Commercial Lenders – For most people, banks will be the first stop when looking for flower shop financing. Before you go to the bank however, make sure you have a business plan and check your credit score. Banks are looking for scores of about 650 but some have credit enhancement programs that drop to the low 600’s but that means higher interest. Expect the bank to ask you to put 20% + of your funds into the project. Figure on three weeks to three months to get an answer from the bank.
SBA Loan – The Small Business Administration (SBA) despite popular belief does not make loans. What they do however is give a bank a guarantee that if the loan ends up in default, they will reimburse the bank between 50-75% of the loan amount. Getting an SBA loan will take more time than if the bank did it themselves and it will cost you more to borrow that money. Consider the SBA loan like insurance and like any insurance comes with a cost, government guaranteed or not. Time to get financed with an SBA loan is about one to three additional months to the banks time. More information at www.sba.gov/loanprograms
Home Equity Loan – Many people don’t think of using home equity loans for their business but this is one of the fastest ways to get money to start your shop. One common objection is that people don’t want to risk their home but if you get a business loan and have equity in your house, the bank is going to require a lien on your home to secure the loan anyway. Home equity loans are also typically less expensive than business loans too.
Personal Savings – Good advice for any person starting a business is to save as much money as possible as things will always cost more than expected. The less money you have to borrow is the less money you have to pay back and will be a huge relief if you have a few slow months of sales.
Revolving Loan Funds – Most communities have Revolving Loan Funds (RLF) to support businesses and create jobs. These funds are typically borrowed from SBA, USDA, HUD and others by local municipalities, economic development organizations and not-for-profits. While they are still very interested in getting the loan money back, they are also concerned less with credit scores and more with the impact to the community. Find a list of funds by county at www.BusinessLoanFunds.com.
Peer-to-Peer Lending – Another interesting source of financing that is becomming more prevalant as banks continue to tighten credit and collateral standards is peer-to-peer lending. It works by having individuals loaning money within this marketplace to people looking for loans and are bypassing the bank. The lenders are getting a better rate than in a savings account. The leaders in the market right now are Prosper Marketplace and Lending Club
Even if you have credit issues and still dream of getting your business started, there are several places that you can find flower shop loans. You may get a lot of no’s when looking for financing and if so don’t be afraid to ask why and fix those issues. Good luck!