ANN PERRY 

BUSINESS REPORTER

If you want to test your entrepreneurial mettle, a home-based business can be a good place to start.

 

Setting up shop at home means instant savings on overhead since you likely already pay rent or a mortgage, or in some cases are even in the clear. Likewise, you probably own a computer. And you can't beat the commute.

But you still may need start-up financing to buy office equipment, upgrade software or pay suppliers. With corporate giants teetering and credit markets still jittery, prospective home-based business owners may wonder what their chances are of securing financing in the middle of a recession for a small-scale and often untried product or service.

"There is still financing available in the Canadian landscape, whether it be through financial institutions or credit unions. So that hasn't changed," said Christianne Paris, vice-president of client and business strategy at the Royal Bank of Canada.

The willingness of financial institutions to extend financing to home-based businesses can hinge on how well the owner has handled personal credit in the past.

"Lenders look at the history of the ability to pay as a predictor of the ability to pay in the future," Paris said.

If you have a spotty personal credit history, there are things you can do to correct it, although they can take time, Paris said. For starters, you should check with the major credit bureaus to ensure their credit reports on you are accurate. And if you have no credit history, it may be worth taking out a small loan – co-signed by a family member or friend, if necessary – and paying it on time.