Advice for taking a loan...

P

pixie9

Cathlete
Hello educated crowd! I'm considering taking out a loan for a start up business. I'm not really schooled on the process (I've taken out small loans totaling $14k before...which I've paid back) and I'm wondering what I should do. My bank offers personal loans for up to $25k (which is almost what I'm needing) as well as business loans. Any advice on which one would be better? Does it even matter? I see that a personal loan would be a LOT less paperwork but I'm assuming there are some drawbacks. Also, are there some pertinent questions I should be asking (besides the obvious rate of interest questions)?

ANY help is appreciated! I'm quite scared of this process but I want to do this!! :)

Carolyn
 
Carolyn, check with the fed's Small Business Administration. They offer low interest & sometimes no interest loans for start up businesses. They partner with banks to do it. I looked into it for a friend a few years ago--it's definitely better than trying on your own.

Also they offer assistance with business plans, taxes, etc.
 
Hey Carolyn--if the organization is similar to what we have in NY state they will also offer you help in starting up a business, aside from just the loan. I had a friend who started her own hair salon and they were a very helpful resources. Good luck!!!!
 
Thanks Beavs. I looked at their website and they offer TONS of information so maybe they are similar. I wanted to avoid lots of paperwork but it looks like that may be unavoidable. I guess people just aren't willing to hand me the money with no questions asked. ;-)

Carolyn
 
Well, there are certain people who might but the interest rate is steep and you don't want to ever miss a payment ;) LOL!
 
Carolyn,

I think it depends on what line of business you want to get into and what State you are in.
My friend and I are starting a new business, Small Business Administration has not been very successful, it is almost impossible to get funding through them at this point.

Whatever you look for you will need a business plan that a potential investor can evaluate the risks and potential gains. You will also have to have some sort of 30-second "elevator speech" to put in a few words what your business is about and what you can offer.

You may want to check out Entrepreneur Magazine, they have very good information on almost any line of small (or big) business you can get into. In our case, we are starting a pet food and pet supplies business and I ordered their "manual" with information and resources, it was invaluable information. It's kind of expensive, $ 69 for the binder but it was well worth it. Here is the link http://www.smallbizbooks.com/

I also got their book "How to start a small business in Arizona" (which is were we are at) but you can find it on Amazon.com for every state.

You can get lots of information as to how to get financing on

http://www.entrepreneur.com/money/howtoguide/index.html

You will also find great information through the National Association of Women Business Owners www.nawbo.org

Private investors through networking is a great opportunity, we actually had someone approach us who was willing to bankroll us for 7 years, it hasn't worked out for several reasons, the main one being that he wanted us to go "too commercial" and wanted to have a 51 % stake in the business for those years, which I wouldn't have a problem with but 51 % also means he could overwrite any of our other business decisions.

In general it is good to find an investor, aside from networking, you can find them through Angel Investor Networks. In Arizona it is www.edesertangels.com and www.arizonaangels.com, I am sure you can find information or referrals on their websites, otherwise just find a chapter in your state.

I don't want to make this too long, in my previous career I have written 100+ business plans for small and medium size companies, so I know what investors are looking for. If you need more info, just email me directly. Otherwise there are really good books out there giving you instructions on how to write a business plan. If you don't have a compelling business plan you won't get any financing through banks, SBA (Small Business Administration) or investors.

And truth being told, without a business plan, I wouldn't take out a personal loan either. You need to do some research, get organized, make financial projections, etc. before you spend your own money or anyone elses money. Aside from that, if you are not careful you can not only blow your own personal money but also can have creditors going after you personal assets.

How exciting though. Whatever you do, I am sure you will succeed!!!
 
Actually the funding does not come from the SBA. As I said in the above post, the SBA partners with banks to provide low interest loans. The loans come from the bank, not the SBA.
 
I understand, Laura! Now SBA partners with banks, whereas in the past they were able to do grants or 0 % or very low-interest loans which were based on SBA giving "surety bonds" to the bank. No longer so, due to limited or non-existing funding, at least that's what I was told in my conversation with them.

They told me that grants or low interest loans where no longer within their means. If you have any additional information, Laura, it would be very helpful for Carolyn and my own business.

I know you know a lot since you have been working in government for a long time, any hints would be greatly appreciated. I am not saying I know everything, that's just what we have been told by SBA and we all know when dealing with those kinds of institutions if you don't know the ins and outs, they can tell you anything, depending on who you are dealing with it may be greatly different from what the next person will tell you, frustrating to say the least. Based on the info I got from SBA, I have pretty much written them off.

In any case, at least in AZ to get a loan to start up a new business, SBA requires at least 20 % to be your own capital and 80 % can be financed, however, they also require additional collateral by means of home equity, or other personal assets.

Thanks for your kind words, Ms. Beavs!!!!
 
Thanks Carola. I did read that additional collateral and 20% of your own capital should be expected. That's why I was considering a personal loan from my bank. Because I require a smaller amount (around 25k), I think I may be able to just do it that way. Also, I don't have a lot of collateral because we had to sell our house before moving to here to Germany. If it were any larger I'd have to take a business loan. Either way, I do need a business plan (I had to do one in one of the business classes I just finished so I have the groundwork. I just need to tweak it for an internet company).

Thanks again!
Carolyn
 
I can understand the grants not existing (frankly after researching it I didn't think there were any grants, just loans) b/c much federal funding has been cut. But the loans should still be there. Banks aren't subsidized for these loans, they get tax credits. While this could be perceived as affecting federal revenue it really doesn't b/c that lost tax revenue isn't counted in the budget.

If you're really serious about it, I'd suggest hiring a consultant. Contact your local government & ask who their grant writer is. You could probably hire the grant writer to help w/the application for maybe $75-100 an hour. Your other option is an attny, but that of course would be much more expensive. Probably a govmt grant writer would be just as effective as an attny. This is all about making your proposal attractive, & govmt grant writers will know how to do that.

Also get support letters from your federal representatives. Congressmen are good b/c they're more accessible, senators are better b/c they're more powerful, but tougher to get a face to face with.

The business plan & other stuff like that would be much easier to get for free, but it takes time. You should see if you can schedule a mtg w/your local SBA rep & see what they're willing to do for you. AFTER you talk to your congressman. ;-)
 
Have you gone to your local Chamber of Commerce? The Chamber here is always holding seminars for new businesses that are chuck full of information including how to get financing, write a business plan, excel in marketing, etc. It might be worth a phone call to them to see what they offer. They can steer you in the direction of local professionals who can help you out.

I also agree that a business plan is a must. Best of luck to you in your venture. ;-)
 
Thanks Laura! I'm not sure I have a local SBA rep. I'll have to check on what the Army has available for us. I'm sure they would have to have something right?
I really like the idea of hiring a professional to write a grant proposal for me. I just don't have the background to do this stuff so I need tons of help. I least I know that much huh? :)

Carolyn
 
>Have you gone to your local Chamber of Commerce? The Chamber
>here is always holding seminars for new businesses that are
>chuck full of information including how to get financing,
>write a business plan, excel in marketing, etc. It might be
>worth a phone call to them to see what they offer. They can
>steer you in the direction of local professionals who can help
>you out.
>
>I also agree that a business plan is a must. Best of luck to
>you in your venture. ;-)


Thanks Angie. I actually haven't gone to the Chamber of Commerce. I'll have to check and see if we have such an entity here in Germany. The problem is that there really aren't many Americans living here that own small businesses (because we aren't German). Hopefully they'll have something here for me since internet companies aren't so uncommon anymore.

Carolyn
 
Oh Carolyn, I totally forgot you were in the Army! Hmmmm, you might have even more resources available to you than I thought. Are you starting your business while remaining in the military or after you're discharged? Although that might not make a difference........do you have some kind of career counseling or post-discharge counseling? That would be a good place to start. Maybe they can direct you towards some financial resources, & the Army might actually have some grants for you.

Your local SBA rep I guess would be in the US town where your permanent residency is. Probably still worth a phone call to them & your congressman. And the SBA probably has extra assistance for military.

Yeah, knowing your limitations is a good thing. :) Kinda like me knowing I need an accountant to do my taxes b/c I can't add or subtract on my own. :+
 
Laura, I'm not in the Army, DH is. :) I don't think I could handle wearing the uniform. Yeah, I'm that superficial. :p
That said, I should have access to stuff that active duty soldiers have. I believe they actually do offer career counseling for dependents (HATE that word!) so that may be a good place for me to start. Maybe I can contact my SBA via internet. I'll check up on that...

Thanks!! :) :)

Carolyn
 
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