Running a home-based business can be a profitable and enjoyable way to make a living. Financing such a business can be challenging, however. Before you consider applying for financing for a home-based business, it’s important to have an ironclad idea, some form of collateral, investors (in some cases) and a long-term plan for success.
Pull a copy of your credit report. A lender will not grant a small business loan to any potential borrower with poor credit. You’ll want your credit to be in top shape — above a 720 FICO score is best — before filling out any applications for credit. See Resources for information on how to obtain a free copy of your report. Red flags that may disqualify you for a business loan include maxed-out credit lines, excessive trade lines (more than four revolving accounts), judgments, bankruptcies and charge-offs. Make sure to clear all of your negative credit before applying for financing.