Tips for Finding Loans for Your Business Startup
Prepare a business plan.
A loan is something that only serious entrepreneurs should look into. Make sure you have a solid business plan ready. Most lenders will probably ask you for one during the application process.
Decide on how much you need.
Your business plan should include an estimate of your capital needs and expense. This should give you an idea of where to start to look for a business startup loan.
Look for possible sources of loans.
If you need money for a business startup, don't just go and jump at the very first opportunity to get a loan. Many times, it might not even be a good opportunity for you. Consider first how much you need, what you can offer in return (in case a collateral is required), how much the interest will be and how soon you'll be able to repay it.
Then, make a list of the sources of loans you can tap. These can include:
Banks
Entrepreneurs have traditionally approached banks when they needed loans for their businesses. Other than investing, offering loans at an interest is actually the bank's way of earning money. If your small business startup needs a loan, a bank is a good place to start.
What you can expect: your banker should be able to assist you in finding the right loan for your business startup. Ask if loans are underwritten at the local level. It will be easier for you to obtain and negotiate for one.
Look for small business loans as well. Not every loan type a bank offers may fit your needs and capability. Besides, a bank that already provides loans for business startups will be more capable of and experienced in handling your unique requirements better.
Small business agencies
Small business agencies are excellent sources of much-needed funding through a business startup loan. These companies often specialize in venture financing so they are more likely to understand your needs. You could also choose from different loan types depending on the amount of money you need.
If your loan is less than $150,000, for example, you're better off looking for lenders that offer small business loans at a good interest. For larger loans, you might want to look at other loan plans or if necessary, lenders.
There are also loans you can tap for small funding. The MicroLoan Program, for example, lends business owners startup money of $35,000 or less. They are easy to apply for and are excellent in case you need funding to purchase supplies or just for working capital. On the downside, these loans are short-term, so you'll have to repay the loan amount plus capital within a short period of time.
If your business startup involves short-term work, such as those that are seasonal, cyclical or short-term based, you might consider obtaining special loans designed specifically for your type of business. These loans are perfect for ventures that involve building or construction and could offer you as much as $750,000 in startup loans.
These are just a few of the types of loans you can expect to find in the market. Make sure you fully understand the responsibilities they entail and that you get the right type of loan for your business needs. Choose wisely because a lot of your success as a business owner depends on how you manage the money from these loans.
Personal loans.
Depending on the circumstances, you could tap personal loans as the first or last resort when you're looking for business startup funding. Personal loans can be tricky but if you have a good source, establish a fair agreement and return the money as agreed, it could help give you much-needed money for your business.
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