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+--- Thread: What do I need - Private Investor or Bank Lending/Credit? (/showthread.php?tid=1)
What do I need - Private Investor or Bank Lending/Credit? - LoveMoney - 03-26-2025
Quote:Former seller of money here. I specialized in uncollateralized loans. I'm going to give you some tough love.
No one reputable will lend you that money, and whoever will likely asks for your knees as collateral.
You have no business, no revenue, no experience with business or the industry, and no collateral.
Business loans are not loans FOR a business. They are loans TO a business. Underwriters analyze risk to determine lendability. In order to do that, they look at business revenue and cash flow, personal income, personal credit, debt to income ratio of the person and the business, overall risk of industry, years in business, etc.
There is nothing to underwrite here but your personal credit (which is not great) and an idea. Not only that, but restaurants are incredibly risky. About 2/3 fail in their first year.
You need investors, not lenders.
Investors are also unlikely to give you what you want because, again, you don't know what you are doing.
Salvidor_Deli
If your business is new, don't expect credit of $100K or $1M immediately. You need to file minimum 2 years of tax return, build business credit, and maintain both a good personal credit score and low debt in order to qualify for business lending as a new business.
In such case, private money (investor or capital groups) come in exceptionally handy but remember that while a private investor may provide you with funding on day 1 of your business formation, it will not become reality until various things are aligned:
- A unique product/service or success business plan
- Background Checks: Some people may look into your past employment, bankruptcies, criminal history such as drugs & alcohol, etc.
- Past experience with earning revenue or industry experience
Which is better?
Depends on you. In case of private investor, you may or may not get the benefit of an involved (partner) who may guide you through the complexities of your business.