Where Do I Begin if I Need a Business Loan for a Startup?
You’ve got a great idea for a business that you want to bring to life. Now you just need to figure out how to get funding. So there are different business loans and some funding options you can choose from to help you start your business.
1. Small Business Administration (SBA) Loans
The Small Business Administration (SBA) has various loans that can help business owners pay for working capital or fixed assets:
- 7(a) loans: The SBA’s loan program, which includes financial help for businesses with special requirements.
- 504 loans: These loans have longer terms and a fixed rate. They’re good for purchasing or repairing real estate, equipment, or other assets.
- Microloans: The SBA’s smallest loan program, providing $50,000 or less to help businesses start or grow.
There are guidelines for loan eligibility that you’ll have to meet for certain types of funding. This includes:
- Being a for-profit business
- Doing business in the U.S.
- Business owners having equity through invested time or money
- Exhausted other financing options
2. Other Microlenders.
Microlender loans don’t come from a bank or credit union. Microlenders are typically nonprofit organizations or individuals. Because you don’t have to go through a typical financial institution, you can get a loan through a microlender if you have a newer credit history or a lower credit score.
3. Friends and Family.
This can be a good option if you don’t want to go to a bank to apply for a loan. Some business owners will use their personal finances to fund their startups. If that’s not enough, they will often ask friends and family for additional capital. Depending on the situation, this type of funding can be a gift or through personal loans.
4. Business Credit Cards.
Business credit cards can be an option if you need cash fast for everyday operations. It also lets you build credit, which can help you secure a business loan from a bank. Like a personal credit card, it’s important you make payments on time or you may find yourself paying interest and fees.
Crowdfunding involves raising capital from a large amount of people. Online platforms allow you to create a campaign where people can contribute small amounts of money. Crowdfunding can raise enough money to help cover working capital costs and other expenses.
Federal and private organizations may offer small business grants that you can use for startup costs. Be aware that some grants may only be available for certain types of businesses.
What Do You Need to Get a Startup Business Loan?
Requirements for a startup business loan vary depending on the lender. There are certain documents you may need, such as:
A business plan
Employer identification number (EIN)
Personal credit reports and scores
Having the necessary documents can save you time when trying to secure startup funds and loans.
How Much Can I Get for a Startup Business Loan?
Startup business loan amounts vary and depend on the type of loan you get. Most 7(a) loans have a maximum amount of $5 million. 4 SBA Express loans have a maximum amount of $350,000.5 Be aware that the more funding you request, the more information your lender may require.
After you know how much business financing you need, it’s a good idea to gather important business documents that a lender may need. This means you’ll want to review your business plan and make sure it’s realistic and accurate.In addition, you’ll want to give your startup the best opportunity for success. So, don’t forget to:
Protect your startup with small business insurance.
Find a mentor to help you run your business.
Create a marketing strategy.