How to get a small business startup loan
Getting a start-up loan is one of the most important steps in starting your own small business. Without this funding you will be unlikely to get very far, depending on the type of business you are creating. Here we will look at some steps in applying for and hopefully obtaining a small business start-up loan to help get you up and running.
Since you are unlikely to have a business credit score if it hasn’t been established yet, your personal credit score will be very likely to have a bearing on whether or not you will be able to get a loan. Therefore, if you know you are going to be applying for a business loan you should take steps to ensure your credit score is as high as possible.
If you have a new and unique business idea, it might be a good idea to apply for crowdfunding. If you get a lot of people on board before your business launches, you are pretty much guaranteed to have a lot of custom during the early days. Crowdfunding is easy to do and is low risk – you won’t be left having to pay back a large loan if your business doesn’t take off as planned.
The U.S. Small Business Administration is a great place to apply for a small business loan. They offer loans of up to $50,000, which can be a great help in getting a new business off the ground. However, they can be difficult to obtain and they are often given to established businesses which are looking to expand, so it might be worth considering the SBA further down the road.
Another option is applying for a personal business loan. This is a great option for those with an excellent credit history and a decent income. They are best used when you don’t need to borrow a huge amount of money and are confident you will be able to pay it back. If you don’t want to visit the local bank, there are loads of online lenders which might be able to send your money within a day or two. You can borrow anything from €500 to tens of thousands, meaning it’s a flexible choice.
You could also considering borrow money from friends and family – many businesses are started by those who have borrowed money from their parents. You’ll have to share your plans with them and make sure they trust you will pay them back when things get going. You might also be able to enlist someone as a partner if they invest a large chunk of money. You could give them a percentage of the business instead of paying them back their original investment – which takes some of the pressure off if your new company doesn’t grow too fast at the beginning.
There are schemes available for women and veterans who are looking to start their own company. Government and private agencies have a variety of grants to award each year, which don’t have to be repaid. Whilst they can be difficult to obtain, it’s worth it as you won’t be burdened with debt in the early days with your new company and can instead focus on keeping up with running costs rather than paying back what you owe.
If you are going to go down the traditional route and take your business plan to the local bank, there are a few important things you can do which will help your application succeed. You need to have all your documents prepared and ready, and know what you need to show the bank. You should also have an idea of where the money will be used, so you can justify the amount you are asking to borrow. You also need to find the right type of loan for your needs. This might involve comparing interest rates and terms, too, so you don’t get any nasty surprises.
However, bank loans are very difficult for start-ups to obtain. Banks usually require a company to have some cash flow and some collateral. They can also be slow, so they aren’t ideal for when you really need cash straight away.