Some people are not fortunate enough to open up a business office; instead, they kick off their business from home. After all, this is the era of e-commerce businesses where a physical store upfront doesn’t count. Millennials are happily engaging in online shopping, judging brands by their digital presence. Even though reaching out to customers has become simple, there are still many hurdles in the journey.
Financial problems are always on top of the list while seeking funds is quite difficult. Home-based businesses don’t have any potential assets or documented statements to acquire bank loans. Unfortunately, you have to try your luck with the limited options available. If you are wondering how? Well, there are different requirements for every loan. So, let us take you through different loans and how to acquire them.
Invoice Financing
Every business faces cash flow problems since customers take ages to foot their bills. If your business is facing cash flow problems, then invoice financing can work in your favor. It arranges funds to keep your business operations going. Lenders are likely to provide you with 80% of the total amount and the pending amount after customers have paid. Unlike traditional loans, there are no interest payments; instead, lenders charge a standard fee. So, how can you qualify for this loan?
Many home-based business owners think that things are difficult for them. Well, applications for invoice financing are the same for everyone. Just like every other owner, you have to present your bank statements and credit score. Alongside this, you have to give a copy of your customer invoices too. Prepare all these documents beforehand to ensure a quicker process.
Home-Based Line of Credits
Sometimes, you are not sure about how much money you need. Therefore, acquiring a loan seems irrelevant, but there is always an option to open a line of credit for a small business. Every financial institution has its line of credit, so if you don’t get approval from big commercial banks, give a shot to credit unions and SBA lenders. Besides, this credit option would give leverage only to borrow the number of funds you need.
Coming to the application process, you have a choice to opt for a secured line of credit that asks for collateral, or an unsecured one which doesn’t require one. You need to have a good credit score, and all relevant documentation with licenses that prove your business is authentic. The interest rates vary depending upon the option you pick. So, decide after seeing the potential of your business.
SBA Home-Based Business Loan
These are microloans for new entrepreneurs, a way to encourage more investment opportunities. If you wish to acquire funds through SBA, it can lend up to $50,000, depending upon the capability of your business. Despite being flexible, they would judge your credit score to see where you stand. These are backed by the government, which ensures feasible repayments and minimal interest rates. After all, they are working towards the benefit of new businesses.
However, you have to prepare yourself for some lengthy paperwork while acquiring these loans. You would be asked to submit personal tax returns, financial statements, personal and business bank records. Alongside this, you have to present an incredible business plan with a statement of why you need this loan. You have to convince them to lend you money by throwing light on your business potential.
Home Equity Business Loans
Usually, business owners are confident about repayments before getting their hands on a loan. If you have faith in your business, then explore the option of home equity loans. These loans are not restricted to big businesses; instead, they are open to everyone. You have to use the value of your home to finance your business. Basically, you will keep your home as collateral to get financing.
The value of your home would determine the amount of money you can borrow. You need to have a credit score of 700 or above. Similarly, your debt to income ratio is also essential to see how much incomes go away in debt repayments. Ideally, it should be 43% or below. The application process is pretty simple if you meet the required criteria. However, only pick this option if your projected financial statements are giving a green signal since it has substantial risk attached.
Business Credit Cards
Since you have a home-based small business, your financing needs should be relatively low. After all, you don’t need money to purchase some plants and equipment. Therefore, try out different options, something like a business credit card, could be a great help in your business. Alongside easy access to capital, it would help you establish a potential credit score to acquire loans easily in the future.
Do you know about 0% APR credit cards? It is an ideal option for small business owners; you can get yourself a business APR credit card to escape interest payments. Different banks have different offers; some offer zero interest for 12 months, while others are also offering up to 24 months. So, what could be better than borrowing money without the need to pay interests?
Besides, getting your hands-on business credit cards is like a cinch. Banks would look at your personal credit score to see where you stand. They would also ask for your business license, other sources of income, and relevant documents. Once you have provided everything, it would take a couple of weeks to process your application until you get approval. Honestly, it is the best option when you have to cough up money on daily expenses.
Wrap Up
Usually, home-based business owners become demotivated due to the lack of business opportunities. Well, it is important to explore options to see what can work in your favor. Even when it comes to financing, there are choices available, except for few. Therefore, start researching the available options. If you are wondering how to get funds? Look above for different options and how you can get them for your home-based business.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
Speak Your Mind