How to Get Capital to Start a Home Flipping Business

House flipping, the business of purchasing a house at a reduced cost, making some improvements and reselling the house at a profit, can be a lucrative business. When the economy sees a downturn and real estate goes down in value, people with house flipping businesses buy up houses and property at deep discounts. If they can hold out until the real estate market turns around, they can make lucrative profits. If you are interested in starting your own house flipping business, you are probably wondering how to get the capital to get started.

Instructions

1. Create a business plan. This is documentation that shows you have put thought into starting your own business. A good business plan is required by many lending institutions in order to get a business loan; even if it isn't required, it shows that you have thoroughly thought through the process of starting your business.

   The Small Business Administration (SBA) offers advice on writing a small-business plan and breaks it down into its main components. Your business plan will have a statement of purpose to detail what your goals are and go through the business description, your marketing ideas, your financial information including anticipated goals and much more. A well-structured business plan can often make a "no" turn to a "yes" when seeking start-up money.

2. Apply for a small business loan. Inc.com, the website dedicated to entrepreneurs, suggests applying for a small-business loan either through the SBA or through a community bank. Use the business plan that you put together in Step 1 to apply for a loan to start the business. The SBA can also help put you in contact with lenders in your area that are offering start-up capital to small businesses. Community banks often are willing to help fund small businesses in their own community to promote local business growth. You can also apply for a merchant loan through Express Funding, a lending company specifically designed to help get businesses started. (See Resources for Link.)

3. Borrow from family members. If you have family members who have the money to invest or lend you, then this could be the route to take. However, if you do this, Small Biz, the website for small businesses, has important suggestions that should be followed to ensure the family loan doesn't turn into the elephant in the room every time you are around the family. First, determine if you are asking for a loan or an investor in your business.

   Assuming you are asking for a loan, make sure to draw up documents that cover all the details of the loan. This is important regardless of whether or not you are charged interest on the money. If you don't document the loan, the IRS could become involved and you might wind up owing taxes on the money. Finally, follow through with your payment plan on the loan. Don't ignore the loan just because it was made by a family member.

References

• Small Business Administration - Business Planning
• Small Business Administration

Resources

• Inc.: 20 Tips for Finding Money Now
• Merchant Loans
• Seven Safe Ways to Loan Money to Your Family