When it comes to small business loans, no age, gender or any other distinction everyone can achieve.
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Experience with small business loans
So today I just wanted to talk a little bit about my limited experience with small business loans.
A lot of people are kind of stumped on this and it’s not really that complicated.
Most of it can actually be solved by simply sitting down and talking to your local banker.
But I wanted to kind of breeze over what I know and understand of it just with getting started.
Just to keep it real simple for you guys if you need a business loan and I mean go on to talk about other things that concern me with small business loans.
But to start off just the two that are really simple is a term loan and long term loan, is you have a set amount of price or set amount of money sorry that you’re going to get a loan for and you’re going to pay it back a certain amount per month for a set about a month. You know a term loan you know you can get pretty long term.
So speak year to five years as a term loan the loan that I got specifically was an equipment loan.
And what that is is it uses I guess I’ll explain how exactly when I had a set amount of money that I got a loan for to buy my truck.
Well the truck itself was the equipment I was buying but the collateral used to get that loan was the equipment going on to my truck.
Small Business Loans: 4 factors that are very important
Now let’s rewind and I’ll explain a little bit to be able to get a small business loans. There’s going to be four factors that are very important. The first being how long you’ve been in business.
When I first started I had no experience in business so that was kind of the account against me or mark against me.
Secondly is your what is a financial health. My financial health was very good. I just came from Alaska had been living up there for a while so financial I was set very well. The next one was your credit score.
My credit score was amazing and like I said in Alaska paid everything off. I was bumping up about like seven hundred and seventy was my credit score at the time.
So Ari had a very strong financial outlook. You know I was set pretty well financially and I had a good credit score. Still don’t have that much time in business. So that was still a mark against me.
And then thirdly was collateral. And I didn’t have any collateral to really put against the truck. Let me talk you through the scenario and why I got a loan.
I had a set amount of capital and that’s why my financial health looked really healthy. I had a set amount of capital and I was to live off of that for the next six months or so until business started coming in for me.
I did not want to consume my capital. So I decide to get a loan and pay it out in lump sums to have a truck because as soon as I get a truck and my equipment I’m making money versus if I eat up all of my capital just to get a truck.
Well I got a truck but I have no capital runoff. So I needed to the capital to live off of and I needed to truck right now to start bringing income in before my capital was gone.
So that’s why I got a loan instead of just paying cash for it while at the time I could have bought everything cash. So now we’re going to go into the other parts not being in business that long.
I did not get that large of a business loan my small business loans is only for thirteen thousand dollars so that was the mark against me.
I could not get that high of a business loan because they or they were going out on a limb anyways to give me a loan with no business experience at the time.
So just going off of my financial health and my credit score they knew that I could afford to continue paying it. And I’ve always paid my payments in the past and will probably continue to do so in the future.
So for collateral I had no collateral and that’s what made it a equipment loan is what it is is because I had no collateral. They used the truck and the equipment on the truck as collateral against the loan.
So if the loan lapses I don’t pay on it they get my truck a loan with all equipment on it specifically including the welding machine the leads and all the tools and stuff on it.
So I got a loan for thirteen thousand everything on my truck set up I got about twenty five thousand dollars in the truck.
So that relieved them of the risk they were taking to lend me the money because I actually have so much more tied up in the truck than what the loan is actually worth or what I owe on it. So remember those four factors.
How long have you been in business if you’re just getting started you had nothing.
Your financial health your credit score and what collateral you have to put against the loan because they’re not going to just give you money for nothing.
So if you’re getting started let’s take a look at those things and see if you’re ready to take on a business loan.
Do not use a business loan as just an excuse to be able to start a business get the toys you want and live just a fun exciting life.
You don’t. It is not advisable in my honest opinion to just decide you want to do business because you want all the toys you go out and somehow you actually talk them into letting you get 40 thousand dollar term loan business loan or an equipment loan.
You go out buy a thirty thousand dollar truck or twenty five thousand dollar truck and you buy a ten thousand dollar Weld machine and get all the tools and you wrap up fifty thousand dollars in this truck when you haven’t even tested out.
If the market can bear you been there or if you’re even a business person at all yet. That’s why I’m a huge proponent and will always preach it if you not in the situation that I was blessed to be in.
Start something on the side don’t get a loan take the long road and start saving and buying tools as you go I know a lot of people that follow me continually tell me that that is what they do and they advise it for others is they have a day job and it said jump in with both feet and taking high risk.
They take calculated risk and what they do is they take a little bit they take their extra money instead of going spend it on a bunch of just you know whatever stupid in this I guess buying brand new trucks or TV’s or big fancy things they save that money and they buy tools and equipment as they go in within two or three years.
They have bought all their equipment cash they owe no debt. And then during that two to three years they are also building a clientele a reputation around their area.
So you’re doing two things at once because you cannot speed up a reputation. So in the time it takes you to gain reputation on the side what you do in your day job you know at night moonlighting or during the weekend during that time you’re also building the tools you’ll need.
So that when you jump out on your own in two to three years you know maybe three to five word is when you do make that jump you’re completely red. You have the clientele there.
That’s going to sustain your bills. You have all the tools paid cash you owe nothing on them. So you have Bill.
You don’t have to worry about losing your equipment because it’s your moneymaker. If you miss a couple of payments and it’s possible they’re going to take away the very thing that provides for you.
That’s a very dangerous game to play. So that was a quick run through of what I know of business loans.
There is a lot more small business loans out there it goes a lot more in depth. There’s credit lines. You know you can get a line of credit for businesses to roll things through you can get invoice loans based off of what you’re waiting on.
If you have an invoice out you can get loans up to 90 percent of the invoice until you get paid. You know there’s a lot of more in-depth biz loans out there I’d want to start with the simple ones that I personally have used and incorporated and understand and hopefully this helps you kind of get started on your own.