I See Your Back....If you already subscribed to my RSS feed. Grab the Free Books. Thanks For Visiting
I’ve borrowed just over $500,000 dollars from private lenders and thought I’d share what I’ve learned about borrowing money from individuals with money to loan. Obviously the most important idea here is only borrow from private lenders when your confident you have a solid idea. Finding people with money to loan has become a big deal to traditional small business owners as banks have become, well, stingy. Here are seven step to getting private loans I hope these work as an out line for how to borrow money from individuals and private lenders.
7 Specific Ways to Think of Your Private Loan Lender.
1. Your prospective lenders want to know you have a grasp on what it takes to create the intended success this cash infusion is purposed for. Just because they know you don’t assume they are aware of you skill sets and the actual business idea or reason your after more working capital.
*Action Tip: Create a simple, to the point, resume that highlights your experience and why this opportunity is worth investing in.
2. You should be willing to give a behind the scene look at your business or idea. If you have a business plan that you originally created get it out show it to them and provide insight as to where you are as far as your business growth is concerned. This can demonstrate your not just rolling the dice with their money. Remember, private lenders are using their own private money to make this loan in good faith, but make them go on faith alone.
*Action Tip: Get out your formal business plan or get into your accounting or tracking information and show them the same stuff that makes you see the good sense in pulling more cash in your business or business idea.
3. What have you put into your business or into this idea? Getting private loans is a lot easier if you can show your private lenders that you have some skin in the game. This can be a little easier with an established business, but if your a start up, you need to put some of you own cash on the table.
*Action Tip: Spell out the money you’ve set aside or accumulated for this endeavor. After all if your not willing to invest in the venture, why should they?
4. A private lender is motivated by loosing money first, making money second. Offering collateral and/or a formal agreement to repay the money can set aside some apprehension of making the loan due to fear of loss. If you have assets such as vehicles, or real property you may consider including these in the agreement.
* Action Tip: You be the one to offer collateral up front. Don’t wait until you created an uninterested and fearful prospective private lender then use the collateral card to save the pitch. If your idea is good, why not put something real behind the words?
5. Another smart way to increase your odds of increasing you money/loan ideas success is to offer the person a general summary of you character. Offer references.
*Action Tip: Have you ever been in a tough spot financially and done the right thing when someone else may have baulked? Let your money man know this.
6. Offer your a credit history to your private lender in the form of a summary. If you have great credit the lender may be curious as to why your seeking a Private loan instead of getting money from the bank. Tell them. Don’t be afraid to go way back to the first time you ever borrowed money.
*Action Tip: Write a short credit summary, don’t through your credit report at them. Try to make their decision about you, not numbers, proof and money.
7. Remember you prospective lender is curious and probably interested in loaning you money because there is something in it for them. Tell them in no uncertain terms what they will make and when they will make it. Write it out. Tell them why you think paying them to let you use there money is a smart idea for you.
*Action Tip: Know what your willing to pay the person for loaning you this money. It helps if you have all this information in you head and offer a summary of what you talk about on paper when the person leaves.
Final Thought on Getting Money or Loans from Private Lenders.
I’ve borrowed over $500k from private lenders and here are a few more ideas to consider when talking with folks about borrowing money. First off, don’t look for a yes or no during the first meeting. Try to leave on the note of ” Having seen what you’ve seen so far, what is your biggest concern in going through with the loan”?
By leaving the conversation this way you can better prepare yourself to talk to your next prospective private lender. I hope this gives you some points to ponder if your looking at a private lender to fund a business start up or to expand a good business.
