Many people feel uncomfortable working with banks and other financial institutions. Due to the massive economic fallout over the past four years, many individuals prefer to do business with other individuals as it relates to their business borrowing needs. However, it should be noted that when you receive a business loan from a private investor that the interest rates associated with this type of capital is much higher than that of traditional bank financing. If you are consistently having issues as it relates to business loans, you may want to investigate obtaining a Small Business Administration loan. This government organization provides a guarantee on a bank loan provided to you by a financial institution.
When you are seeking a private investor loan, you are going to need to have a promissory note in place. This document is the legal agreement between you and the private funding source. You should have your attorney review a promissory note thoroughly to make sure that it falls in line with all lending laws that are applicable in your state. You should always make sure that there are no clauses that require you to provide a personal guarantee for the loan. Another clause that you should make sure is excluded is whether or not the private investor can take control of your business or attempt to take shares of your company. This has been a common issue when individual businesses work with individual investors as it relates to private investor loans.
In closing, getting business loans from private lenders is a difficult process. However, once all of the necessary information is provided to these outside funding sources, you can expect that a lending decision will be made within one week. This is typically much faster than the responses that are given by private investment firms, banks, and the Small Business Administration. We strongly recommend as well that you work closely with your certified public accountant as it relates to producing the necessary financial statements and credit application that will be submitted to a private lender. In order to further your case for receiving a private lender loan, you should submit a full and complete business plan that will showcase the operations of your business, what you intend to do with the loan proceeds, the products and services that you will offer, as well as a complete market analysis regarding your business. We are going to continue to discuss how you can develop a business plan specific for a private lender as time progresses.