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March 30, 2017 | business

Financing Your Small Business Loan

Many of us dream about starting our own business and the more daring among us do what is necessary to make that happen. Apart from having the drive and the idea, there is also the need for funding. No idea, no matter how great, is ever going to become actualized if you, the would-be business owner, can’t come up with the money to get it started.

Funding Sources

As Jeff White of points out, there are three basic ways to fund a start-up business:

  • Use your savings
  • Solicit backers
  • Borrow the money

You may be able to use your savings or have enough savings to cover what you need. It is a good possibility you will need both saving and another option.

Getting a backer (someone to upfront you the money) sometimes can be difficult. Backers are going to want to see something tangible before they commit to a startup. This often leaves the entrepreneur in a Catch-22; they can’t get backers without prototypes or creating something to show them and they don’t have the money to get even that far.

Furthermore, backers are going to want to see real commitment from the owners they invest in. They want to know that you’ve got skin in the game beyond coming up with a good idea.

Borrowing money could be a great option for you but you will want to make sure you shop around and get the best rate you can.

The Home Equity Loan Solution

The solution to this problem could well be right over your head. The equity you have in your home can be leveraged into enough money to put you in a position to go to potential backers and get the larger sums you need to really take it to the next level. When a backer sees that you were willing to put your own money into the project, they will not doubt your seriousness. What they don’t want is to find themselves putting up their money for someone who turns out to be a hobbyist.

Apart from approaching friends and family for an interest-free loan – which can often lead to angry words and trouble if you can’t pay them back – a Home Equity Loan is the most inexpensive way to raise the funds you need to get your operation up and running.

Ideal for Micro Businesses, Too

Not all businesses will require capitalization from outside sources; some have financial ambitions that can be handled by a small portion of your home’s equity. Let’s say you want to start a landscaping business, for instance. This means your initial outlay for equipment and advertising is not going to be a sum that will require that you seek backers. Home Equity Loans are ideal for that sort of smaller, limited-goal business. And if it takes off and you find yourself needing a fleet of trucks and a larger, commercial loan – then your Home Equity Loan did its job of getting you into the game!

Do Your Homework

Before you commit, be sure you know the market for your idea and talk to a lender to discuss the risks and details of borrowing against your home. They’ll be glad to help you out with any questions you might have.

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