Home Business Financing

Funding a home-based business can be a difficult endeavor, especially if the owner was previously an employee and is venturing into business for the first time. Banks are often reluctant to lend to solopreneurs or first-time business owners, and prefer to see more than a year of operating income prior to making the decision to lend. Here are some financing options that may be more realistic for new business owners to pursue:

Related Party Loans

Approaching friends or family members with a loan request may be your best option. After all, they know you personally, and are likely to stand behind your idea. Do not assume, however, that these types of agreements should be done on a handshake. You will need to convince your potential investors with a verbal and written plan that includes realistic projections prepared by you and your accountant (preferably a Certified Public Accountant). You will also need a loan agreement that all parties need to sign before any checks are written (preferably prepared by a lawyer).

Peer to Peer Lending for Business

Borrowing from other individuals is made possible through crowdfunding and peer to peer lending networks. Your odds of getting funded through online channels is especially good if you already have a strong and active social network via sites like Twitter or Facebook. Simply make a compelling case and direct your Twitter and Facebook followers to your funding request page. There are many peer-to-peer lending opportunities for business online so be sure to research your options first.

SBA Loans

If you need access to a large loan (more than $50,000, for example), you might want to consider pursuing a SBA loan. Visit sba.gov to learn more about this process and to find a lender near you.

For Online Retailers

If you run an online business, you may want to consider financing your business through Kabbage.com. This is an internet finance company that allows the business owner to apply online, link payment accounts and get a rapid lending decision. If approved, business owners can tap into business lines of credit of up to $50,000 that can be used to fund purchase of inventory or improvements such as changes to web site design.

Whatever method you choose to pursue, be prepared to share your company's financial history, projections and unique brand with the potential lender to have the best chance at getting the funding you need. Also plan on investing at least some of your own money from savings or credit. This shows your co-investors that you have a strong commitment to your business idea, and will also ensure that you pay close attention to the daily financial details of your business. As previously mentioned, it is also a smart move to consult with a CPA and lawyer before committing to any financial agreement.

Linda Jenkins is the CEO of Gold Alliance Group, Inc. Her ebook, Creative Financing: How to Get a Small Business Loan without a Banker, is available at GoldAllianceGroup.com, Kobobooks.com, Amazon.com and other major ebook retailers.

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