Funding for a Home Business
Updated: Jun 15
Home-based businesses, franchises and other startups have more funding options today than ever before. Aside from getting clients, getting funding is the biggest priority as a business owner. Most new home-based businesses or statups in general, don’t have the assets or the track record needed to qualify for traditional bank financing. Fortunately, alternative lenders offer faster approval, easier terms and more funding. Smart business owners use this funding to grow their company and improve their credit to a point where they can qualify for better terms. Below is a list of nine financing options that home-based entrepreneurs can access for their startup and working capital needs.
Brick-N-Mortar Funding works with micro-loan lenders that specifically help small business owners, self-employed individuals, and home-based businesses. The program provides small loans, up to $50,000. These loans can be used to start, manage, and grow your small business.
2. Invoice Factoring
Whenever a home-based business sells a product or service to a larger company, they must wait 30 to 60 days to get paid. The problem is that many business owners need that money to pay for salary and business expenses and can’t afford to wait that long for payment.
Factoring is a great way to get paid on your invoices now. The factor pays you upfront for your slow-paying invoices from creditworthy commercial clients. You get funds immediately, while the factoring company does the waiting for the invoice to be paid.
3. Finance Purchase Orders
Home-based resellers and wholesalers run into problems when they get a very large purchase order from a client that pays on net 30 – 60-day terms and a supplier that wants to be pre-paid for the order. Unless you have the funds to handle the order, you risk losing the client.
Financing your purchase order provides funding so you can pre-pay suppliers. Often, purchase order credit lines are used in combination with invoice factoring because they allow you to keep cash flow in check.
4. Equipment Leasing
Equipment leasing has an advantage over buying equipment for home-based businesses. Leasing allows you to rent the equipment for a monthly payment, rather than paying for it outright. Many leasing terms enable you to purchase the equipment for a nominal amount (i.e. usually $1) at the end of the lease period.
5. Peer to Peer Lending
One way to get financing for your home-based business is to use peer to peer small business lending. The size of the loans depends on who is doing the lending and on average, they max out at $35,000.
Most peer-to-peer lenders are simply individuals lending money to other individuals, who may use the funds to run their business. Loans are usually structured as personal loans rather than business loans.
You can get these personal loans through Brick-N-Mortar Funding with minimal docs required.
6. Home equity line
One common way to finance a home-based business is to use a home equity line of credit (HELOC). These types of loans allow you to tap into the equity of your home and use it for personal or business purposes. They have the advantage of being cheaper than many other options. However, this can put your home at risk if the business fails or the mortgage payment becomes unmanageable. Fortunately, our underwriting team collects all the docs they need to look into your financial profile and determine if this is the right funding option for your situation before they will move forward.
7. Credit cards/stacking
With no business history, it’s difficult for a commercial lender to determine the level of risk they will incur if they fund a home-based business. Most home-based businesses start out using their personal credit cards to pay for business expenses. Although they generally carry a high percentage rate, they also offer great perks that are beneficial to small business when carefully managed. Paying the credit card off every month helps you avoid excessive interest charges. Also, frequent use and pay-off will not only improves your credit score but also will earn you an increase in your credit limit. Credit card stacking is a strategic method many alternative lenders use to meet your funding requirements.
8. Friends and Family
One final alternative is to get a loan or an investment from friends or family members. Treat them like you would treat any professional investor and disclose all information and risks involved. Get an attorney to draw up proper legal documents. Most importantly, when you partner with people that bring experience or knowledgeable to the table in your industry, they understand your struggles and can be valuable assets in your corner when you need advice.
9. Looking for financing?
Here at Brick-N-Mortar Funding, we are funding-advocates who work with direct lenders that have been hand-picked for their high approval and fast funding rates. They provide a wide variety of working capital such as:
· Secured and unsecured financing
· micro loans
· working capital
· equipment loans/leasing and term loans
· Revenue funding: MCA, invoice factoring and purchase order financing
· Lines of credit and credit card/stacking
For a quote, fill out this form or call (701)-587-3940.