenty of very successful businesses started with investment dollars from personal connections. Maybe there's a client who has always supported you or family member who's willing to risk a little cash in exchange for a small portion of returns? Chances are there are people who believe in you and the home business you're trying to create.

Keep in mind that asking friends and family for money shouldn't be any less formal than asking for a grant from the government. Draft a proposal and make your pitch in a professional way. If they agree, write up a contract so that both parties keep their end of the deal. It may save you from painful disputes later on.