anyone know much about loans?

[adwyn]

It is possible to get loans to purchase with very little down. In the US 3% is the most common down payment amount for houses under $250,000. Even poor credit (and don't mistake no credit with poor credit) will likely not torpedo you but rather set a higher interest rate. What is more important is your front and back end ratios.

As infinit2000 said, you can get an equity loan and blend it with an SBA. This is a lot more complicated though.

PM me if you want with some details and I'll help with some suggestions, I'm probably not licensed to operate wherever you are but I will offer advise where I can.

 

[der_kluge]

Why can't you just get a home loan? You only really need 5% or 10% of the house price to get a home loan. You've got that and then some. Home loans are great ways to boost your credit rating, and you can deduct the interest off on your taxes.

 

[Dimwhit]

To piggyback on a couple others, if you're a first-time homebuyer, you can get an FHA loan for 3% down. If you've had a bankruptcy, you can still get that loan if you're at least 2 years past the discharge. So if it's a matter of having no so great credit, if you've been clean for 2 years, you should still be ok for an FHA.

 

[Morrus]

Wow. That's the cheapest house I've ever heard of in my life! For the same sort of thing here, you'd be looking at £150,000+, which is about $275,000. And that really is the lower end of the housing market.

Your house I could buy on a credit card! In fact, you have $12,000, you need $36,000, so you only have to raise $24,000 (which is about £15000 here... small change!)

 

[punkorange]

I would have no problem getting the home, as I have a signer on that, it's the extra $24,000 for the business I need

 

[Rel]

I would have no problem getting the home, as I have a signer on that, it's the extra $24,000 for the business I need

I don't know how much you earn, punkorange, but I'd seriously consider trying to pour money into the house for a couple years and THEN start the business. This has several advantages:

1) You wouldn't have to worry about finding a way for the extra financing immediately.

2) Less of your income would be going to debt service which means that you could pay down your mortgage even faster.

3) You'll rapidly be building equity in your home, which is a powerful tool for leveraging more money at good rates.

4) The house will (probably) appreciate in value getting you even more equity and borrowing power.

5) You can take out an equity loan on the house once it is payed off or nearly so and gain the tax advantage of such a loan on the money you need for the business.

Furthemore, one big reason why businesses fail is because they incur debts that cause a strain on the ability of the owner to make payments when the business is first starting. This won't be nearly so big a problem if you have payed off the house already.

 

[Bront]

I would suggest a small business loan over a personal loan. Here's why.

1) If for some reason, the business were to fail, you don't potentialy loose youre (House, car, insert other colateral here), and likely you'll have less of a tab as they sell off parts of your business to recoup the loan.

2) Never mix business and personal money. Bad idea. It's hard to track for taxes, it can break you on either end, and it can be an accounting nightmare, especialy if your papers are ever looked at.

3) There are tax breaks for small business loans, pluss, you'll be able to borrow enough to cover your expenses and losses durring the first year or two (You likely will loose money in the first year(s)).

I want to know where you are buying houses for $36,000. I got something not that much bigger, though much newer, for nearly 6 times that ammount almost 3 years ago.

 

[Angel Tarragon]

Sorry, I don't know squat about loans. Loins, however, is a different matter.

 

[devilbat]

In Canada, we have "no money down" option when purchasing a home. Very good credit is required to qualify for that plan, and generally the interest rate is a point or so higher then prime. There may be a plan like that in your neck of the woods. It's really a mut point though, as you said that your credit wasn't so great.

 

[Old One]

I don't know how much you earn, punkorange, but I'd seriously consider trying to pour money into the house for a couple years and THEN start the business. This has several advantages:

1) You wouldn't have to worry about finding a way for the extra financing immediately.

2) Less of your income would be going to debt service which means that you could pay down your mortgage even faster.

3) You'll rapidly be building equity in your home, which is a powerful tool for leveraging more money at good rates.

4) The house will (probably) appreciate in value getting you even more equity and borrowing power.

5) You can take out an equity loan on the house once it is payed off or nearly so and gain the tax advantage of such a loan on the money you need for the business.

Furthemore, one big reason why businesses fail is because they incur debts that cause a strain on the ability of the owner to make payments when the business is first starting. This won't be nearly so big a problem if you have payed off the house already.

Listen to Rel...

He and I both own small businesses and everything he says is spot on. Undercapitalization is the biggest single reason for business failure. Also, far too many people these days load themselves up on debt before they get on firm financial footing...it is very easy to get into debt...very, very hard to get out of debt!

In addition, you will probably have to personally guarantee a business loan (regardless of the business structure you choose - Sole Proprietership, LLC, S-Corporation or C-Corporation). This is particularly true for start-up business where the owner(s) have no previous business experience.

If you haven't done so already, I strongly suggest you contact the local community college and take any small business courses they have (they are usually very reasonably priced and taught by other local small business owners) and contact your local SCORE (Service Corp of Retired Executive Officers). One of the best sources of small business funding is an SBA (Small Business Administration) Micro-loan (up to $25k), but they will require a solid business plan and SCORE counseling before an SBA-lender will issue the loan.

From a tax standpoint, a business loan is preferable, because the interest is fully deductible against business income prior to paying taxes. A personal loan - even if used to start a business - may not be tax deductible. In addition, personal, unsecured loans typically have the highest interest rate.

One final thought (and I am sorry if I am coming across as a wet blanket), do your homework. You mentioned you want to start a "store"...is this a gaming or comic book store, by chance?

Retail has one of the highest failure rates in small business...and an underfuneded effort without a solid business plan is almost doomed to fail. Before socking yourself (and a co-signer) with lots of debt...answer these questions:

(1) Do you have at least 6 months of living expenses set aside to cover your personal needs during store start-up (food, clothing, mortgage on the new house) so you don't have to rely on any income coming from the business (12 months is even better)?

(2) Have you done a formal business plan?

(3) Have you thoroughly researched your idea (including location, rent, inventory, suppliers, local business taxes, possible competition, previous start-up efforts in the retail line you are attempting that either succeeded or failed)?

If your answer to any of the above questions is "No"...then you chances of success are very slim. Don't expect someone to lend you money just because you have a "great idea"...you should do your homework first, put together a solid plan and make sure you are on firm personal financial ground.

I have personally started, built-up and sold 2 small businesses (currently own my 3rd) and work with small business owners on a regular basis. Those that don't put together a solid plan, get some education and have adequete funding rarely make it.

Sorry to be a buzz-kill !

~ OO