Taking out a loan is a very scary step for new business owners because a lot of them are unaware of what they are actually getting into. This can be quite scary for a lot of them because even though they know that they really need the funds to get started, they have a very basic understanding of how interest rates work and how terms can affect their payment strategy.
If that sounds like you and you do not know where to start to get the right loans for your small business, read on and learn some of the key loans for a startup business.
SBA loans are the first loans that you need to turn to. By applying for a loan from a financial institution that is partnered with SBA, you can save yourself from the heartache of being rejected by various banks and financial institutions because of your limited credit history and lack of documents to prove years’ worth of profitability.
The reason why SBA partnered institutions are less likely to reject your application is that these loans are guaranteed by the United States government, practically eliminating any risk that the financial institution may be taking on by funding an unproven company.
If you are a business owner that is part of a minority group or you come from an underserved community, there is probably a much easier way for you to gain funding for your business. There are a lot of non-profit microloans that are set up for business owners like this so that the marketplace will gain more representation from a wider diversity of entrepreneurs.
Qualifying for these loans is not as hard as qualifying for traditional loans because since these institutions are not in it for profit, they are far more understanding of bad credit ratings and poor performance histories.
Personal Business Loans
The biggest advantage that you can expect from personal loans for business is that they are usually bigger than the ones offered by traditional business loans. These loans also typically have more flexible payment terms.
Because of the higher amounts and better terms, however, you can expect that these loans would also be more difficult to qualify for and you will most likely have to provide proof that you can be cash flow positive sooner rather than later.
This one isn’t necessarily a loan but if you are a business owner that is qualified for a grant, that is amazing news because these are probably the best type of financing that you can get. To put it in a very simplistic manner, it is free money. You do not have to pay back any principal or interest on them, you do not have to worry about pitching your idea in a unique way the way you would on crowdsourcing websites, and you do not have to worry about surrendering any equity the way you would for venture capital firms.
Business Credit Cards
Finally, business credit cards are an option if you are a business owner that wants to borrow only what you need. Getting a lump sum loan may be detrimental because you may not need the entire amount but you will still have to pay interest on that amount. Furthermore getting a lump sum of cash from a traditional business loan may compel you to overspend. You do not have to worry about that with a business credit card.
As you can now probably tell, options for financing for the savvy new business owner that is willing to find a way. Go through these steps carefully and make your business dreams a reality.