Business Financing
An investment of $12,400 is not a trivial amount from a personal standpoint,
but it is a relatively small amount for most lenders. This figure is
significantly less than the average business loan (and most new car loans for
that matter), leading to many streamlined financing possibilities. IdeaVision
doesn't provide financing directly. However,
individuals with a reasonable credit history should feel confident that they can
obtain a hassle-free loan for their new business. The information below is
provided to help you understand your financing options.
Businesses can be financed with either a personal loan or a
business loan. Personal loans are designed to cover a wide variety of family
needs such as bill payments, remodeling, college tuition and other major
expenses including starting a business. However, approval of the loan isn't
usually tied to any specific item, giving you a great deal of flexibility in how
you spend the money. In contrast, business loans are tied to a specific
business. They generally require detailed business plans and a thorough
financial investigation.
The two types of loans are compared in the following chart:
| |
Personal Loan |
Business Loan |
| Used For |
Any personal expense |
Tied to a specific business |
| Amount |
Typically 5K-50K |
Typically 50K and higher |
| Experience |
N/A |
Often 2 years in the business |
| Paperwork |
Basic credit history |
Detailed business plans |
| Approval |
Quick, often within a week |
Varies, but much longer |
Based on the loan amounts in the chart, a personal loan is the most appropriate
type for this particular business. A business loan is designed for ventures that
require higher investment levels. As such, it's recommended that you pursue a
personal loan because you'll have a better chance of obtaining the loan. The
simplicity, quick approval and flexibility of personal loans are added benefits
for taking this path. Most of our business owners who financed the business did
so with some type of personal loan, often from a lender in their own community.
Loans from family members are also frequently used.
Examples of personal loans and related options are shown below:
|
Loan Type |
Comment |
| Home Equity Loan |
For people that own a home |
| Bill Payer Loan |
General loan for bills and major expenses |
| Line of Credit |
Range of credit for any purpose |
| 401(k) Plans |
Borrow from your retirement account |
| Friends and Family |
A major funding source for start-ups |
| Credit Cards |
34% of start-ups are financed this way |
A short visit to your local bank or credit union is all it takes to find out
which option will work best for you. Before applying for a loan, it's worth noting the following items
that lenders often look at in your credit history:
- History of prompt credit payments
- Bankruptcy in past 5 years
- Open collections (bills turned over for collection)
- Federal or state tax liens
- Bank account balance (ability to make payments)
We'll be happy to help you assess your options so that you can structure a financing
plan that works best for you.
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