There are ways to launch a startup with minimal capital, or even without one at all, but let's face it, the process is significantly smoother (and more profitable) with some funds to get the fuel burning.
While there are different ways to raise this money, the fastest startup funding method remains to be taking out a loan. There are various small business loan options online, which is the best way for your business.
It is a loan that is specifically designed for new business owners. It is recommended for those who are wondering how to start a business, thinking about where they're going to get the necessary funds; or those who are already in the early ages of their business but are still in need of support to fully take flight.
Review Your Startup Costs
It can be difficult to come up with a specific estimate of your total monetary needs when you're still starting up your business. A lot of changes can happen in the course of the launch, not to mention some hidden charges that you might not even consider.
However, you should still have an idea of where to put the money, at the very least. There are different aspects when starting a business that you can devote your loan amount to. Allow us to give you some ideas.
Equipment purchase is one crucial aspect that can require a significant chunk out of your capital. Food businesses, for instance, require appliances, cash registers, vehicles (for delivery), and more.
Another essential expense is business furniture. This is especially true for those who are thinking of setting up a small inn or an office.
Finally, those in retail would require an initial inventory purchase to get the business started.
The keyword here is "initial", but you must not forget that a startup will require ongoing expenses to operate as well. These outflows include your employees' wages, rent and utility bills, taxes, and more.
Have Your Requirements Ready
Aside from determining the amount that your launch requires and where you can possibly spend your money on, another hurdle that you need to overcome before filing for a small business or startup loan is to prepare your requirements.
It is only normal for financial institutions to be wary of lending money to new businesses. They don't have a history yet, and most of all, no proven revenue.
Therefore, the best way to increase your chances of getting approved is to make that extra effort of obtaining the requirements. You must have a solid business plan, preferably with a realistic and data-based financial projection.
If possible, register your business with your local government office. Make your business legal. Get it a permit. Obtain a license.
Finally, don't forget to clean-up your personal financial statements. Check your credit score. Make sure that all its entries are correct and accurate. Each credit company would require different requirements, true, but most of them will definitely look into your personal finances.
Choose Your Preferred Credit Company and Loan Plan
Speaking of different credit companies, there are different types out there. Online and storefront lenders are among the most common choices, but don't forget to look into banks, credit card companies, and both government and non-government agencies.
Each of them has its own pros, cons, and available loan plans. Online loans, for instance, offer many conveniences. You can process your application digitally, and there's a lower possibility of getting interviewed, but they usually offer loans with higher interest rates.
Storefront lenders, on the other hand, may require you to visit their office to file for your loan but they're usually less strict when it comes to credit scores and a little bit easier on their interest rates.
There are various loan plans to choose from as well. Equipment financing is a loan you can make to cover all your equipment needs. A business line of credit, on the other hand, is great for those who need funds to cover unforeseen expenses as they arise. You'll be given a fixed credit limit that you can reach out for little by little.
There are also business credit cards that you can use to purchase other things, such as inventory. What's great about this type of credit card is that most of them will even let you earn points that you can redeem later on as a discount or as a cashback gift.
Finally, Prepare for a Possible Collateral
As mentioned above, it's not easy for new businesses, especially small startups to convince lending companies that they are worth betting on. Hence, some of them may require collateral as a final step before they approve your application.
This collateral may come in the form of a security deposit. There are storefront lenders that require you to provide a check that they can cash in should you fail to make your payment.
There are also equipment financing plans where the equipment that you have bought with the funds themselves serve as the collateral. Depending on your contract, the credit company may resort to carting your equipment away in the event that you won't be able to settle your account with them anymore.
Lastly, there are also financial institutions that require the signature of a co-maker. It is a person who, depending on your contract, pledges to cover at least the principal amount of your loan (the original amount before the added interest rate and other fees) if you fail to settle it.
Applying for a small business loan can be quite challenging, yes, but it's not impossible. By keeping the steps that we have shared with you in this article in mind, we are confident that you will be able to increase your chances significantly in getting approved for your chosen business loan.
Should you get accepted, though, just be sure to keep tabs on all of your due dates. Prepare the money ahead of time, and if possible, make your payments a few days early. Settling your debts and building your brand's financial reputation will serve as one of the pillars of your business' success.
