One thing that the COVID pandemic taught us is that the service sector is volatile. You might be earning thousands of euros per month but when the crisis strikes, you are equally vulnerable to lose the job. On the other hand, entrepreneurship is different. You not only earn profits for yourself but employ others too.
Starting a business is no child’s play. You need to have proper financial planning, a good team to work with and an analytical mind to foresee the business future. You should be able to keep the business running even in its lowest phase.
4 Best Options for Startup Loans
Your employees should have faith in you. While these are leadership qualities, you need to focus on the financial aspect as well. One aspect that bothers every wannabe businessman is the lack of funding. Loans from public and private financial institutions come to the rescue here. But here is the catch.
You don’t always know the types of loans that are available in the market. Also, you must know the type of loan that is best suited for you.
Let us have a look at 4 types of loans that are most suitable for budding entrepreneurs:
1. Startup loans
The startup ecosystem is thriving right now. Research shows that on average, 13700 startups are coming up every day. Governments across the world are promoting it. It not only showcases a country as a bustling economic hub but also creates employment for many.
But having a startup has its share of problems. Fierce competition from the established firms, hiring suitable candidates, cybersecurity, financial management are some of them. The solution to most of these is a loan.
With this amount, you can hire suitable candidates and pay them a salary, get an expert cybersecurity analyst and keep your system robust and spend money on promotions to attract investors as well as customers. The biggest advantage of this loan is that you need not meet the credit score requirements.
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You can get the loan even if you have zero scores. Also, the repayment terms are flexible. The interest rates are lower. Also, the start-up loan is unsecured. This means none of your assets will be held under the guarantee.
However, a guarantor is still needed. You can use this loan for any purpose. It could be for the purchase of appliances, payment of staff, or maintenance of the cash flow.
2. Transport and logistics finance loans
Most private lenders provide this loan to startups who are looking to enter into the transport and logistics industry. It is a well-known fact that the initial phase requires the purchase of heavy vehicles, various equipment, and the hiring of manpower.
Transport and logistics is a capital-intensive business. You need different types of transports, warehouses, and shipping equipment. You also need manpower. Even after securing these, you need a constant cash flow to keep the whole machinery running.
From ensuring timely delivery of goods to taking care of the vehicles, the industry constantly asks for more capital. If you have just ventured, you might be short on finances. Transport and logistics finance loans come in handy here.
You can apply for a loan starting at £10K(unsecured business loan) and go up to £2,000,000(secured business loan). Do a proper check before you decide on this loan. compare the terms and conditions from different agencies.
Choose the one that puts minimum financial pressure on you. Also, you can go for the one that allows smaller EMIs rather than one lump sum payment.
3. Agricultural loans
Starting in the first place in agriculture requires you to have land possessions, proper farming machinery, and fund for the purchase of seeds and fertilizers. You can opt for agricultural finance to meet these requirements. Most lenders give 5 years for repayment of the loan.
Agriculture is unpredictable. You can have a bumper crop one year and zero the next year. So, it is important to diversify the crop to minimize loss and maximize profit. You can also opt for the dual crop. You must select the crops wisely. A wrong crop combination or unsuitable for your soil type will always lead to a loss.
If you are new to agriculture, consult an expert. Then, decide on the crops, fertilizers, and also tools. For that, you need capital. The agricultural loan is meant to promote farming and it will help you in venturing ahead.
4. Bridging loans
This type of loan is meant for those emergencies when you are just a little short of finance. You may have a 90% amount to pay the invoice but that 10% may decide if you close the deal.
So, taking the bridging loan solves that issue. For example, you may need construction finance to complete a house renovation whose buyer needs it urgently. The bridging loan will help you solve the cash crunch. There are 2 types of bridging loans: closed bridging loan and open bridging loan.
If you opt for a closed loan, you need to repay it by a particular date. But, if you opt for the latter, you need to pay it within a period, usually a year. The biggest advantage of this loan is its short term. It does not accumulate huge interests like other loans.
A budding entrepreneur needs proper financial planning to survive in different financial situations. You need to have a good knowledge of loans and when to take them. Having an accredited financial planner is always a wise decision.
Together with that, you need to have an analytical mind. You need to have a sharp understanding of which type of loan is going to best suit your requirement. A wrong loan or a default can put you in long-term financial stress or a bad credit score.
Most budding entrepreneurs commit the mistake of not being well-read when starting. If possible, get in touch with a good financial advisor and try to understand different facets of business financing. Try reading books on business financing for a better understanding. After all, self-learning is the best form of education.
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