Do you have a great idea but need some cash to back it? Here is some information to help you find the best business startup loans for your company.
When you hear 'business startup loans', do you envision hefty credit requirements or just a lot of red tape?
If you're looking for capital to get your startup business off the ground, there are multiple options.
Banks and other financial institutions tend to be the first go-to for most people looking for capital for their startup, but there are other providers too.
Below are five options for business startup loans:
Typically, a bank will likely require a lot of information before shelling out the cash. These might include income tax returns, bank statements, credit history and any other personal financial information.
They'll probably need some sort of collateral to secure the loan too.
Bank loans have low interest rates, but they also have short repayment times which often include balloon payments. And getting approval is tough.
"Even though approval rates have increased, big banks approve [only] slightly more than 20 percent of the loan requests they receive," said Rohit Arora, CEO, and co-founder of Biz2Credit.
Banks usually have a minimum lending amount. If aren't planning to borrow that amount, then consider financing through a Small Business Administration (SBA) loan.
With SBA loans, money doesn't come directly from the SBA.
Instead, they set guidelines for loans made by its partners, which include banks, community development organizations and other smaller lending institutions.
There are a variety of SBA loan types to choose from that allow for some flexibility in setting up the parameters of how the money can be used and repaid.
The SBA provides a government guaranty, which will usually cover between 75 and 90 percent of the loan. This eliminates a great deal of the risk for the lender.
And unlike banks, the SBA loan tends to favor its borrowers. However, because additional paperwork needs to be filed and extra fees need to be paid, the SBA loan takes longer to get an approval than the conventional bank loan.
With an alternative lender, your business doesn't need to have perfect financial status, there are few restrictions on what the money can be used for, and the loans are approved in less than five days. Sometimes almost instantly.
The downside is that the alternative lender loan will have you paying a premium with significantly higher interest rates than the bank. It's the payoff for getting the loan fast and without great credit.
If possible, get a card with a zero percent introductory interest rate for at least the first six months. Preferably longer. You can take advantage of that time to work on getting your business off the ground without the added stress of paying interest.
But make every attempt to pay it back before the rate increases, because if that rate shoots up to 20% or more, you'll be paying off that debt for a long time.
Angel Investors are wealthy and/or retired people looking for places to invest their extra capital. If you're fortunate enough to have a business idea that's appealing to an Angel Investor, be sure to look into the laws that govern their activities.
Business startup loans can help you ease into the process is starting your business. But whatever route you choose, it's also crucial to learn the art of budgeting.
Remember that it takes time and commitment to grow your company.
Do you have a success story using business startup loans? Let us know!
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