One of the biggest challenges for a new small business is getting capital to support its initial growth, according to a 2016 report from the US Federal Reserve. Small businesses are the primary source of employment growth in the United States. But are much more likely than large corporations to face financial problems, such as access to capital. To proudly light your physical or metaphorical “Business Open” sign, you will probably need to access cash as a small business loan.
A loan for creating a company is designed to meet a new company’s financial needs. The income from the initial loans to a small business can go to elements such as working capital, equipment, machinery, supplies, inventory, furniture, and the purchase or construction of real estate.
If you have already started your loan search, you are sure there are infinite small business loan options. Each of them will have its advantages and disadvantages. You may have discovered that the cheapest options are unavailable to entrepreneurs without years of the activity or established credit scores. You can establish and create business credit data for free using Nav.
Here is a list of 7 viable options to obtain a startup business loan.
Where can I get an initial loan for a small business?
1. Start-up Advisors
The creation and growth of a new business face unique challenges. Half of the new companies will not survive for five years. Making the wrong decision (how to obtain the wrong financing) can deceive you in the first years.
That’s why using a startup advisor can make sense. These consultants usually require a premium to connect to the loan.
In addition to financing, they can verify its viability and ensure that all the essential services necessary for a start-up are covered, from creating a business plan to corporate insurance.
2. Equipment Financing
Banks are typically known for their loan opportunities, and if you have good relations with yours. You can turn to them. But for most start-ups, a traditional loan will not be the best option. Banks apply strict loan standards to small businesses generally. Offer only what they offer to established businesses. However, you may be able to work with your bank to obtain funds for the team.
Designed specifically to pay for the purchase of equipment and machinery. Equipment loans have a structure like that of a traditional loan, with monthly repayment terms over a prolonged period. However, the product should only be used to purchase equipment or machinery. The loan rules for financing equipment may be less strict because your equipment will be used as collateral for the loan. In other words, in case of default on your part, the bank has the right to confiscate your equipment to cover the cost of losing money.
3. Professional Business credit cards
Commercial credit cards are an excellent alternative to a small business loan. It can help you get off to a good start by separating personal finances from personal finances and establishing commercial credits. To qualify for a corporate credit card. Issuers generally review their credit scores and combined income (personal and professional). Most commercial credit cards offer magnificent bonuses and registration bonuses.
A good piece of advice would be to choose a card with an initial financing offer of 0%. This allows you to make purchases and maintain a balance of 9, 12, or even 15 months without paying interest. At the same time, you start your own business. A recent Federal Reserve survey on small business credit shows 52% of small businesses. Use commercial credit cards to finance their businesses.
4. Micro Loan SBA
In addition to the SBA 7 (a) and 504 loan programs. The SBA offers small loans, usually provided through community development finance institutions (C.D.F.I.) and non-profit organizations. An SBA microloan of up to $50,000 replenishes working capital or purchases stocks, consumables, machinery, equipment, accessories, and furniture.
5. Micro Lenders
The SBA is not the only microcredit option. Credit organizations are non-profit organizations that offer small businesses the opportunity to receive financing in small portions (less than the U.S. $35,000). When it comes to micro-sponsors, be sure to consider the following two options:
- Action: Up to $10,000 is available; this is an excellent loan for starting a small business if you have worked for less than six months and have an incubator or a home business. Since the required credit rating is 575 or higher, this is also a good option for borrowers who do not have a stellar loan.
- KivaZip: Kiva works on a trust-based community platform. Companies can finance commercial loans from people with charitable interests up to $5,000. These loans have an annual interest rate of 0%. They are offered to entrepreneurs with difficulties who have demonstrated their character, invited their network of creditors, and could not access other financial resources and have activities that have a positive social impact.
6. Financing an account
Financial invoices are a convenient, albeit generally expensive, way to avoid cash flow problems caused by long billing cycles if your customers pay your bills. This is a quick option: you can get financing in just one day, which requires a bit of paperwork.
Fund box is one invoice financing provider that works with companies with only three or more months of activity and three or more months of accounting software data (Quickbooks, Sage, Xerox, FreshBooks, and others).
By design, KivaZip is very similar to a new source of funding called crowdfunding. Popular crowdfunding platforms such as Kick-Starter allow anyone with a vision to raise funds for their project or company.
A loan to start a business through collective funding will require the activist to share his business plans. Goals with a large group of people in the hope that the desired funds will be received as a result of additional donations or endorsements. These campaigns require a lot of marketing effort, but the last reward, if you increase your funds, is a start-up loan and confirmation of your business idea by many potential customers.