Finally, another creative form of funding for startups is crowdfunding. Like grants or investments from friends and family, crowdfunding can be a worthwhile alternative when you can’t yet qualify for a more traditional business startup loan—or as a supplement to initial capital.
Find the Lowest Rates on Startup Business Loans
A startup business loan is any type of financing available to businesses with little to no history. A variety of business loans and financing methods are available to startups—including SBA microloans, asset-based loans, business credit cards, and more—although it can be difficult for new small businesses to access funding.
You might access a startup business loan that functions as traditional debt financing—where you receive capital and pay it back over time with interest. Or you might find that equity financing is better suited for your startup—in this case, you’ll receive funding in exchange for shares or stock in your business.
In any case, although business startup loans can work differently based on the specific product and lender, the most important thing is that the loan works for your business. The right financing product for another startup might not necessarily be what’s right for your startup—so you’ll want to make sure that whatever type of startup business loan you choose is one that can meet your unique funding needs, and of course, is one that you can afford.
How much can I borrow?
Depending on the lender and type of financing, you may be able to borrow anywhere from $5,000 to $5 million. The exact amount depends on how long you’ve been in business, your annual revenue and your personal credit score. What you plan on using the funds for and your existing relationship with the lender may also play a role. And some lenders might require collateral for larger amounts.
Because business loans are so common, you can find lenders that offer both online and in-person applications. You can also go through an online business loan connection service to prequalify with multiple lenders at once.
The information you need to provide will vary depending on the the type of business loan you’re applying for and the provider you go with. In general, you might need to have the following documents on hand:
Is a business loan connection service a direct lender?
No, a business loan connection service isn’t a direct lender. Instead, it works with affiliate lenders to help you find financing you might qualify for. After filling out an online form, you’ll receive prequalification offers from lenders that may be able to provide funding. This gives you an idea of what rates and terms you might qualify for before filling out the lender’s full application.
What If You Are Denied a Startup Business Loan?
Luckily, there are a number of steps you can take if you are denied a startup business loan. Start by finding out why your application was denied. This may be a matter of contacting the lender directly or, in the case of an SBA Microloan, reviewing the notice of denial.
Once you understand why your application was rejected, take steps to address those shortcomings. This often involves waiting to borrow until your startup has more established financials, or taking steps to improve your personal credit score by paying down debt and making on-time payments.
Alternatively, consider another type of startup financing with less stringent lending requirements. For example, if you are denied a traditional loan, a business credit card may offer the funds you need with less robust qualifications. If your startup is simply too new to qualify for any kind of conventional financing, consider starting a crowdfunding campaign or working with friends and family to raise the funds you need.
Sources:
https://www.fundera.com/business-loans/startup-business-loans
https://www.finder.com/what-is-a-business-loan
https://www.forbes.com/advisor/business-loans/best-startup-business-loans/
What is a business loan?
The turnaround time for a business loan largely depends on the lender you work with and the type of financing you’re interested in. It can take a bank or credit union one to two weeks to process a business loan application and disburse your funds.
What types of business loans are available?
From term loans to lines of credit to short-term funding, you have a variety of business loan options to choose from. What’s right for you will come down to the type of business you own and what it needs funding for.
- Term loans. Business term loans are typically unsecured and ideal for covering a one-time expense. You receive a lump sum — typically anywhere from $5,000 to $5 million — that you pay back plus interest and fees over five to 25 years.
- SBA loans. The Small Business Administration (SBA) offers several loan programs for business owners who’ve struggled to qualify for financing in the past. These are typically term loans that come with more competitive rates since they’re partially backed by the government. However, the application process can take months to complete.
- Lines of credit. Similar to a credit card, you receive access to a credit line that you can draw from as needed. Depending on the lender, you’ll either be on the hook for fixed installments over a set term or minimum monthly repayments.
- Equipment and vehicle financing. These work like term loans, but they’re secured by the equipment or vehicle your business is purchasing. Rates tend to be lower than with their unsecured counterparts, but you risk losing your asset should you default.
- Short-term business loans.Short-term business loans — typically invoice factoring, invoice financing and merchant cash advances — are ideal for businesses that need emergency funds fast. While they’re typically easier to qualify for, they’re more expensive than the other options on this list. And repayments are usually due daily or weekly over a few months.
How much can I borrow?
Depending on the lender and type of financing, you may be able to borrow anywhere from $5,000 to $5 million. The exact amount depends on how long you’ve been in business, your annual revenue and your personal credit score. What you plan on using the funds for and your existing relationship with the lender may also play a role. And some lenders might require collateral for larger amounts.
Because business loans are so common, you can find lenders that offer both online and in-person applications. You can also go through an online business loan connection service to prequalify with multiple lenders at once.
The information you need to provide will vary depending on the the type of business loan you’re applying for and the provider you go with. In general, you might need to have the following documents on hand:
Is a business loan connection service a direct lender?
No, a business loan connection service isn’t a direct lender. Instead, it works with affiliate lenders to help you find financing you might qualify for. After filling out an online form, you’ll receive prequalification offers from lenders that may be able to provide funding. This gives you an idea of what rates and terms you might qualify for before filling out the lender’s full application.
Sources: