Only about 20 percent of startups survive into their second year after opening. There are lots of reasons why startups fail, but a lack of steady cash flow is one of the most common.
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.
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.
loans are much easier to get your hands on than business loans, especially if
you have a good credit score.
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.
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.
are small, short-term loans, so they’re not great for long-term business
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.
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
tons of different loan options you might want to consider if you need help
funding your startup.
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.
are some tips that will increase your chances of getting your loan application
Know Your Credit Score
helps to know where you stand, credit-wise, before you apply for any kind of
Take time to
assess your business credit score and your personal credit score and correct
any errors that might be bringing them down.
help you know what kind of funding you’re likely to be eligible for even before
the application process is complete.
Have Documentation Ready
to provide a lot of documentation when you’re applying for business loans
(especially SBA loans).
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
well-written proposal can make a big difference when you’re applying for a
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
don’t realize that their business’s online presence can have an impact on their
loan application approval.
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
what kind of loan you’re applying for, be sure to read the loan agreement
you understand how much you’re borrowing, the loan’s interest rate, and all the
details of the loan term.
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.
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.
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.