How to start a business is one of the oldest topics around. The entrepeneur must have an idea of the targeted business  and some practical experience in the business by either being a previous employee or going to hire key employees who understand the make up of the industry.  Examples of this could be a dump truck  and/or over the road truck driver who has been offerered an opportunity to lease on with the employer but must obtain his own truck . Once he has obtained the necessary truck and financing, then his rate of income would jump to a contact scale. He would be at risk for the operating expenses of the truck  such as fuel, maintenance, labor etc. Another example of a start up business would be a limouusine driver who has many years of driving experience and wants to branch out on his own. In both instances, this want to be enteprenuer had experiene in their respective industries and had a working knowledge of the business.

Additionally, there are many opportunities out there where a person was either tired of his employment or had a vision to start up a business with a demand already in place for its product and service. These situations require a little bit more scrunity because the lack of experiene may be a hinderance for obtaining overall success. An example of this is where there is demand  to be put glass in for apartment buildings , hotels, residental houses, retail stores, apartments etc. The make up of the business seems simple on the surface but cost accounting of each job is required, glass must be bought properly,  union dues are required,  management of each job is essential to its sucess of the company, and related taxes and insurance may make this so simple business start up into a run away nightmare. In this case, the lack of experience without superior management  and controls in place can outweigh the demand and supply cycle.

In any case, whether you have experience in the industry or an idea to start a business, a business plan would be a good idea to develop. This business plan should be created by the ownership and/or management team to lay out the particulars to the development of this start up busiess.  This business plan can be brought in its raw form to an experience professional such as a C.P.A and/or attorney for its prepartion and comments.  This business plan can be as simple as one page or as detailed as a book, the decison is yours.  This business plan is in its simpliest content is what the business is , how to plan to finance the start up costs to get it running and how you plan on maintaining the operations. This business plan may have a projection for funds needed to commence the start up phase and a budget for the profit and loss of the cuurent operation of the business in detail.

The reason a business plan is needed because the entrepreneur or  ownership team is probably going to need some financing to get the business of its feet. The forms of start up financing can be in a form of  a loan, equity financing and leasing such as  equipment, trucks and other pertinent items. This area probably is the key part whether the start up business gets off the ground or not.  In either case, the credit of the ownership will be investigated by the banking institutions for a loan and the leasing area. A personal financial statement and prior years tax returns may be required as well to show financial strength.  In the equity or venture capital arena, the group of prospective will invest money in your start up business for an equity interest. This could be quite complicated and be beyond the context in this article.

For this article, we are going to discuss the loan and lease options for the start up business. Most banks that are lending money for a start up business are very cautious  and will require excellent credit for the applicant to even be considered. This may require a credit score of 700 or higher.  This first requirement could eliminate over 80% of the applicants.  Even if the credit score can be obtained, the bank may require 20% down payment on the investment and assets that are tied up, assuming the assets are even there to consider. This banking formula may be good for a small pool of entrepeneurs or investment partners. The  bank properly would still charge a high rate of interest and attach all the assets that can get their hands on for collateral. The start up dump trucks, over the road trucks, limousine, restaurants and similiar industries would be considered high risk to the bank and properly rejected either way.

Lets take a look at the leasing aspect of this start up business. Leasing is a form of renting construction equipment, commercial and work trucks, and office and computer equipment but with a buyout clause at the end of the lease to take title to whatever we are leasing. The requirements to get into the lease may be as low as first and last payment and as much as 25%. Each situation is different and this offers the start up business a way to invest very little monies into the business.  Additionally, all other monies can be used for start up operating expenses such as marketing and other key areas.  Leasing is not a new form of financing but could be a lending solution to the start up business.  Many lenders have repos and dealer finance programs for the start up and seasoned  business.  Credit qualifcations can be as low as 575 for the credit score and up to $100,000 for available financing. Once again, in any lease arrangement, the owner or owners would be personally guaranteeing the lease.

In either case, the start up business has a good opportunity to succeed if you have some back up money to put into the investment. You probably need anywhere from 3-6 months additional funds available to keep aside to assist the start up. The lenders look favorably if you have industry experience, a good management team and possibly additonally income coming in from a second job and/or a spouse working.  

The final part of the equation is there are lenders out there that require full documentation. This means prior income tax returns, personal financial statments, appraisals and prior months bank statements. Additionally, there are lenders out there that will do an application only program, especially for leasing. This could eliminate the hassle for all the paperwork and might justify whatever additional expenses might be required.

In conclusion, happy hunting for your business start up, strongly consider preparing a business plan, either for yourself or your lender.  In addition, shop for the appropriate lender that will meet your financing needs.

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