What is a Business Capital Loan?
A business capital loan is a loan provided to entrepreneurs and business owners who wish to start a new venture. This loan helps create a stable foundation for the commencement of the business and can be paid off when the business begins generating revenue.
How to Get a Business Capital Loan?
Applying for a Business Capital Loan is easier than most personal loan applications. Instead of having to worry about credit score, history, or your income, a business capital only requires you to tick one box: homeownership.
If you’re a homeowner and have some equity over your home, or own some other real estate that you have equity for, you can easily apply for and get a business capital loan.
How To Apply For Business Capital Loan?
If you already have home equity or other real estate properties, your journey to acquiring a business capital loan will be a short one. All you need to do is apply for a loan using your home equity. For verification, the lenders might later request important documents such as your house documents, mortgage contract, and bank statements.
Your application will definitely be approved unless your equity isn’t worth much. Once your application is approved, you can enjoy the boons of the loan through careful investment in your new business.
Can I Get a Business Capital Loan Without Homeownership?
Homeownership is essential for business capital loans because it allows a safe method to extend a secured loan without any great risks. However, if you do not have property or homeownership and still wish to apply for a business capital loan, there is a way for you too.
If you do not have homeownership but have a thriving business that needs financial support, you can reach out to several lenders that provide business loans at interest rates. These loans are based on how much revenue your business generates and how long you’ve been in the market.
How Much Money Can I Get From a Business Capital Loan?
Since a business capital loan taps into your home’s equity, you are eligible for receiving the amount that you would receive from a home equity loan. However many business loans start from $50,000 to up to $5 million.
Pros and Cons of Business Capital Loan
While it may seem like the easiest thing in the world to get a loan off your home equity, you need to be certain that it is the right choice for you given the nature of different businesses. You will need to take care of your investments and make sure your business does well enough to pay back the loan.
Here are a few pros and cons of getting a business loan through home equity.
1. They are a quick source of money
Home equity loans for businesses are a quick way to acquire a big loan for your business. Instead of going through the ordeal of taking care of different financial records and waiting for them to be analyzed.
2. Less interest rates
Since business capital loans are based on home equity, they are secured loans with lesser risks due to which they have low-interest rates as compared to other loans.
3. Lower monthly payments
Given that the interest on these loans is quite low, the total amount owed is also lower as compared to other loan schemes and therefore monthly payments are significantly lesser.
1. They are risky
A home equity loan for business can be very risky considering you’re putting your house as collateral for the business. Businesses are known to fluctuate and any negative trends might cost you your house.
2. It May not suit all businesses
Business capital loans using home equity are only good for business ideas where a steady income can be generated. Risky business ideas such as restaurants should not be financed through home equity.
3. Come with several other charges
We know that business capital loans come with low-interest rates. However, these low rates are coupled with substantial closing fees that include appraisal and application fees.
A business capital loan is a great opportunity for entrepreneurs and new business owners to step out and launch their businesses without worrying about high-interest rates or insufficient financial support. However, like all business loans, these require your business to go smoothly and generate a steady stream of revenue.