Best Options for Small Business Startup Loans
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 main 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 in the form of a small business loan.
As can be assumed from the title, a loan for the creation of a company is a loan designed to meet the financial needs of a new company. The income from the initial loans to a small business can go to elements such as working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of the real estate.
If you have already started your loan search, you are sure that there are an infinite number of small business loan options. Each of them will have their advantages and disadvantages. You may have discovered that the cheapest options are not available to entrepreneurs without many years of the activity or with established credit scores. You can establish and create business credit data for free using Nav.
To start, 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. In fact, 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, but it might be worth it.
In addition to their financing, they can verify its viability and ensure that all the basic services necessary for a start-up are covered, from the creation of a business plan to corporate insurance, etc.
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2. Equipment financing.
Banks are usually 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 and 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 for the purchase of 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 can be an excellent alternative to a small business loan and 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 personal credit scores and combined income (personal and professional). Most commercial credit cards offer excellent bonuses and registration bonuses.
A piece of good 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 while you start your own business. In a recent Federal Reserve survey on small business credit, 52% of small businesses use commercial credit cards to finance their businesses.
4. Microcredit SBA.
In addition to the SBA 7 (a) and 504 loan programs, the SBA also offers microcredit, which is usually provided through community development finance institutions (CDFI) and non-profit organizations. An SBA microcredit of up to $50,000 can be used to replenish working capital or to purchase stocks or consumables, machinery, or equipment, as well as accessories and furniture.
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 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 been working for less than six months and you 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 community platform based on trust. Companies can finance commercial loans from people with charitable interests up to $5,000. These loans have an annual interest rate of 0% and are offered to entrepreneurs with difficulties who have demonstrated their character, invited their network of creditors, and not they were able to access other financial resources and have activities that have a positive social impact.
6. Financing an account.
If your customers pay your bills, financial invoices are a convenient, albeit generally expensive way to avoid cash flow problems caused by long billing cycles. This is a quick option: you can get financing in just one day, which requires a bit of paperwork.
Fundbox is one of those invoice financing providers that work with companies that have only three or more months of activity and three or more months of accounting software data (Quickbooks, Sage, Xero, 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 who has 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 and 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 for your business.