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I am evaluating starting up a small business and have been told I should get an SBA loan. A good friend of mine said I should just go to my bank and get a business loan.
Any suggestions on the pros/cons of each? I plan to do some of my own research but the real world experience sometimes does not come out.
Any help would be appreciated.
02-18-2004, 10:02 AM
There's a lot of questions you need answers to before anyone could give you good advice on this. What do you want to accomplish? Have you done market research? What type and size of lawns in your area? What kind of equipment will work best for the lawns you intend to target? How much money do need? How much do you have to put down?
When I was preparing to buy an existing business, I built a business plan, including 5 years of proposed budgets and secured financing through a local bank. I think it's a lot easier getting the financing if your buying an existing business than it is if you're starting from scratch. Starting from scratch, I would think you could get a trailer, walk behind, and assorted hand tools for $10,000 or less - if you shop carefully. I certainly wouldn't start with more than that. You can always rent bigger/more equipment if needed, and then add as you grow.
All that having been said, I'd avoid the SBA unless absolutely needed. It's just a lot more paperwork and headaches.
02-18-2004, 04:36 PM
Either way you choose, you'll need a business plan to get a loan.
02-18-2004, 06:50 PM
I am starting with $3500, granted i already have much of the equipment needed like a half ton long bed truck and 18 ft trailer. Loans will help you get a leg up on the equipment, but it hurts when you have to send that payment to the bank. Whatever way you choose to go make sure you have a sound business plan to make that payment and still line you pocket with green.
Hope this helps.
02-20-2004, 04:19 PM
All I can say is SBA loans are hard to get. I took a buisness class just to help me build a great buisness plan to take to the bank. Worked on the plan for a while and was turned down by several banks. Be prepared to get asked several questions regarding your buisness. I ended up working for a few years to save for start-up money which I think was the better way to go looking back. The money I was short parents took out a home-equity loan which gave me a really low interest rate.
02-20-2004, 04:33 PM
If you own a home, the home equity loan is a better way to go. Business loan intrest rates can start at 8 percent or higher, while home equity loans or the one i got was under 5.
02-20-2004, 10:44 PM
Remember 90 percent of business fail in our country. All of them fail for various reason but the majority dont make it becasue of debt to income is to high. Just becasue we can get equipment doesnt mean we can get the customers. Start as cheaply as you can. stay away from the larger loans... personally i would never back my business with personal assests.. here are some ideas....
5 friends or relatives, give you 1k a piece they get back 1200
mow for a wealthy person who can pay up front to help you buy equipment... do their lawn in return it is money they would have spent anyway.
finance company for the mower you choose, with same as cash, but be sure to pay it off..... before the 6 months... oterwise it a bad investment for you.
Hope this helps.
02-20-2004, 11:33 PM
personal loans here run about 13%. its almost better to use a credit card then get a loan. the way i'm going about it is buy with the money i make. i hear you will be in the red the first 4 years just buying equipment....
02-22-2004, 12:13 PM
Starting out is the hardest part! I look foward to the day when all of my equipment is paid off!! Hopefully soon though..
02-22-2004, 01:26 PM
Speaking of credit cards there is a trick I learned to keep interest down. Look for great offers, many cards will give a really low interest rate for the first year for signing up. Transfer balances from one card to another, I kept a 0% interst rate just by transfering balances. Credit cards want your debt to be with them, as an incentive they will advertise 0% interest on there card for 6 to 12 months for transfering your balance to thier card.
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