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Should I get a business loan?

Guest post by: Dan Miller

Article Overview: “Dan, Thank you for all that you do. I would like to know what your opinion is on getting small business loans. It takes me a while to put money to the side from my regular job to invest in my businesses. I have tried buying wholesale collectibles on ebay to resell and also affiliate websites but found the long hours and no return on investment in the beginning hard to overcome. I could not get any traction going and would quit before I felt I ever got started. Would you recommend a business loan to get things going faster?”

Should I get a business loan?

“Dan, Thank you for all that you do. I would like to know what your opinion is on getting small business loans. It takes me a while to put money to the side from my regular job to invest in my businesses. I have tried buying wholesale collectibles on ebay to resell and also affiliate websites but found the long hours and no return on investment in the beginning hard to overcome. I could not get any traction going and would quit before I felt I ever got started. Would you recommend a business loan to get things going faster?”

Not with what you’ve described here. If you have to have a loan to make the business work I think you’re in trouble. Don’t be like the farmer who lost money on every watermelon he sold – so he went out and bought a bigger truck. No, if you aren’t making money on a small scale there is nothing to leverage for bigger profits.

If you already have a business that works and a loan would help you leverage what you’re already doing – then go for it. If you’re buying designer clothing from an outlet and predictably triple your money with every piece you put on eBay, then more money to leverage those profits would be an option.

Always start with what you have to make your business profitable first. Never start with borrowed money – it creates an artificial environment that prevents you from really knowing how the business works. The struggle to make it profitable from day one will help you build something that has true potential.

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Article Tags: borrow, business, career, cash, credit, debt, future, invest, investment, leverage, loan, money, potential, profit, profitable, small businesss, work you love



Related Forum Posts
timeframe for loan process - In general, it should not take more than 10 - 12 weeks once the lender has your loan package. Unfortunately, I have heard horror stories where 4 - 6 months after the person submitted their loan package, they still have not closed on their loan and some cannot even get in touch with the lender for an update. (not with my business and the lenders we deal with, but others have told me this when they contacted us after they were fed up with their current lender). I think it's dependendent upon whether or not you have gone to the right lender for your type of business loan and also dependent upon whether you have packaged the loan properly. When a loan has not been packaged properly, lenders will not even review it. It can sit on their desk for any legnth of time before they get around to sending it back to you "declined" (for improper packaging). It's best to have your loan professionally packaged. That's the beauty of dealing with a loan broker or other professional who provides this type of service. It's best to seek out professionals who specialize in your specific type of business loan. The loan goes through diffrent stages. The first stage is the initial review by the lender, where the Lender will decide if you are favorable for loan approval. If you are, the loan will be sent onto the underwriters and you may or may not receive a proposal letter from the lender (it depends upon the lender). this letter may need to be signed and returned. The lenders initial review should take anywhere from 5- 10 business days. The second stage, is the underwriters review where your loan with either be approved or denied. This is a crucial stage and can take about 3- 4 weeks. Once approved you will receive an approval letter that needs to be reveiwed by you (or your lawyer) carefully. this letter needs to be signed and returned in order for your loan to go through the final stage. The third and final stage is your loan closing. This is where everything is finalized so they can fund. This stage can take another 3 - 4 weeks. Keep in mind that if you are dealing with a loan broker, you should add another 2 - 3 weeks to your loan timeframe as it will take about this long for the loan broker to gather and process all your documentation and package it and get it off to the lender (this includes delivery time).
Using your home for collateral is one thing, but... - Putting up your home for collateral is one thing, but utilizing the equity in it to finance a business is a whole other ball game and could be damaging in the long run. Do you know that if you completely finance your business with home equity instead of a busienss loan you will not be able to obtain a working capital loan later down the road? should you run into some financial troubles or wish to expand or remodel with working capital loan, you won't be able to get it if you finaced by personal means. It's always best to build a track record with a lender for future use and it's always better to be in business debt rather than personal debt. I always say: "You wouldn't hire a Plumber to do the Electrical in your home, so why would you finance a business using your home equity? Equity loans are for your home, business loans are for your business. You may however, utilize some of the equity in your home for loan down payment (depending upon your qualifications) and we can help determine whether that would be more helpful or damaging to your loan by pre-qualifying you for free. when using your home for collateral, it doesn't necessarily mean you will lose your home (in the event you cannot pay your loan payments). Lenders are always willing to work with you once you have a loan with them and they have already taken on the risk. they typically only utilize what they lien if nothing else can be resoloved (so it's basically a last resort) to go after what they lien.
Women getting financed - Spouses shouldn't be co-signers, they should be part of the loan. Lenders prefer married couples to apply together, it stregnthens the loan because the female can show outside income while she's managing her new business. Outside income means showing a lender there is other income aside from what she is drawing on her new business. A lot of women apply alone and only show their assets and do not include their husbands which is a mistake. All assets, regardless of who's name they are in are considered joint assets in a lenders eye. When you show all assets it stregnthens the loan because you are showing stronger net worth / collateral making for easier loan approval. We understand that the woman prefer to do it alone, but she has to ask herself what's more important getting financed or trying to do it alone? A husband can be on a loan application at a very small percentage (5%) and doesn't ever have to take part in running the business. And when listed on the application (under 20%) the lender will not look into the husbands credit or personal history (so he is pretty much kept out of the loop) but can help stregnthen that loan in order to obtain approval.
loan - What are all mortgages loans for first time buyer? What is the current interest rate on mortgages loan? I am looking for some personal experience from the first time buyer. Where is the best place to get mortgages loan? Is there a federal mortgage loan? I am looking to buy in the next few months and I need some one to guide me on loan and everything about home buying for the first time.
Getting financed - It has always been my experience that it will always be better to be in business debt rather than personal debt, but I suppose when you can run your business out of your home and have so little overhead, it could be better to simply finance yourself and secure a business line of credit just in case you need it. On the flip side, when it comes to businesses outside the home, you want to secure financing and SBA is probably the way to go (depending upon what your total project will cost). Banks that provide SBA loan products prefer the loan be 100K or more. Then there are Micro Loans (loans that go up to 35K) and Signature Loans that are unsecured loans and mainly based on your credit score (680 or higher), they can finance anything in between and then some. It's been said in some of my other posts that when you obtain business loans its beneficial because you are building a track record with a lender for future use. Should you get financed via a business loan and later you need additional working capital to keep your business going (or to expand) the lender is going to be more apt to help you because they have already taken on the risk of your loan. Now, they would prefer you better yourself whether it be expansion or to pull yourself out of a hole so you do not default on the 1st loan... and if that means helping you further, believe me they will do it. However, if you finance yourself, who's going to help you with additional working capital if you run into trouble? Lenders won't help you because you financed yourself...they tend to take on the attitude that you didnt need them before, so why now? What if you had originally financed yourslef with home equity and still haven't paid it back...now you have a first mortgage a second or Home Equity line of Credit and your business is in touble and you have no way out.


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