In today's economy, you need to put as much in your favor a possible when seeking financing of any sort, and especially for a new at home based business. Bankers are extremely "skittish" after all that has happened since the collapse of the real estate "bubble", so you must be as prepared and professional as possible when getting ready for that all important meeting with your loan officer.
There are many things you should consider before trying to secure "start-up" funding from a bank and here are five of the items I consider most important.
1. Check Out Your Local Banks First. Again since the beginning of our economic downturn, larger national banks have gotten extremely difficult to deal with. Right now, I would shy away from them like the plague. Today, your chances of getting a loan with these guys a pretty slim, so bigger is not necessarily better. The smaller community banks might be more inclined to finance businesses in their areas, and their loan officers are more likely to give you individual attention, especially if they known you and have done business with you in the past.
2. Make sure you know what's in your credit report. Before you ever get to the point of making a loan request appointment at your local bank, make sure you thoroughly review your own credit report so that you can begin the process way ahead of the game. Be sure you know what potential lenders are going to find in a report they use to determine if you're a good risk for a loan. If your report shows a mistake, make sure you contact the three major credit reporting agencies and demand a correction. If there are any late payments, bankruptcies, and/or foreclosures in your credit report that did indeed happen, be sure to include a letter with your loan application explaining the events and reasons that led this "black mark", and how the situation has changed and/or has been corrected.
3. Develop a well thought out and professional top home business plan. Put yourself in your banker's shoes! Would your lend money to a guy who has not taken the time to thoroughly analyze every aspect of how he was going to put together a successful home based small business and "put pen to paper" on how exactly that was going to be accomplished?
Having a solid business plan is your best shot at getting a loan, period! So it is imperative that you not only develop a complete plan, but also a professionally presented plan as well. It's especially important to produce a "dynamite" executive summary. This is what bankers look at first and should be a synopsis of your at home based business from one to three pages in length. If you do a good job and they like what they see, they might read on.
4. Don't buy real estate when leasing is an option. Lenders want to deal with frugal, careful and fiscally conservative entrepreneurs. Bankers also favor businesses that plan to rent rather than purchase a building and your proposed top home based business start-up fits that bill. That's because lenders prefer that you invest in assets that generate income, like inventory and equipment, seasoning your business before your go "crazy" with expansion programs. Bankers also don't look favorable on high renovation costs.
5. Put "skin in the game. Another way to improve your chances of getting a loan is to put some of your own money on the line. Bankers typically like to see work from home company professionals put up at least a 25 percent equity stake in the businesses they finance. Of course this is one of the easiest metrics to meet because you probably already have at least that much equity in your home where you plan to launch your business. A 25% down payment for inventory and equipment will help the approval process move forward.
Remember, preparation is the key whether you're just trying to earn extra money from home or building a top home based business projected to support you and your family. Preparation will give you the confidence to shine in your meetings with loan officers while on your top home business path to success.
