- Are you getting ready to start your own business?
- Do you want to make sure you’re part of the minority that lasts long-term?
Well, the right type of startup financing at the beginning can make the process of starting your own business a lot easier. Moreover, with the right financing model in place, you can put your business on a growth track right from the beginning, hence chances of failures are very low.
Read on to learn about some of the best loans you can apply for to fund your startup and turn your business dream into a reality.
1. SBA Loans
One of the best loan options for startups is a Small Business Administration (or SBA) loan. The federal government guarantees these loans.
SBA loans are low-interest loans with better repayments terms than other types of business loans. You can borrow quite a bit of money using an SBA loan, whether you need a few thousand or a few million.
At the same time, SBA loans aren’t right for everyone. Because the government backs these loans, the application process is more rigorous. Your business will have to meet more requirements to be eligible.
2. Personal Loans
If you don’t qualify for an SBA loan, or if you need to get your hands on funding faster, a personal loan might be a better option to consider.
Personal loans are much easier to get your hands on than business loans, especially if you have a good credit score. For instance, if you are based in Hawaii and are in good standing with your bank or federal credit union in Hawaii, you have better chances of getting a personal loan approved faster.
You can use personal loans for pretty much anything, including your business’s needs.
One of the only downsides, though, is the fact that you can’t get as much funding as you can with a business loan. The average personal loan amount ranges from $1,000 to $50,000.
3. Equipment Loans
If you need money to buy equipment for your startup, an equipment loan might be a good fit for you.
Equipment loans are available to both new and established businesses. The loan is secured by the equipment you buy. It serves as collateral, so you don’t have to worry about putting anything else up.
Equipment loans tend to have better interest rates than a lot of other loans, too, especially if you have a good credit score.
You can use equipment financing to buy or rent all kinds of equipment, including vehicles, so it’s a versatile funding option.
4. Payday Loans
If you don’t have a great credit score and are having a hard time getting approved for other types of loans, you may want to consider a payday loan.
Payday loans are small, short-term loans, so they’re not great for long-term business funding.
However, if you’re in a jam and need some extra cash to tide you over for a few weeks, payday loans can get the job done. You might also want to use a payday loan while you wait for other funding to come in.
Just make sure you have a plan in place to pay them back. Otherwise, you’ll get hit with high interest rates and will have a hard time getting out of debt.
Getting Approved for Loans
There are tons of different loan options you might want to consider if you need help funding your startup.
Of course, if you have subpar credit (or no credit at all), it can be challenging to get a bank or credit union to take a chance on you and approve your application. It’s not impossible, though.
Listed below are some tips that will increase your chances of getting your loan application approved:
Know Your Credit Score
It always helps to know where you stand, credit-wise, before you apply for any kind of business loan.
Take time to assess your business credit score and your personal credit score and correct any errors that might be bringing them down.
This will help you know what kind of funding you’re likely to be eligible for even before the application process is complete.
Have Documentation Ready
You’ll need to provide a lot of documentation when you’re applying for business loans (especially SBA loans).
Make sure you have all your important business documents organized and accessible. Some documents you’ll likely need include your business plan, bank statements, tax returns, and business license.
Write Up a Proposal
A well-written proposal can make a big difference when you’re applying for a business loan.
Include information about your plans for the money and how you intend to pay it back. This can speed up the application process quite a bit. Ide
Assess Your Online Presence
Many people don’t realize that their business’s online presence can have an impact on their loan application approval.
A professional online presence may cause lenders to take your application more seriously and have more faith in your business.
Consider Alternative Lenders
Don’t limit yourself to brick and mortar banks. According to this article, online lenders are a viable option and often have better terms and interest rates than other lenders. Consulting a debt management consultant or a money expert who has experience of business loans can be quite helpful in making the right decision.
Read the Fine Print
No matter what kind of loan you’re applying for, be sure to read the loan agreement carefully.
Make sure you understand how much you’re borrowing, the loan’s interest rate, and all the details of the loan term.
Taking the time to do this will help you ensure you don’t get hit with any unpleasant surprises later on.
Fund Your Startup Today
As you can see, there are lots of different loans you can apply for to fund your startup.
Applying for loans is only the beginning, though. To increase your chances of having your loan application approved, be sure to keep these tips in mind as well.
Do you want to learn more about funding a startup and keeping it running? If so, we’ve got lots of resources available for you on our site.
Check out the Startup Ideas section of our site today for all kinds of helpful information that every entrepreneur ought to know as they begin their journey toward becoming successful business owners.