0
0
Startup business loans can help new entrepreneurs cover costs like equipment, payroll, inventory, and other utilities. Though it may be tough to qualify for traditional business loans, some online lenders offer working capital to borrowers with one or fewer years of experience.
Depending on the lender, you may be able to access different types of financing options, such as short-term loans, loans for startup businesses, business lines of credit, or equipment financing. Compared to conventional banks, you will generally receive smaller loan amounts, shorter terms, and low-interest rates.
Startups can improve their likelihood of loan approval by choosing the right type of financing, understanding credit score value, and competitive lending options. Here’s what you need to know:
6 Steps to Get a Startup Business Loan
- Write a business plan – Many startup loan lenders ask for a business plan as a crucial part of your approval process.
- Decide what kind of financing you’d like to apply for – There are many types of business loans and other funding options. Work together with a lender to decide which works best for your startup business.
- Check personal and business credit scores – Bad credit score is one of the main reasons behind loan application rejection. If you don’t have a business credit score yet, lenders will see your personal credit score – so be sure to look into it and take steps to improve it.
- Compare lenders – Getting a loan can be overwhelming. Make sure to find a suitable loan with the best rates and fees.
- Collect necessary documents – Requirements may vary by lender; however, most would want to see three years of business or personal tax returns, copies of business licenses and registrations, financial statements, and business/personal bank statements.
- Submit – You may be able to apply for a startup business loan online and submit the required documentation via an online portal or email.
How can Startup Business Loans Help?
A startup business loan can help a new business access many types of loans to get funding to cover their expenses, even if you might not have a business credit. These loans can help you expand your business and grant funds for:
- Buying furniture, PCs, or other equipment
- Purchasing or leasing office space
- Purchasing inventory
- Paying utilities and other overhead expenses
- Recruitment
As a whole, you can use small business loans for startups for any expenses to launch and grow your business.
Startup Business Loan Options
- Line of Credit
A business line of credit allows you to withdraw money as needed up to a specific limit instead of borrowing a lump sum. You only need to pay interest on the amount you’ve withdrawn. Like a credit card, a line of credit allows you to pay off the amount you draw down and you can borrow these funds again.
- Short-Term Loans
Short-term business loans have repayment terms of usually three to 18 months. These loans can be an ideal choice when you need funds for a short-term purpose, such as covering temporary cash shortages or a seasonal income gap.
- Equipment Financing
Equipment financing can help startup owners purchase equipment for running their businesses. These loans use the equipment as collateral, so they are more readily available than unsecured business loans.
Pros of Startup Business Loans
- Taking on some kind of debt allows you to preserve your personal savings
- You may get quick access to the funding you need to start or grow your business
- You don’t need to sell part of your business to investors, so you hold complete control
Conclusion:
Getting a loan for a startup business can be challenging. Generally, conventional banks ask for a good credit score and financial health, so don’t get discouraged if you don’t get approval on your first attempt.
Some online lenders give plenty of startup business loan options to help you build a promising future. To get a loan for your new business, determine what sort of financing you require, evaluate your credentials, research lenders, gather documents, and submit your application.
