Once you have decided to get a patent, the question often becomes, “How am I going to pay for it?” One attractive option is to get a loan from a bank and use it only to pay for the patent. However, this should not be approached mindlessly. Unlike credit card companies, banks are extremely conservative and often will not lend money unless you have impeccable credit or are willing to pay huge interest rates. This is especially true during the current 2008 financial crisis. So if you decide to use this type of patent financing, here are some things to keep in mind:

1) Check your credit score BEFORE applying for your loan.

It should go without saying that people with higher credit scores can borrow more money and pay less interest. That said, it’s amazing how few people actually take the step of checking their credit score before applying for a loan. This is mandatory, not optional! Even if you find out that you have a low credit score, knowing about it CAN help you. Credit reports often have mistakes and erroneous entries, that the credit bureaus are required by law to correct. One common example is that a bill you paid long ago might still be on your report as “unpaid.” If so, you can likely have this removed which in turn boosts your credit score.

2) Determine the amount of money you NEED and borrow NO MORE.

The correct approach for getting and using a loan is to identify what you need the loan for, calculate exactly how much you need, get the loan, and spend it only on what you planned. It is not, as many loan applicants seem to believe, exaggerate how much money you need and spend it on anything that catches your eye once the money is in your hands.

So, how much money do you need to pay for your patent? It depends. Start out with a provisional patent. Borrow no more than $500-$1,000, depending on whether you do it yourself or use an attorney. Therefore, you should borrow only that amount. If the bank insists on loaning you more, try to borrow as little additional money as possible or use alternative patent financing, like a credit card.

3) Devise a plan with a date for full repayment.

It is foolish to go into any type of debt without a plan for repaying it. At a bare minimum, any plan must include a date by which you expect to fully repay the debt with calculations of how and when it will be paid off. So, for example: you already had a provisional patent but now need to borrow $3,000 for a utility patent. Figure some things out before borrowing that money.

First of all: how will you pay it back? Presumably, you are borrowing the money because you don’t have it now. So how will you get the money to pay it back? With that question answered, you can move on to the question of how long it will take to pay the money back. How much can you afford to pay per month? How many months would you have to make that payment before the entire loan was paid off? Don’t forget to take interest into account; after all, no bank would lend you the money if all you had to repay was the exact amount borrowed.

Only when you have a written plan indicating exactly how and when the loan will be repaid should you accept it.

4) Get banks to compete with one another.

Loans often come down to a negotiation between you and a loan officer. Who wins in negotiations? Usually, it’s the person with the most options. And while you may not have more “options” than a bank (who can theoretically turn around and lend money to thousands of other people), you can get banks competing against each other. The best way to do this is to shop around. Get quotes from multiple banks and lenders and make each one aware that you have other offers. Websites like LendingTree.com can help you do this automatically by showing you side-by-side comparisons of how much each bank will lend you at various interest rates. You are then free to either accept one of those offers outright, or try to negotiate further with one of the banks in question.

The key is to approach funding a patent with a bank loan as a responsible consumer. If you execute all of the above four steps in order, rather than leaping at the first loan that seems appealing, you will undoubtedly have a better experience.

PatentHelpNow.com is a website dedicated to providing inventors with free patent help. You can contact us at: PatentHelpNow@gmail.com