If you have a business idea, or you believe that your true vocation is to embark on an entrepreneurial path, but you are more than broke to start your own business, the only way to make that dream come true is by lending capital to finance your dream. business. Yes, you can have different sources to ask for a business loan. But they are all different. Some may not even allow you to borrow.

Here, we’ve listed a few sources you can apply for a loan from and their qualifications so you can narrow down your perspective.

Capital investment

Equity means ownership. Therefore, those who have built their businesses are the only ones allowed in this form of loan. If you go for the equity investment, you should be ready to let go of some of your startup. Because, once you sell 51 percent of your shares, you lose control of the company. This type of loan is the same as putting a ‘business for sale’ sign on your business.

However, if you are the type of owner who likes full control of your business, you can borrow from other companies in your business, if you have one. Or lend to your friends, business partners, shareholders, or others you trust and create a deal with them for them. That would be legal as long as you have a mutual agreement with these people. Also, before indulging in this type of loan, make sure you know the law to protect yourself.

personal savings

Personal savings are the most common form of capital investment. This means that the fund you are likely to get to start your business is through personal savings, inheritance, friends and family. This type of investment is what most people turn to when starting their own business. And it’s actually a good thing for investors and lenders, as it means you’re very invested in the business because you’re willing to risk your personal savings.

In the course of your business, it is advisable to keep your personal investment to at least 25% to increase capital position and leverage. Remember, the more capital your business has, the more attractive your business will be to banks that can lend you up to three times your business capital.

Commercial Loans

This represents the second most used way by entrepreneurs to finance their companies. According to Business Week, small business loans were down 18 percent due to the financial crisis. Although this does not mean that your loan would be disapproved because commercial loans are on a case-by-case basis. And the only way to get your loan approved is to follow the 4 C’s of lending. Are here:

Cash Flow: It is the amount of money that circulates through your business or its liquid assets. When applying for a loan, you should strengthen your cash flow, as this indicates that you can repay the money you are borrowing.

Collateral: It is the value of the asset that you are willing to give as collateral for the payment of your loan. This is to assure the lender of your commitment to pay because if not, the guarantee will be lost in case of default.

Commitment: This is the amount of money you are committing to your business. However, this is not as important as the other two mentioned above, since your loan can still be approved without disclosing your part.

Character: This covers your personal credit score and your history with the financial institution as a whole. This is exactly what you need to look at if you plan to lend. All of your debts, no matter how small, must be paid off and you must maintain a good credit rating to significantly increase your chances.

In fact, there are different institutions from which you can apply for a loan. It all depends on how creative you are in designing your capital mix to get started with your dream business.