Nowadays it is more difficult than ever to do business. As a result, more and more of you are looking to move or start a business in your home. You may be wondering if you can get a loan for a home based business. We will answer below.
1. Do You Qualify?
Most lenders will allow loans of this type. The location of the business is not as important to them as its and your viability. No reputable lender will grant a small business loan to a potential borrower if you have poor credit. This is why it is essential to pull your own credit report before applying. You want to aim for a credit score of 720 FICO or above. If this is you, feel free to apply for a home based business loan. If this is not, look over your credit report for items that are holding you back. Do you have debts, late payments, or other red marks? Address them as soon as possible. Even if you get a home based business loan with a lower score, it is likely you will be charged more for interest – which is why it is essential to get these resolved ASAP. You also want to see to any:
- Credit lines that are maxed out.
- Too many accounts or trade lines. Four or more is usually the cut off.
- Any bankruptcies, judgements, liens, etc.
- Any other lines of credit such as other loans, mortgages, and even car payments.
Click here to begin the request for your free credit report from the Federal Trade Commission.
2. Research Lenders
Now that you have turned yourself into a desirable borrower, you should find a lender worthy of your business. You may research lenders from the Small Business Administration, as they tend to give the most favorable terms. These agencies themselves are not direct lenders but instead can help you select from private lenders. They are required by law to meet the government’s set of guidelines. However, they are also looking to make a profit and will review your business with care. They will ask you for a number of documents you can get from your bookkeeper such as your present bank statements, a one-page report on your home-based business, your prospective customer base, and projections for long-term sustainability and growth.
3. Apply for and Select a Loan
Narrow down your prospective lenders to three. Apply for them and choose the one with the best terms. Have all copies of all documentation and some patience. These loans can take weeks to clear and the details to arise. You may have to be flexible in your original terms, but that’s why we recommend applying for three. Once the terms come through, you can make a clear decision. You may even be able to negotiate a better loan using their competitor’s offers. You may also be asked to put up a piece of collateral, especially if it is your first business loan.
4. Continue to Use Your Contractors
You may have need for your old or new contractors during or after the transition period. Be sure to continue to use them as needed to help ease it all. For example, do not negate sending your bookkeeper all the costs associated with the move, loan, and any other expenses you may incur. These may be tax deductible, so keep good records on it all.
Get a Loan for a Home Based Business in Houston & Bookkeeping
Feel free to contact us to get help getting a loan for a home based business in Houston or any small business bookkeeping.