Home Business Financing
Home business owners tend to underestimate the costs involved in running a business. As they search for money, one of the last options is to ask a person that they know for a loan. Fears surface. Will the person think the business is a good idea? If they reject the idea, will it make the relationship uncomfortable?
As the insecurities mount the excuses of why they shouldn’t “bother” the person build. Well if I can’t get the money at the Bank, I probably don’t deserve getting it from someone I know. What if I can’t pay them back like I had hoped I could?
In this economy there are many reasons why home business owners can’t get the capital they need to build the stream of income that they desire. Unless you have credit and assets a bank isn’t interested. Research shows that banks made 4562 fewer loans of under $150,000 in 2011 than in 2010 and that only 36% of the applications were approved.
On the other hand According to the Research conducted in 2010 by businessinsider.com,
“An astonishing 87% of all funding of private companies in the US comes from friends and family.”
If these loans are done professionally and legally, they make a lot of sense. The business owner needs a plan so he can show exactly how he will pay the money back. He needs to learn the best way to approach and talk to investors.
A home business owner can virtually raise any amount of money that he needs if he learns the skills necessary to request funds in an intelligent and compelling manner.
Emily Maltby in her article “Small-Business Lending Jumps, But Credit Struggles Linger” gave the example of Pam and Todd Turkin’s business, Just Baked Shop LLC to illustrate the struggle of small businesses, even established ones in securing a bank loan.
The couple’s first cupcake bakery in Livonia, Mich., took off in late 2008 and they were immediately strapped for financing. In 2009, just as they were poised to open their second store, they were denied a $20,000 credit line from their primary bank. So they self-financed and borrowed funds from family. In mid 2010, as the bakery hit $1 million in sales and the Turkins were opening their fourth store, they tried another bank for a $60,000 credit line. Again, they were denied, but the bank allowed them to lend against a $20,000 certificate of deposit. http://online.wsj.com/article/SB10001424052970203388804576612950561189010.html
And the mistake that I made and many other people make is asking like this: “You wouldn’t want to lend me money for my business would you?
There is a right way to ask that will trigger investors desire to make the loan. A proper pitch package delivered in a business like, yet friendly way will yield results. A pitch package should include a letter of request, a mini business plan and options for the lender to consider.
“Let me remind you that credit is the lifeblood of business, the lifeblood of prices and jobs”.
- Herbert Hoover
All the Best,
Billy Nafziger
PS. If you would like to hear a webinar entitled Person to Person Loan Formula go here.
