When it comes to successfully launching a new business, having the funds to succeed from the start is key.
According to the U.S. Bureau of Labor Statistics, 20% of new businesses fail within their initial year. Moreover, one of the primary reasons in recent history is simply a lack of funds.
In fact, per a recent study, 47% of startup failures in 2022 were due to a lack of financing (nearly double the percentage that failed for the same reason in 2021) and running out of cash was behind 44% of the total closures in 2022.
Getting a business loan to start gives you a safety net and stability. Additionally, it is a hefty advantage to put plans in place to ensure your business grows. But how can you secure a loan, and what can these funds cover? What are your financing options, and who can you contact for additional help in getting your new business rolling?
The process starts with understanding the fundamentals of small business loans. Also, understanding who you can connect with to launch your endeavor with confidence and a clear path toward a profitable future.
How Can a Loan Help Your Business?
A business or startup loan can provide a wealth of benefits beyond the initial financial security required to rent a location, retain staff, or purchase inventory. These benefits can include (but are not limited to) the following:
- obtaining fees to register, trademark, and form your business
- hiring consultants and other professionals in financial planning, marketing, and other specialties
- paying for utilities and equipment, like laptops, cell phones, and Wi-Fi
- expanding your advertising
- offering inaugural promotions to build a customer base
Any endeavor or step that will give your business an initial boost can be covered with a business loan. Therefore, these first steps are essential for the lifespan of your company.
You want to make a stellar and noticeable first impression as soon as you launch. That is why a small business loan can help set these way makers for a successful future ahead.
Financing Options for New Businesses
Conduct an online search, and you’ll quickly discover countless options for financing a new company. There are many factors to consider including varying terms, interest rates, and amounts.
Business credit cards, SBA loans, bank loans, and even alternative funding options (like crowdsourcing) are all readily available for entrepreneurs. However, the key to securing a loan is universal and requires a bit of advanced planning.
The Essential Steps to Obtaining a Small Business Loan
Generally, before you can meet with a lender, you’ll want to account for the following factors determining whether your request for a business loan is approved.
A thorough business and financial plan
When applying for a loan, look at your request from a lender’s perspective. How risky is the business you are starting, and what is your expertise? How quickly can you turn a profit, and how do you expect to get there? Building a strategic plan that outlines the best next steps will go a long way in ensuring confidence from a lender.
A solid business and personal credit history
Your credit score is instrumental in obtaining any loan, so ensure it is attractive from the offset.
A list of assets
Lenders want to know that you have skin in the game, so create a list of your assets that could be liquidated, like equipment, just in case the business does not succeed.
How Do You Boost Your Chances of Obtaining a Business Startup Loan?
Consult a business financial advisor.
The above list is just a primary outline of what is required to be approved for a small business loan. Therefore, the best thing a business can do before sending out applications is to seek some expert business loan advice.
A business financial advisor can help you review your plans and documentation to ensure that you maximize the number of funds you receive from a business loan. Also, aim to minimize your payments and interest along the way.
There are countless options for acquiring a business loan. However, determining the best one that will help and not hinder your progress requires the insight of a financial expert.
As such, if you’re ready to launch an exciting new business venture, start your journey with a conversation with our financial experts at Sadock Advisory.
With a little assistance in preparing through the many funding options and determining the best way to make a great impression, you can dive into your new business venture with a clear path toward financial security and success.