Entrepreneurs rarely have the funds on hand to launch a new business start-up successfully, which is exactly why start up business loans are the norm when it comes to exploring and building a new venture. Even the smallest new companies can benefit from a startup business loan, whether it’s for turning a hobby or passion into a fully operational business or for expanding an existing endeavor in new but correlating ways. A great business idea is the first step to creating a company and securing a loan is the immediate next step.
Our expert team at Saddock Advisory can provide detailed and individualized business loan advice to allow your ideas to come to fruition. In the meantime, here is a primer on what you need to know about securing a startup business loan.
Types of Start-up Business Loans
There are a range of start-up business loans available, and the type of loan you want to pursue will be personalized to your idea, the funds required, and what you want to achieve and when.
A sample of these different loan types includes the following.
Lines of Credit
Traditionally issued by banks, a line of credit gives new businesses access to cash for varying expenses. Like a credit card, a line of credit is flexible and allows the borrower to withdraw any amount of money whenever required. As such, the primary limitation of a line of credit is the total spending limit.
Lines of credit offer lots of freedom but can be hard to acquire for businesses that are less than three years old and/or have the potential to fall into debt in the near future.
Small Business Administration or SBA loans are loans granted by the government based on a company’s years in operation, credit score, and annual revenue. Qualifying for a small business loan is generally easier than qualifying for a bank loan. Still again, it’s helpful if a business has an existing history and a plan to move forward.
Online or Peer-to-peer Lending
Do an online search for “how do I get a loan to start a business?” and you’ll be flooded with websites that act as a funding connection for new entrepreneurs. There are dozens of reputable, renowned, and safe websites that can connect qualified applicants with investors or lenders on a smaller scale, and the details of the loan are identical to a loan from a bank or a government agency but without the middleman.
Online and peer-to-peer lending options are great for start-ups that haven’t found their feet yet (but with a solid plan), and there is lots of flexibility on the loan amounts, payment terms, and other individualized details. The key is to ensure that the website and ensuing lenders are reliable and can provide cash flow now and for the future of your business.
Also issued by a bank (especially a bank that you already do business with), a personal loan is an option for brand-new companies that do not yet have a history of revenue or years in operation. Interest rates may be slightly higher than other types of loans (like SBA loans), based on an individual’s credit score and the institution lending the money. However, personal loans are generally easier to acquire than traditional business or SBA loans.
What You’ll need to Qualify for a Startup Business Loan
Saddock Advisory can provide a detailed guide of what you’ll need to ensure a loan, but you’ll typically want to make sure you have the following ready before you apply:
- Credit scores and business credit
- A solid business plan
- Collateral, such as savings, a home, or other assets that enhance your personal wealth
- A business plan that outlines exactly how you’ll realize your vision
- Required documentation, like several years of annual tax returns, bank statements, accounts receivable, credit card sales, and outstanding debt or invoices
Above all else, you need a great idea and a partner to help you acquire the loan you need to launch your new endeavor.
The experienced team at Saddock Advisory is standing by discuss your great idea and how you can best see it realized.
Simply put, the best way to acquire a business start-up loan is to avoid going it alone. With a dedicated resource like Saddock Advisory behind the scenes, you can make the best first impression possible to any lender and can transform your vision of a new and successful business into a vivid reality.