Do Home Based Businesses Require Start Up Loans?

Growing a Business at Home

When you work from home, you may not think of yourself as a real company. Small business entrepreneurs tend to forget that some of the largest companies started in the Depression right out of a business run out of a garage or on the kitchen table. How did these people manage to take their home business and grow it? At some point, they had talk to a banker about a business loan or find creative ways to finance growth for their endeavors.

Conventional Loan Routes

If they had the assets and credit scored necessary to get a loan from a bank, either through a small business loan incentive or not, entrepreneurs would look to this choice first. Some have even put up their homes as collateral as part of a home equity line of credit that they tapped for business purposes. That includes a high amount of risk should the business fail, since the home would be forfeit too. Thus, people who either have few assets other than the business, or who want to minimize personal risk, might look at other options.

Unsecured Loans

These can be credit cards, merchant loans, and loans from family and friends. Credit cards, however, do require a good credit history. Merchant loans don’t require a credit check, but will rely on the health of your monthly credit card receivables to determine your eligibility. While some entrepreneurs don’t mind borrowing from family and friends, this can cause a strain on the relationships if the business fails taking their money with it too.

Leasing Instead of Owning

If a loan just isn’t an option, another way to fund business expansion is through the practice of leasing. That means that you lease equipment or services for a set period of time and pay in monthly installments. This precludes the necessity to generate large amounts of financing to own, rather than rent things you need to expand. If you really can’t find a good loan program, think about what your current needs might be and see if you can finance the expansion temporarily by leasing. On the positive side, if the new business you are trying to garner doesn’t come in, you just terminate the services after the lease period is over. If you find you get tons more new business due to the expansion of your services, you’ll be in a much better position to negotiate a loan to buy equipment and services in the future.