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Franchise News

November 15, 2010

Where To Get Business Financing

This article describes how you can ask for money to use for a down payment on your small business or franchise.

So you want to start your own franchise or small business. You have come up with a great idea to make money or chosen the right franchise, and are confident you will be successful. You have developed a business plan, decided what you need to have for equipment, supplies and advertising to get started. Now all you need to start your new small business or franchise is a loan.

Loans are not always easy to obtain these days. Banks and other types of lenders can be cautious about who they lend money to, and how much money they want to lend. So after you have developed your business plan, you need to get financing to start your new successful small business. If you are choosing a franchise, to get started may be easier since you are leveraging ofn years of proven success.

Most lenders will require a down payment from a new business loan borrower. Down payments are a sign to the lender that the new business owner is serious about starting their business and are willing to self invest a significant amount of money to start a business. Many lenders require a down payment of up to 30 per cent on the purchase of a business. While all lenders differ in their requirements, all lenders will require a significant down payment before lending money for a loan. But where can you get down payment money for your small business purchase? There are several good sources for down payment money.

Down payments usually come from cash on hand or from money that business owners or partners have saved. It is important not to use all of your ready cash for a down payment investment. This is because lenders will look at your assets and cash on hand when deciding whether or not to loan you money. So you want a some cash on hand in savings. Another reason to keep some of your cash ready to use is that it takes a while for most businesses to become established and to start to earn money. You may need some financial padding to live on until business picks up, and you are making enough money to pay the bills.

Family members may want to invest in your new business by giving you a financial gift for a down payment. These gifts may not be loans, however. Legally they must be gifts that are not to be paid back to anyone in order to be used for down payments for business loans.

Some lenders allow owners to finance part of the down payment through the lender. While this is a convenient way to come into down payment money, these types of notes or loans usually come with higher interest rates, and the buyer will still need cash for at least part of the down payment.

Home equities and retirement funds can be refinanced for small business down payments. Home equity loans can cause problems with the actual business loan, so be sure to ask lots of questions before you refinance your house or take out retirement fund money to use for a down payment on your small business or franchise.

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