Starting your own business is a dream that many people have. The opportunity to be your own boss and create a company from the ground up is an exciting proposition for so many, but it can also be overwhelming. Even a good idea for a small business may fail if you don’t choose the right path to take when finding startup cash says Peter Decaprio.
Here are some of the most important tips on how to get financing for your new business:
1) What kinds of loans will I qualify for?
There are several options out there from traditional bank loans, microloans, SBA Loans, crowdfunding opportunities and even peer-to-peer lending platforms that all allow you to get funding for your start-up. It’s important to research what types of small business loans you can apply for, and what types of organizations offer them. You don’t want to waste time filling out applications for loans that you will likely be denied.
2) Create a plan for your business
Before applying for any financing options, it’s important to have a plan in place for how the funds will be used. Even if you are seeking bank loans or microloans, having documented proof that you know exactly what the money is going towards (and why) makes it more likely that you can get what you need when loan shopping. This shows lenders that your small business idea has sound reasoning behind the logistics of its operation. The more prepared you are in this area, the better you’ll fare when looking at all available funding sources.
3) Do your research
You can apply for loans in person at banks, with micro lenders and other organizations. However, applying online is often easier and allows you access to more funding than you might otherwise be able to find locally. This makes it possible to shop around for the best rates on small business loans in all different categories. By doing this research, many people are able to get started with their own business without having to go through an excessive amount of red tape or paperwork explains Peter Decaprio.
4) What exactly is involved in the loan process?
Take some time to really think about what financing entails when considering whether or not it’s right for you. A bank loan typically has stricter qualifications than a microloan would; however, microloans are much harder to come by, especially for newer businesses. There may also be collateral involved in the process which you would not initially expect. Don’t let yourself be caught unawares when signing off on any small business loans, because coming back later to renegotiate terms is definitely not an option.
5) What’s my credit score?
Small business lenders often want to know your personal credit score before they agree to fund your venture with startup capital. The better this number is, the easier it will be for you to get approved for financing options that make sense for your new business venture. This means that if you already have established good standing with a bank where you’ve held multiple accounts in past (and made absolutely sure to not ever default on any of those loans), you are much more likely to be able to secure business financing options through that institution.
6) How do I find outside-the-box small business funding sources?
When all else fails, it never hurts to look at alternative methods of getting startup money for your new venture. Peer-to-peer lending is increasingly popular, as are crowdfunding platforms that help connect hopeful entrepreneurs with potential investors. Even if you have terrible credit or can’t get funding through a traditional bank loan, there are many other ways to get the capital you need for your company. It just takes some digging around and creativity in order to find out what these are says Peter Decaprio.
7) What are My Alternatives?
When you look at the loan process and the requirements necessary to be approved for a small business loan, there are often alternatives that can open up other sources of funding. For example, if collateral is required and you don’t have anything readily accessible to use in this capacity, perhaps a family member or friend would be willing to cosign on the loan with you. Creditors know that having someone else involved will give them a better chance at getting their money back quickly. So many peer-to-peer lenders offer options such as this for borrowers without any assets to use as security.
8) How much do I need?
Typically speaking, most microloans and small business loans include an amount of cash along with some kind of repayment plan. Before committing to any particular bank or institution. Sit down and really think about what you need for your business so that you can budget accordingly. If you can’t afford the monthly repayments on your loan, then financing simply doesn’t make sense.
9) What security do I have?
At this point in time, the value of just about anything is relative to its potential use. As collateral for a small business loan or line of credit. Cars are often used as an example here; if you own one outright (meaning no debt is left on it) and it’s relatively new. Chances are good that the lender will approve using it. As part of your security agreement for any type of finance. It may even be possible to secure a business loan without any collateral at all. But this is something that varies from one lender to another.
10) How long do I have to repay the loan?
Typical small business loans are repaid in installments over a predetermined amount of time. Usually between 1-5 years says Peter Decaprio. The terms agreed upon with your creditors. And clearly laid out in writing and signed by you and anyone else involved in the process. It should include information about how much will be paid every month and when these payments must be made. This is done to ensure that everyone has enough money coming in for regular living expenses; if payment obligations aren’t met, consequences such as wage garnishment may come into play.
So now that you have all the information you need about how to get a small business loan. What are you waiting for? The worst thing for your company’s growth is to let it stagnate due to lack of funds. So doesn’t become part of the statistic! Utilize these tips to find the financing your business needs and use it wisely.