Business Financing

An investment of $12,400 is not a trivial amount from a personal standpoint, but it's a relatively small amount for most lenders. This figure is significantly less than the average business loan (and most new car loans for that matter), leading to many streamlined financing possibilities. Individuals with a reasonable credit history should feel confident that they can obtain a hassle-free loan for their new business.

There are three strategies that make the most sense for financing this business:

Self-Financing
Bank Loan
IdeaVision Payment Plan

Combining strategies works well also. The information below is provided to help you understand each option.

Self-Financing

Self-financing makes use of savings and other personal resources (along with those of friends and family) to fund your business. It's a popular approach because credit checks aren't required, plus the process is relatively quick and easy. Consider if one or more of the following self-financing methods would work for you:

Resource	Comment
Family / Friends	Some are more comfortable with asking than others, but it's one of the most common methods used.
Credit Cards	Another common method as about one third of start-ups are financed with one or more cards. Rates must be managed carefully, but special offers can work to your advantage.
401(k) Plans	Borrow from your retirement plan without penalty up to 50% of the account value ($50,000 maximum). You have five years to pay the money back (with interest), which replenishes your account.
Life Insurance	Whole life policies (not term insurance) accrue a cash value which you can borrow against.

Bank Loan

Obtaining a loan from banks or other lenders is another financing option. More financial scrutiny is involved than with self-financing, including a review of your credit history. However, you can simplify the process significantly with the proper strategy.

The first step is to understand the difference between the two major loan categories: personal and business.

Personal loans are designed to cover a wide variety of family needs such as bill payments, remodeling, college tuition and other major expenses. However, approval of the loan isn't usually tied to a specific item. Thus, you can use the money for any purpose, including starting and operating your business.
Business loans, in contrast, are tied to a specific business. Approval generally requires detailed business plans and a thorough financial investigation.

The two types of loans are compared in the following chart:

	Personal Loan	Business Loan
Used For	Any personal expense	Tied to a specific business
Amount	Typically 3K-50K	Typically 50K and higher
Experience	N/A	2 years or more in the specific business
Paperwork	Basic credit history	Detailed business plans
Approval	Quick, often within a week	Varies, but much longer

Based on the loan amount, it's recommended that you pursue a personal loan for this business because you'll have a better chance of obtaining the loan. The simplicity, quick approval and flexibility of personal loans are added benefits for taking this path. A business loan is designed for ventures that require a higher investment level than ours.

The most common types of personal loans are described below:

Loan Type	Comment
Unsecured	Loan that doesn't require any collateral. Credit history is important because lender assumes increased risk.
Home Equity	Second mortgage based on the equity built up in your home. The equity is used as collateral for the loan.
Home Refinance	Refinance your first mortgage. If enough equity is available to finance more than is currently owed, you can access the difference (known as cash-out refinancing) for your business.
Line of Credit	Range of credit that you can access and pay back as desired up to a maximum amount borrowed at one time (like a credit card, but at lower rates). Both unsecured and home equity types are available.

A visit to your local bank or credit union will help you determine which loan type is best for you. It's also easy to apply online now with many of the national lenders.

IdeaVision Payment Plan

The traditional financing options above typically result in the lowest total cost. Thus, you're encouraged to pursue one of them if possible. However, IdeaVision also offers a payment plan to assist you if one of the traditional options won't work for your situation.

The plan consists of a down payment ($5000 minimum) and equal monthly payments that are automatically withdrawn from a checking or similar account over a term up to 18 months maximum. A fee is charged based on 10% of the purchase balance, plus $50 per month. The fee is allocated within the monthly payments.

An example payment plan is outlined below based on the minimum down payment and maximum term:

	Amount	Comments
Down Payment	$5,000	Due at time of business purchase
Purchase Balance	$7,200	Business price ($12,400) - evaluation deposit ($200) - down payment
# Months	18	1st payment due one month after business purchase
Fee	$1,620	$720 (10% of purchase balance) + $900 ($50 x # months)
Total Due	$8,820	Purchase balance + fee
Monthly Payment	$490	Total due / # months via automatic withdrawal from checking or similar account only
Total Payment	$13,820	Total of down payment and monthly payments

Note that you'll reduce the fee and total payment (perhaps considerably) by increasing the down payment and/or decreasing the number of payments. There will be a corresponding change to the monthly payment.

This option is a payment plan, not a loan tied to an interest rate. No third party lender is involved. As such, application and credit checks aren't required, nor are there any closing costs. It's still a serious commitment though. A professional payment management firm is used to implement the program, including collections responsibility if necessary.

To support this option, IdeaVision may need to obtain financing to fund its own operations since full payment of the license is delayed. The company is thus taking on some of the financing burden to help you, relying on its strong credit and financial history to do so. The fee compensates IdeaVision for its own borrowing costs, administrative charges and risk it assumes to make this option possible.

Combining Strategies

Using more than one financing strategy also makes sense and is done frequently. For example, you may be able to borrow a certain amount from family or your 401k, then take out a loan for the balance. Likewise, the payment plan could be utilized by applying the down payment with a credit card. Regardless, we'll be happy to help you assess your options so that you can structure a financing plan that works for you.