There are a number of loans your business may need to get started when building from the ground up. From startup loans to working capital, it's importnat to know what you need your loan for to accurately determine which will be the best fit for you. Other factors to consider include lender reviews to payments plans; read on to determine the best fit for your business.
Business startup loans provide funds for the purchase of everything required to get the business up and running. Some businesses borrow enough through their start-up loans to pay the business' expenses for the first three-to-six months in operation.
- These loans can be secured loans on equipment and property or unsecured lines of credit for other expenses.
- Compare business start-up loans carefully. Look at interest rates, terms and the amount the lender will provide. Consider unsecured lines of credit if you’re struggling with credit problems.
If you're concenerd about your business credit, check your credit report with one of our pre-approved vendors.
Private Business Loans
When it comes to private lenders, business loans are a substantial part of their investing. This type of lending allows for borrowers to obtain money from investors, companies or others that are not associated with commercial banks. Generally, the process requires a less stringent approval process, with lower credit requirements. Some private lenders are every-day citizens.
- Obtain a business loan from a private lender locally by finding a partner or equity investor in the company.
- Third-party resources to find private investors help businesses build capital by connecting them to investors.
Government Business Loans
Small business loans are available through the federal government. These SBA loans are federally backed loans for a variety of business needs including start-up, real estate purchases, equipment purchases and expenses. These loans typically have lower interest rates and help millions of small businesses to start or remain open.
- Apply for a bank business loan through the Small Business Administration, the division of the federal government that provides small business loans. They offer disaster assistance loans, start-up loans, and equity capital and surety bonds.
- To receive an SBA loan, go through a commercial lender that will help you qualify for government funds.
- Some businesses can qualify for specialized economic development loans through the Economic Development Administration, which is part of the U.S. Department of Commerce.
Investments in commercial business loans often require a well-planned, professional looking business plan. Be sure your business plan is comprehensive and shows how to intent to spend each dollar of your loan; this allows the lender to see how the business will be a profitable, viable entity.
According to Biz2Credit Small Business Lending Index in March 2012, small bank lending approval rate was at 47.6%, alternate lender approval was at 63%, and loans by credit unions had a 57.9% approval rate. Once you have figured out what type of funding your business needs, take all the steps necessary to get your loan approved.