How does a small company go about getting a line of credit for expansion?

We'll end the year with $450k in annualized sales, and already have around $550k signed for 2008. Without outside financing we'll likely end 2008 with about $750k in revenues. We need a $150k line of credit to hire two engineers, and a sales rep, with which I think we could end next year with more like $1.2M in annualized revenues.

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December 05, 2007

Posted by TonyLiu

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Setup a tax ID with the IRS to have your business distinct from your personal identity and go after a loan.

Another option in case you have bad credit, is a home equity loan. If you are willing to secure your business loan with personal equity in your home, you will have plenty of options even if you have poor credit. The danger with a home equity loan is that startups are impossible to forecast with certainty.

Have you considered borrowing from family and friends?

Comments

mthbp: We're an LLC taxed as an S-Corp. Commercial bankers have told us that with less than 10 employees, and $1.5m/year in revenue they have no programs without our personal credit being tied to the business. Our personal credit is bad because of the debt from bootstrapping.

We do have some family and friends options, but none that are enough to really make much of an impact. I think what our best option would be investment with an option of converting into debt or a payoff.
mthbp: We're an LLC taxed as an S-Corp. Commercial bankers have told us that with less than 10 employees, and $1.5m/year in revenue they have no programs without our personal credit being tied to the business. Our personal credit is bad because of the debt from bootstrapping.

We do have some family and friends options, but none that are enough to really make much of an impact. I think what our best option would be investment with an option of converting into debt or a payoff.
TonyLiu: family and friends might not be enough however, I'd fund as much as possible from the family and friends sources as you can. The last thing you want to do is have outside influence effecting your business. Family and friends and shield you from that ordeal.

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How does a small company go about getting a line of credit for expansion?

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