A Business Loan Breakdown For The Modern Entrepreneur

No matter your current financial situation, the idea of becoming an entrepreneur can be quite exciting. If you don’t have a great deal of ready cash, you can borrow to invest in your business if you plan ahead. Set up the necessary structure to protect your personal finances while you work on your business.

Set Up Your LLC Immediately and Business Bank Account Immediately

Setting up an LLC is quite easy but you will need an EIN. Consider a short conversation with an attorney to cover all the requirements for your state and, if you have an accountant, ask for guidance on keeping your taxes and fees as low as possible.

Make sure you also set up a business bank account when you set up your LLC. Just put in enough to keep the account active and don’t allow any automatic payments from that account for now.

Protect Your Personal Credit Score

Putting your own credit on the line in an effort to fund your business will cause more problems than it will solve. When you’re working on your business loan applications, you will need to submit your personal credit score.

If your score has taken a hard hit, be aware that some monies may not be available. and others will be expensive. For those who plan to bootstrap their businesses by getting loans in their own name, it’s a very good idea to

  • keep your current job to keep your income up
  • pay bills as soon as they come in so you don’t miss any due dates because you’re busy building your business
  • cut expenses temporarily to free up more cash for your business

Find someone else with short-term financial crunch goals and ask if they want to be your roommate, or consider relocating to somewhere less costly. Dedicate all day Saturday to working only on your business and use Sunday as your side hustle day. Plan to be tired for a while until your business starts to build an income.

Start Your Application Early

One of the cheapest ways to get money to fund your business is through an SBA loan. However, the application process can be time-consuming and your approval may be slow in coming. If you must have the money immediately, consider a hard money loan.

Be Prepared To Pay More For Speed

There are many investors who are not excited about the stock market right now. If you have at least a small down payment on the investment you want to make, you can quickly gain access to use funding tools for your business such as hard money loans in California and other areas you do business in.

You will need to be able to demonstrate a strong profit and loss record; even if your business is barely in the black, there are hard money lenders who will work with you if your business plan is strong. Do your best to meet face-to-face with those you hope to borrow from; a strong relationship with a hard money lender can be quite lucrative for all involved but you need to put in the time to build up a rapport.

Focus On Relationships

As you build your business, do your best to build strong relationships both locally and digitally. Even if your business will be completely online, a positive relationship with a local banker can be incredibly beneficial. If you prefer to bank online, make sure you also have a local sticks-and-bricks bank.

Your hard money lenders will also be happier if you can remain in consistent contact. Get permission to send them an email with updates and let them know if any payments need to be delayed. Keep in mind that the hard-money community is quite tight-knit. If you have to default on a loan with a particular lender, be aware that their fellow lenders will soon know how you handled it. Your risk as a borrower may go up, but you can still maintain the relationship with careful communication.

As a general rule, business debt offers longer terms than personal debt, particularly if your debt is unsecured. If you choose to buy a commercial building, you will notice that your commercial loan will be longer than your 15-year mortgage. Do your best to build up savings for your initial business purchases and keep your personal debt-to-income ratio as low as possible to avoid getting in over your head.