Can you get a loan?
There are many ways to run a business, and in the age of the Internet, it is becoming more and more common to run a business out of your home. As convenient as it may be to get up and start work each day without having to commute, running a home-based business does come with a few intricacies. For one, you might wonder what your options are if you find yourself in need of a business loan.
Can you even take out a loan with a home business with limited assets? Yes, you can. In fact, there are a few different types of loans that are worth exploring in your situation.
Small Business Administration Loans
These loans, which are more commonly known as SBA loans, are provided as a part of a government-backed loan program. They are specifically intended for new small businesses, and as such, the requirements to qualify tend to be pretty low. You do not need to have a lot of assets or a long credit history, which is definitely helpful when you're running a business out of your home.
Generally, the SBA will consider your personal credit history, rather than just the business' credit history, which makes it easier for newer business owners to qualify. SBA loans also tend to be pretty flexible; there are not a lot of restrictions as to how you must spend the money.
Home Equity Business Loans
This is a borrowing option that is actually only available to people who run their businesses out of their homes! As with any home equity loan, you are borrowing against the equity in your house, or in other words, you are taking on a second mortgage. However, the money is being borrowed by your business, and not by you. So technically, both you and your business will then have mortgages on your home.
The downfall of home equity business loans is that if your business defaults on the loan, you could be foreclosed against. However, these loans are fairly easy to get, and they're not a bad option if you keep your borrowing in check and are confident you'll be able to pay back what you borrow.
Business Credit Cards
Another option for home business owners and other business owners with few assets is a business credit card. Typically, the credit card company will not care whether your business has a brick-and-mortar storefront as long as you show the income to cover your expenses.
You can find business credit cards with low introductory interest rates. Sometimes, there may even be a deal that allows you to pay zero interest for a certain period. If you expect your income to increase in the coming months, you could put a big purchase on a low-interest business credit card, and then pay it off a few months later with very little interest.
Opening a business credit card can be a good long-term solution to your financial needs. If you need to borrow short-term in the future, you won't have to shop around for another loan; you'll already have a credit card you can put the purchases on.
When you have a home business, you don't typically have as many assets as you would have with a separately located business. This can make getting a traditional business loan from a bank a little challenging. However, you do have options. Look into SBA loans and business home equity loans, and consider applying for a credit card instead. None of these options really depend on your physical assets, making them good choices for home businesses.
Equal Housing Lender