There are various options to get loans for starting up a business. You can approach a bank or any financial institution, you can consider approaching your friends and family, and also some govt. institutions like Small Business Administration.
Having a killer business idea is not enough to start a business. ‘Finance’ is the key factor that is required to start any kind of business ― a small business unit or a medium size one. Take time to pen down the various sources/options for financing your venture. This would give you a vague idea regarding whom to approach for a loan. You should also consider how and when you plan to repay the same.
There are certain things that you need to take into consideration, while applying for a business start up loan. First and the foremost thing is to check your credit report. If you have a bad credit history, repair your credit first. A bank or a financial institution will lend you money at a higher rate of interest, if your credit rating is poor. Instead of paying a higher rate of interest, it is wise to improve your credit score, and then approach a financial institution.
You can finance your new business by using some amount of money from your savings. Another source is to borrow from close family and friends. If they have faith in your business plan, they would be ready to finance it. Else, you can apply in any of the traditional financial institutions, for instance a local bank or a Credit Union.
Small Business Administration
Small Business Administration or SBA is the single largest organization in the United States to provide assistance to any new venture. SBA assists a new business by granting loan at a reasonable rate of interest. Whatever may be the size of the business, the applicant must contribute at least 10% of the total amount as down payment. The money can be used for various purposes such as to buy machinery, furniture, and could also be used as a working capital. These are long-term programs ranging from 7 to 25 years, and the maximum amount that is lent is around $2 million.
You can obtain a loan, if you are ready to provide a collateral. A collateral is an asset such as your car, home, or property, which a borrower pledges with the bank to raise the capital. A secured loan is easy to acquire at a reasonable rate of interest. However, keep in mind that if you default on the monthly payment, the financial institution or the bank has the right to foreclose your property.
Bad Credit Business Loan
Approaching a bank may not be easy, if you have a blemished credit history. No bank would be willing to give you a loan, if you have a credit score less than 650. A private financial institution usually grants bad credit business loan, but at a higher rate of interest. Before zeroing in on a particular financial institution, check out the online and offline bad credit business loans. This would give you a vague idea regarding the rate of interest offered by various financial institutions.
Business Start Up Loans for Women
Nowadays, women have become career-oriented. Many of them are interested in starting their own ventures. They can avail business start up loans at a reasonable rate of interest through SBA programs. Most banks and Credit Unions lent money under the SBA program. If a woman is interested in it, she should first approach a nearby bank or the local Credit Union to get more information.
Choose the option that is best for you. If you are not sure about how to go about the process of acquiring a loan, do not hesitate to approach a reputed financial adviser. After understanding your business plan, he would be able to guide and also advise you on the type of loan that is best suited for your venture.