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Cost-Effective Borrowing - Facing The Need For Money
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By Small Business Advisor

Your business plan is working and your company is growing. Now you realize that the second most important ingredient to fueling growth is raising capital.

As a small business owner, here are some ways to manage your borrowing costs and obtain more loan funds.

Some of the more obvious assets you have may include your company's cash flow, personal credit cards and your individual retirement account. In addition, you may also be able to borrow on the strength of your character, management experience and customer contracts.

The best way to cultivate a relationship with your local bank is to establish a rapport before you need money. That includes maintaining balances in your accounts, not overdrawing your checking account and not using uncollected funds.

Credit card loans are unsecured by the typical interest rate is 18%.

Your checking account may help you get a bank overdraft line of up to $10,000. This line of credit allows you to issue checks for more than you have on deposit up to an agreed amount.

Initially consider looking to friends and family members for loans. Loans from this group may carry a lower interest rate than commercial loans or no interest at all.

Next look to banks and finance companies. The small business community is the fasted growing segment of the financial market today. Nearly one-half of outside financing for small business comes from commercial banks.

Finance companies and banks usually require personal guarantees and collateral. A source of collateral for a loan is your home. The approval rate for a home equity loan is much higher than for the average business loan because of its lower risk to the lending institution. If you can't repay the loan, the lender of a home equity loan could foreclose on your house. Interest on a home equity loan is tax deductible.


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