Business mentoring and/or consulting experts warn against investing your own money in your small business because they have seen what can happen. When you make an investment in other areas, you typically see a return on your investment. When you invest money in your own business, you might not see the same results. Gordon Ramsey and Robert Irvine both host television shows where they help failing restaurant owners turn their restaurants around and start earning a profit again. A large number of those restaurant owners take out a second mortgage on their home and empty their savings. If the business fails, you do not want to find yourself in danger of losing your home, your child’s college fund, or your life savings.
Many people have found that a small business loan offers ideas on how to save money. This type of loan works in the same way as a car loan or a home mortgage. You borrow money and the lender charges a percentage rate on the loan. The rate is attached to the size of the remaining balance on your loan. The faster you pay it back, the less money you pay in the long run. By the same token, when you take your time paying back the loan, the interest rate compounds and you pay much more in the end.
The government founded the Small Business Administration as a way to protect small business owners. The program works with financial lenders, giving small business owners access to different types of loans and keeps the interest rates low. When you apply for a loan, you list information regarding your company’s type and size, as well as your financial history. The SBA reviews your application and decides if you are a worthwhile investment. The SBA might request a personal face-to-face interview before making a decision. If it decides that your business is a worthy investment, it takes your account to a bank. The bank loans the money, but the SBA promises to cover any debts if your business folds.
The SBA is not your only option for funding your business. Even if the company turns you down, you can reapply with a partner. If your partner has a better credit history and more experience with businesses, then the SBA might back the company. Working with a business coaching expert is another idea. The coach goes through your credit history and helps you improve your application before applying for a loan.
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