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    7 Replies Latest reply on Sep 27, 2010 3:58 PM by phanio

    How likely that I can get a loan without using my home?

    jenhere Newbie
      My husband and I want to purchase a small business. It has a great track record and we have $40,000 cash to invest. The business franchise fee is $25,000 with a total investment around $75,000. The problem is that we need to relocate- which we are happy to do!- but the SBA lender wants collateral for the additional funds- meaning our home. We can't do this because we need to sell and move for the business. We have no additional collateral. There are many other facts, business plan specifics, etc. but what we really need to know is:
      What chance do we have to find a lender with only a large downpayment and no collateral? (credit score 685)
        • Re: How likely that I can get a loan without using my home?
          FinanceOne Wayfarer
          You may want to check into the SBA Microloan program. The max loan amount is $35,000 but that looks like it would be enough capital. With a large downpayment you may not have to use personal assets for collateral. Microloans are only offered by appointed banks that serve specific geographic locations. You can find the list on the SBA's website.

          If part of the capital needed is for equipment purchase then you may be able to do a finance lease for a startup business. Last time I checked the maximum equipment leasing amount for startups was $25k. Equipment leasing works differently than car leasing. At the end of the lease you can purchase the equipment for a nominal amount (usually $1 or $100 depending on the State).

          Traditional bank loans may also be an option. A single bank may not want to take on all the risk so you would likely have to split the financing between several sources.
          • Re: How likely that I can get a loan without using my home?
            phanio Pioneer
            Couple of things - many micro lenders will also require a personal guarantee - based on your current assets like your house - meaning that you are restricted from selling it without their permission - but, all may not require this.

            Another option, keep you house - take a second on it or use it as collateral for your SBA loan - then, rent out the house and use the rental income to either finance the second or to help pay the SBA loan or for your business. You can still move.

            Lastly, there are several other ways to get small amounts of capital that may meet your needs (besides micro loans) - like peer-to-peer loans - not collateral and no personal guarantees or other non-bank lenders that only look at credit and income - credit above 660 FICO.

            Know that micro lenders may provide up to $35K for new businesses ($50K for established businesses) - their average loan amount is around $13,500 - that is what they like to approve. But, you pay that back, you can always go back for a larger amount (see how that works).

            Also, can the franchisor not help you out with the financing?

            Business Money Today
              • Re: How likely that I can get a loan without using my home?
                jenhere Newbie
                No, unfortunately the franchisor will not help with the financing. I wish that we could go the conventional route but it looks like even though our house doesn't have much equity, these lenders still want collateral. We'd rather not have a mortgage and a business debt and our plan was to move into a rental.
                Your alternatives are very good options. Thank you!
                We are putting together something for some local "investors" to take a look at as merely a loan with interest (as a silent investor) and not an active participant or with a return on profits. Any advice on that?
                  • Re: How likely that I can get a loan without using my home?
                    BiznessLender Wayfarer
                    Not all SBA lenders are created equal. What one lender will not do, another serves it as a niche. I know of one SBA lender who specializes in non-real estate franchises. I will confirm with him regarding additional collateral, but I would like to know a bit more about your situation. If you are doing a fairly good sized down payment, why is the lender requiring more collateral? You should only be required to put a particular percentage. Especially confusing is the insistence of using your house as additional collateral with little to no equity in it.

                    If you would like me to see if there is some way I can assist you, I will be glad to. Not sure that I can, but willing to refer you to a lender I know if he can help.

                    Visit my website or email me directly and I will try to see if I can be of any assistance.

                    Best regards,

                    Rafael Pabon
                    President, Business Lending Associates
                      • Re: How likely that I can get a loan without using my home?
                        SBC Team Guide
                        Hi SBOC members,

                        As a reminder, please do not post personal contact information. We just had to delete a post in this forum because the member included their personal contact information.

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                        In your personal profiles, you can post all interesting information about yourself and your small business. By completing your profile, you can direct members there to find out more, along with, added security of your personal information not floating around the community.

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