6 Best Options for Small Business Startup Loans

6 Best Options for Small Business Startup Loans

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Starting and operating a small business can be an exhilarating experience. Every step involved includes learning, experimenting and exploring. To try and be your own boss or to present an idea to the public is a commendable feat. Such an endeavor does come with its own set of obstacles. The most prominent one is the question of funding. One of the biggest challenges that startups can face is obtaining adequate funding to support the initial phase of business. Since most of us do not lay on a pile of cache, the most common course of action is taking a loan. And this can prove to be no easy task. The job falls on us to demonstrate to a lender that we are worth taking a risk on. That goes for both us personally, and our business. Evidence that we can be profitable will be required in order to cover the costs of the loan itself. Unless we are personally, independently wealthy and can cover the expenses internally, loans are pretty much a given. For a long-standing business, this process is just time-consuming but not too difficult. For startups, it is a whole different story, and it can be tricky. Here are the key points every startup should go through when considering taking a business loan.

Let’s go over the types of loans there are available, and there are a few.

1. Microloans

Starting with the smallest ones, there are microloans. These loans typically have an upper limit of $50,000 and are meant for small businesses and startups. They can be used for any business purpose, but there may be specific restrictions imposed by the lender. Most commonly, these are used to purchase supplies, inventory, and equipment, but can also be turned into working capital. As the name suggests, these loans are suitable for businesses that need small amounts to get started.

2. Personal Loans

Next in line are personal loans. These differ in the sense of owning eligibility. Instead of the business profile being under the microscope, the borrower’s eligibility is put under questioning. The credit history of the business will not be considered but the applicant’s will. This is especially useful if the company’s credit score is not the best. What this entails, even if a loan is granted, is that the costs associated with it will be less than favorable. So, if we have a stellar personal credit score, we can apply for a personal loan which we can use to finance our business endeavors. This particularly makes sense if we are just starting up, as the business history cannot be taken into account.

3. Equipment Loans

Equipment loans are pretty self-explanatory. These ones are used to finance or co-finance equipment, which is considered to be a long-term investment. Machinery, commercial vehicles, industrial appliances, and many more fall under this category. These types of loans allow business owners to acquire equipment through more affordable monthly payments. The alternative being, paying the full cost in advance, we can see why this is an appealing prospect.

4. Business credit cards

Business credit cards work exactly like personal ones that we all have. There is a predetermined credit limit, set by the lender. We can use our card up to the said credit limit to pay any and all expenses while doing business. There are fewer requirements to fulfill when applying for a business credit card, compared to other types of loans. Another thing that sets this type of loan apart from others is the special reward programs. These can include but are not limited to points being racked towards: airline miles, cash-backs, and other rewards. There are plenty of companies that deal with these kinds of services, such as OurMoneyMarket. As always, be sure to be well informed about ongoing terms and conditions between different companies. Ultimately, it falls unto you to make the right, calculated decision.

5. Crowdfunding

Moving on to more modern types of gathering resources, crowdfunding is a big buzzword today. A relatively new kind of financing, it is growing in popularity, particularly among startup businesses. Our idea is pitched on a crowdfunding platform, and through it, we can reach investors that are interested. These investors are willing to give financing to our project in order to see it come to fruition. A most usual practice is to offer these backers special value when the product or service is finally complete. It can be a free sample, a discount to the finished product or some other form of added value as a reward and thanks.

6. Friends and family

For us and our business to get started, we can always choose to turn to our closest investor. A friend or a family member will always be there for us to provide help for our ideas. Even so, we should not expect an unconditional loan from them. Be prepared to demonstrate a presentation similar to the one we would present to any of the formerly mentioned lenders. By doing this we will encourage our friendly lenders to place their bets on us and our ideas. Bringing business into the family and other personal relations can be a very tricky business. In order to mitigate that, create a payment schedule through a written agreement. We cannot stress enough that everything should be in writing. Another upside is that both parties can negotiate a deal that will work for both. This is something we cannot do with any of the previous lenders, they set the carefully calculated terms and conditions. A word of warning, there is a reason why bringing business, politics, and sports into the family is being frowned upon. There is always a chance that a deal can go bad, it is just the nature of life. And it has the potential to destroy relationships, but here you can lose much more than your financial investment.

There are other types of loans, but we have covered the ones that are relevant to our situation. Getting a business loan for a new startup idea requires meticulous research and much more. The more in tune we are with the entire industry the higher are the chances that we will get a favorable deal. We have covered all the necessary steps for understanding the types of loans we can pursue. Today, there are more options than ever to start your own part of history. Ultimately, it comes down to you and your presentation of the idea, brand, business, product or service to the lenders. Convince them that it is the best thing since sliced bread. You will be on your way to fulfilling the business plan you imagined.

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