Tips on How to Get a Business Loan as a Sole Proprietor
07 Jul, 2016 / Comments: Comments Off on Tips on How to Get a Business Loan as a Sole Proprietor / By William Mahnic
Owning a business as a sole proprietor is the most common way to start out. As a sole proprietor, you run the business by yourself and there is no line between you and the business itself, meaning that you are liable for anything the business does or owes. If you need capital to get up and running, you might have a little more work to do than any other business form due to the fact of the liability that a single owner can cause. Here are some tips to get that loan that you need.
Use Angel Investors
Angel investors are the most lucrative method of getting business financing when you are a sole proprietor. These investors are people that believe in your business and want to see you succeed. The best way to make this happen is not only to heavily network within your industry, but to also have a solid business plan in place so that the investors can see what a plausible solution you have and that you have a proper plan to make things work.
Contact the SBA
The Small Business Administration is a great asset for sole proprietorships because they offer small business loans to even single owners. The guaranteed loans, called 7(a) that they offer are backed by the government, which means that the bank will get reimbursed should you default on the loan. These loans max out at $50,000, so you will have to use your funds wisely, but it can definitely help you get up and running.
Explore the Private Market
Big banks are not the only place to obtain a business loan as a sole proprietor. The private market is filled with a variety of investors ready to lend money to small businesses. Many private investors provide the same type of financing a bank would provide, including lines of credit and equipment leases, yet without the requirements a bank would place on you. The fact that you have minimal credit and are the only person responsible for the payments does not deter a private investor when you can show them a reason to invest in you.
Ask the Crowd
Crowdfunding is another great source of business income for a sole proprietor. If you have a great idea and the public can see the benefit in what you have to offer, they will give you money. All it takes is proper marketing of the idea you have for your business. There are a variety of ways you can utilize this form of financing including offering samples of your product and exchanging shares of your business. The people that help fund your business can also feel good that they helped you get up and running, which is often enough reward for some people.
Talk to Your Peers
Your peers could also be a great source of financing in your business venture. They can offer similar financing as a bank could provide with looser financing terms. They will still want to see a proper business plan and plenty of forethought on how your business will run, but they will not require extended credit history, collateral, or even investment of your own money. Each peer-to-peer lender will have their own requirements, however, so make sure to find out what each one requires and offers before agreeing to the terms.
Finding financing for your sole proprietorship is not impossible, it will just take some creative thinking to get the money you need. If you are serious about getting up and running, you need to put your business plan together and start marketing. Eventually, the financing options will fall into your lap, but you have to be willing to put yourself out there so that others know what it is you are trying to do. Of course, you can try the traditional bank route, but do not get discouraged if it does not work out.