Raising Capital for Your Business

• Real Estate- Usually you can borrow up to about 75% on real estate you own. That's free and clear equity. If you still owe on the real estate then it's 75% of of it's value minus any mortgages you owe on it.
• Automobile- Again you can only borrow against an automobile that has been paid for and it usually has to be a late model auto. You can't find lenders that want to loan money on a car or truck over 5 years old.
• Stocks and Bonds
• A Life Insurance Policy- If you have a life insurance policy that has a cash value you can get up 95% of it's cash value.
• A Savings Account- You don't have to spend that savings account, you can borrow against it.
• A CD Note- You can borrow against your CDs and most of the time get a much better interest rate on the loan. I borrowed against my CD on a 2 year not and got the loan for only 3%!
• Equity in a Business- If you already own a business, you can borrow against the equity you have in that business.
• Collectibles- Do you have a valuable stamp collection or coin collection? Lenders will usually loan you money if you have a valuable collection of some kind.

Since the early 1990s, small businesses have increased at a tremendous rate. These small businesses need loans and usually they have little or no collateral to offer the lending institution. Because of this new emergence one organization, The Association for Enterprise Opportunity has been formed to uniquely engage in micro lending. If you have a small business you might consider a micro loan from this organization. To qualify as a micro enterprise:

• Your company must be a sole proprietorship, partnership or family business that has LESS than 5 employees.
• You must not have credit needs of more than 15,000.00

There are also new micro lending institutions now that micro lending has become popular. You can find more at Accion.org
Accion.org even helps those small business startups in other countries as well.

3. Your Credit Rating

Before you approach any bank or lending institution, you should know your credit score. Most BANKS will require a good credit rating. A good credit rating will usually be anywhere from 680 to 850. If you know your score is lower than that then you might have to seek alternative lending institutions that specialize in loaning money to those with poor credit. (You can find loan sources for lending to those with poor credit in our special section just for that. loans.Digital-Women.com

You should be able to look at your credit report at any given time as a recent study showed that up to 70% of credit reports have mistakes on them. I didn't know this this and when I signed up for credit monitoring I was surprised to find a 5,000.00 charge off from a credit card company that I had NEVER done business with. I filed a report and it was removed immediately, BUT it had been in my credit report for over 2 years without me knowing it.

4. Small Community Banks

I love my bank! They are a small community bank and they are much more lenient that the national type banks. They have realized the growth of small business and they have targeted that market. It's a great way for them to make money as well, so don't be surprised if you can get a loan from a small community bank easier than the big ones. They want your business.

Some advantages of small community banks:

• Most of them offer services such as financial planning, financial counseling, tax planning, cash management and more
• They are usually the cheapest source of private funds available for you
• You get a personal approach to your request for a loan
• They usually don't have all the extra "fees" that larger banks have.

When you borrow money a number of factors come into play when determining the interest rate you will be charged for your loan. The most dominant element of these factors is the Prime Rate. The prime rate is a fluctuating rate that is determined by the supply of money and the demand for loans.

You can keep an eye on the prime rate from your local newspaper, usually in the financial section. You want to borrow when the prime rate is down. 

When a bank loans you money, it first considers your credit worthiness. If you have a good credit score then you can get a lower interest rate. A bank will add a small percentage, say 2% to the prime rate if you have good credit. If the prime rate were 5%, then the bank would add 2% to the 5% and you could get a loan for 7%. In the same breath, the lower your credit score the higher the percentage the bank adds to the prime rate to determine your interest rate for your loan.

The banks main concern is how much of a risk it is to loan you money. The higher the risk, the higher the interest rate. If you are borrowing money for a business loan, you can show the bank you are serious about making your business profitable by investing a hefty portion of your own money. This shows the bank that are willing to risk your own money and not just theirs.

6. Ask Questions Before You Sign Loan Papers
 

1. What is the interest rate on your loan going to be?
2. How much cash will you receive? (Sometimes banks will deduct the interest charges from amount loaned before you get the cash)
3. What will your monthly payments be?
4. Is there a balloon payment due at the end of the note? If so, how much?
5. What will the total of all the payments come to?
6. Are there any other charges or fees besides interest charges?
7. Will there be any penalties if you decide to pay the loan off early? (Some banks will charge a penalty fee if you pay the loan off early BECAUSE they lose interest money on the loan when you do that and that's where they make THEIR money.)

When looking for lending resources don't forget to rule out:

• Credit Unions
• Foundations
• Venture Capitalists
• Private Investors
• Angel Investors
• Family or Friends

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