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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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The Biz Question

I need to investigate how to get a business loan to purchase some computer equipment for a business that I'd like to start. Where do I begin ?

Answer from our Guest Expert Lillyvette Montalvo

Hi There!

I've got some good news and bad news.

First, the bad news is since you're brand new to the biz world, your options for getting loans are somewhat limited because of your lack of a "track record." Since you're just starting your biz, many bankers would pass on feeding you any of the dollars you crave. Most banks won't consider a biz loan until you've been in biz for 2 or 3 years.

But the good news is you can roll up your sleeves and find other financial opportunities in the biz kitchen of life. Here are some ways to go.

Check Out Your Checking Account

Even tho banks aren't the best starting point, your overdraft protection on your own personal checking account can offer up a way to "get money." Find out what the overdraft protection limit is on your account. Then check to see what the interest rate is on this "borrowed" money. It's sort of like getting a micro-loan from the bank. Except it's not a direct loan, since no paperwork's involved. This may permit you to actually have the necessary capital to make your first/last down payment, depending on how much you're actually looking to borrow.

"Golden" Credit Cards

If you've got low interest rate credit cards, by all means...use them! But, watch out! Don't max out your credit cards if you don't have a plan of action to pay them off quickly. They can be very helpful (and tempting), but if you can't make the payments, they can chew up and spit out your biz all too soon. If your biz will generate cash immediately, this may not be a problem. But if the biz takes a while to bring in some cold hard cash, this may not be the best choice.

The Small Business Administration Crew

The SBA offers a variety of different loans. But like any good government agency, you have to fulfill all of the SBA requirements to qualify. Since none of us are experts in dealing with the SBA, head on over to your local SBA office and see what programs they have in place and what type of assistance they'll provide when it comes to filling out the paperwork. They'll let you know if some of these tasty dollar dishes are what you're looking for. And often, they'll point you in the right direction for what you need. You can go to their website at www.sba.gov to get a listing of the regional and state SBA offices.

Leasing Your Way to Start-up Success

Have you thought about perhaps leasing your equipment rather than buying it? Here's some food for thought on leasing.

  • Leasing conserves your working capital; it's flexible; and it preserves your credit lines (for the future, in your case).
  • Leasing provides a variety of tax benefits; it eliminates equipment obsolescence; and your acquisition costs are low.
  • When buying something that depreciates, always consider leasing. When buying something that appreciates in value, always purchase. (A financial rule of thumb sort of speak.)

For example, companies like Dell, Compaq, IBM, and Gateway, have lease programs in place. This way, you don't need to have a whole lot of capital in place to get your computer equipment. They'll work up some monthly lease payments.

Women & Minorities Only

Some women's organizations have scholarships and "loans" they give out to other women and minorities, but it depends on the organization. For instance, some women's organizations only give "loans" out to their own members who are starting or struggling in their own business. So check out some women or minority organizations or associations and see what type of loan programs they might offer. And don't forget about the biz-friendly SBA. They have some loan programs just for women and minorities as well.

Friends and Family

This is always a tough call. Involving family and friends via loans into your new venture can often cause more trouble than its worth. But depending your situation, this is often a good way to get a loan for your initial start-up equipment -- without all the paperwork. It might be worth a shot!

A Plug for a Biz Plan

Do you have a biz plan in place? A biz plan is the key ingredient for letting others (and you) get a feel for your new start-up -- and for requesting a loan. Your biz plan is a written down form of your goals. It shows where your company has the potential to be within 3 to 5 years. It helps you to stay on track. It also shows all of the expenses the biz will incur (i.e., equipment purchase or lease, rent, etc.) and how much income you project in that same time frame. This allows potential investors (and you) to see how sound the biz will be.

You can get free help on writing a biz plan at a local Small Business Development Center. SBDCs are located on university campuses nationwide. You can get a listing of their locations on the SBA's website.

Hope this helps you get started! Best of success!

Lillyvette Montalvo

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