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Old 05-17-2019, 05:18 PM
 
Location: Murphy, TX
654 posts, read 2,764,548 times
Reputation: 447

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I had startup small side (part-time) business awhile back and have been investigating capital/funding sources.

Last time around I used cash/Saving + Credit Cards (0% balance transfers) + Personal Loan + Mortgage. I managed pay all of those off and generated small income stream.

But main problem I faced was how hard it was to get capital and large interest they charge. Lot of Small Business Loan run at 8% to 15% interest rate, so this mean you better be making ton of profit just pay of rate. Venture Capitalist also seem large percent, for ownership stake, and profits.

Meanwhile, 0% Balance Transfer Credit Card with fees worked out to lowest rate of about 3-4% APR per year. The Mortgage was second lowest at 4.5%. Then finally the personal loan at 6%.

Those options I used turned to be lowest rate compared to a real business loan. In fact, if I ended up any of those rates of 15% or so it would have very very hard to make any profit over last few years.

Next thing I noticed how hard it was to get those Small Business Loan or Venture Capitalist investment. Tons of paperwork, experience already running a business, plus they still want collateral. Meanwhile, the 0% BT had basically zero paperwork, the personal loan took a bit, and most was mortgage. Even then the mortgage paper work was done in say 5 days.

Obviously, cash is best option.

However, am I wrong that next best and quickest option of getting fund is from 0% BT Credit Cards, Personal Loans, or Mortgages?

Is there some business finance that provides lower interest and fast approval that my research didn't catch?
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Old 05-19-2019, 07:28 AM
 
Location: Scottsdale, AZ
9,928 posts, read 6,363,894 times
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I would never borrow money to start an untried business.

By bootstrapping with your own money, no matter how little, you're committed to proving your business model is sound. And you don't have crippling debt to service.
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Old 05-19-2019, 09:52 AM
 
Location: North Idaho
24,715 posts, read 32,382,162 times
Reputation: 50231
People who loan you money want to be paid back. Unless you can prove that you are capable and willing to pay them back, they are not going to loan you money. Even if it looks on paper that a new business will a make itself profitable fast, it is still a high risk loan, thus high interest.


No one is going to give you money to start a business with no idea about whether or not they will be paid back, except for maybe your grandma.


Your zero percent credit cards are short term and then they convert to high interest rate debt. Unless you are absolutely certain that you can pay that money off in 6 months, it is not a great source of money.
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Old 05-20-2019, 07:34 AM
 
Location: Scottsdale, AZ
9,928 posts, read 6,363,894 times
Reputation: 36581
Quote:
Originally Posted by oregonwoodsmoke View Post
People who loan you money want to be paid back. Unless you can prove that you are capable and willing to pay them back, they are not going to loan you money. Even if it looks on paper that a new business will a make itself profitable fast, it is still a high risk loan, thus high interest.
Seems obvious, yet we see this question all the time.

One could do worse than to find an experienced mentor who is willing to provide guidance and perspective.
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Old 05-31-2019, 01:04 PM
 
Location: Union City, NJ
1,870 posts, read 1,205,220 times
Reputation: 2438
Quote:
Originally Posted by oregonwoodsmoke View Post
People who loan you money want to be paid back. Unless you can prove that you are capable and willing to pay them back, they are not going to loan you money. Even if it looks on paper that a new business will a make itself profitable fast, it is still a high risk loan, thus high interest.


No one is going to give you money to start a business with no idea about whether or not they will be paid back, except for maybe your grandma.


Your zero percent credit cards are short term and then they convert to high interest rate debt. Unless you are absolutely certain that you can pay that money off in 6 months, it is not a great source of money.


Interestingly enough, I see banks approving as much as $35,000 in personal unsecured loans with 5 year terms but won't approve that same applicant for a $20,000 business loan/line.
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Old 05-31-2019, 01:07 PM
 
Location: Union City, NJ
1,870 posts, read 1,205,220 times
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Quote:
Originally Posted by fluffythewondercat View Post
I would never borrow money to start an untried business.

By bootstrapping with your own money, no matter how little, you're committed to proving your business model is sound. And you don't have crippling debt to service.

Sometimes that's not possible for some people. Borrowing the money gives the business the "this HAS to work" element to it.

I started a small service business several years ago, funded completely by a 0% credit card. It was less than $10,000 total but I knew I hard to work hard to recoup that money quickly. It's easy to throw your hands in the air and say "I tried" when giving up just means you lost some money versus going into debt. At least that's the way I looked at it.
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