Regardless of how good your business plan is, or how convinced you are of its future success you will still have to convince the bank when you apply for a loan. Unfortunately, the decisions are now increasingly based on formula and credit scores with little attention given to the individual or to the business you are building.
This can mean in these tough economic times it may be difficult to establish a loan for the start up of your new business. It may be because of a poor credit history, a problem with your business plan, or another reason you do not fit the ideal lending candidate profile.
If this is a problem you face then what can you do? How can you raise capital through other means? There are still several options available to you.
The first would be to approach friends or family for the loan. You may not feel comfortable with this and there are some risks. Some of the most personally problematic risks are in the potential of offending the family member and damaging the relationship if you are unable to repay the debt as promptly as you intended. You may find the family member themselves hurting financially and ask for immediate repayment of the loan ahead of schedule. You may find this impossible to do.
The next option would be delaying the start up of your business and saving up the cash you need for your initial capital outlay. This may seem an unattractive option for you at first, but it does have its benefits. By following this line of logic you are starting your business with no personal debt and, should the unthinkable happen and your start up business fail, you won t be left with a debt to cover with no business income with which to make the repayments.
You don’t need to quit your regular job right away either. Instead of diving in head first to your new venture you might choose instead to start slowly by working your day job and using part of that income to support the business you are trying to get off the ground. There is less pressure for the new business to make a profit in its earliest days as you have another income to support you. You can use some of that regular income to buy needed supplies.
Reworking your business plan may also help. Reevaluating your needs can help you to see where you can trim. You can also reduce the amount of stock you need to buy initially, so you can reduce the size of the loan you are seeking. You may also see an error you made in your business plan that made it seem unreasonable to the bank. Attempting a second time to gain a bank loan with a smaller request and a better business plan may bring success.
Being rejected by the bank is not an end to your at home business, but it will mean a change to your plans. A little creative thinking can get you back on track and may mean your brand new business can still be a success.
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