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Most small companies begin as home-based businesses. At this initial stage, one of your significant challenges is getting the appropriate type of financing, especially when you’re buying a home as an entrepreneur. Home-based businesses have fewer options due to the lack of assets or the financial history to get proper financing from a bank. However, there are alternative options that help a home-based business grow to the point of qualifying for a mortgage or even better business loans. The right financing option depends on the intended use. Read on for tips on what to keep in mind, courtesy of TreeStone Properties. Types of Loans for Home-Based Business Owners 1. SBA Microloan Through intermediaries, the Small Business Administration (SBA) Microloan Program offers small loans of up to $50,000 . The loans come with business training to give small business owners the skills they need to grow the business. This loan can be helpful when starting, managing, and expanding a small business. The loan requirements are different depending on the individual state. 2. Small Business Factoring This program finances invoices that are slow-paying from creditworthy commercial clients. You're able to receive the funds right away, as the factoring company gets the 30- to 60-day waiting period on the invoice. This type of financing is flexible, and it helps you manage daily operations and grow your business without cash flow interruptions . 3. Finance Purchase Orders Financing your purchase orders enables you to pay suppliers beforehand, allowing them to manufacture and deliver your order. This way, you’re able to get the order and retain the client, regardless of the size of the order. You can use purchase order funding together with factoring to keep track of the costs. 4. Leasing For home-based businesses that require equipment, leasing can be a better choice as compared to buying. Leasing allows you to pay for the equipment in monthly installments that will not strain your business. The majority of leases have an option that allows you to buy the equipment for a small amount at the end of the lease duration. 5. Peer-to-Peer Lending Peer-to-peer lending among small businesses allows you to get a loan from other business owners. The loan size will depend on where you're getting it from, but the upper limit is $35,000 . These loans are available as personal loans, not business loans. 6. Home Equity Line A home equity line enables you to leverage your home's equity and use it for purposes of business. They are more affordable than most options but have a higher risk of losing the house. 7. Business Credit Cards Business credit cards give you the capital you need and help you build a good business credit history. Since you only need a good credit history to get approval, business credit cards are easier to get than business loans. 8. Friends and Family Loan There are many benefits and risks associated with getting a loan from friends or family members. If you opt to get financing from friends and family, ensure you treat them like professional investors. Reveal all information , inform them of the risks, and have an attorney provide a contract or the proper legal documents. Select people who will help the business by bringing experience or contacts to the table. 9. A mortgage A home is a given for a home-based business, so there may come a time when you’ll want or need to purchase a new home to support an expanding business, growing family, or both. The home buying process can be trickier for self-employed folks (as opposed to employed ones), so you’ll need to take these steps into consideration. Essentially, you want to maintain (or improve) your credit score before making this move, research the market to determine what you can afford, and get pre-approved for a mortgage. What You Need to Get the Loan for Your Home Business ● Get a copy of your credit report and get pre-approved. ● Identify the red flags that can disqualify you, such as maxed-out credit lines or bankruptcies. Ensure you clear all adverse credit before filling in your application for financing. ● Perform a self-analysis to establish your credit risk and how much you can afford. ● Consider the strength of your assets, cash flow, and whether you have current investors. ● Ensure the approved loan offer covers your business needs. Finding the right financing can be overwhelming, but by carefully weighing your options and being methodical in your approach, you can find the perfect home to launch your business