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Start-up business loans

portfolio37194029.jpgFunding a start-up through a bank is a long-shot. Most banks and other lenders will not provide you with the money unless you have invested some money on your own, raised a great deal of money from investors, and if you have valuable collateral to front the loan.

A start-up business loan is a higher risk from other loans. It is similar to obtaining an unsecured personal loan; the bank doesn't want to give you too much money because there is no guarantee that you will re-pay it. If you front your car as collateral for a personal loan, they will consider giving you the loan, but you will still have absurd interest rates that almost defeat the purpose of the loan.

If your personal financial situation is poor, you will be considered a high-risk by almost every lender out there. Since start-ups require a large investment from you, the bank will assess your current and past financial state. Having a low credit rating will significantly hurt your chances as will your re-payment history. Lenders want to see a credit report that has a solid payment history and a borrower that is able to control their spending. If you are too high of a risk, you will need to work harder to obtain the start-up business loan.

Start-up business owners have all the cards stacked against them. Almost all start-ups fail within the first year so banks already consider you a risk just for being a start-up. Second, most business owners do not properly investigate the market and their competitors, leaving the lender with a handful of questions you are unable to answer. Third, several business owners do not have a great deal of money to invest in the start-up, this proves to the lender that you do not believe in the company because you are un-willing to take a risk and invest your own money into it.

If banks will not provide you with a small business start-up loan, you do have some other options. First, start asking for help from your network of contacts. Friends and family members will come into play here because they will either invest individually in your company or they will put you in touch with some people that can.

Angel investors are a great source of financing for a start-up. Angel investors are wealthy members in the community that enjoy investing money into start-ups to return a nice profit. Angel investors can easily hand over $50,000 or more, which can really get your company moving forward. Most small businesses require at least $70,000 to get started, although it really depends on your industry. Angel investors are commonly known as venture capitalists and they are willing to take on risk when everyone else won't.

If you can't find the investors on your own and you don't know how to find angle investors, you can look into some grants that may be available for your start-up. There are numerous types of grants out there; many of them are for specialty businesses so you may have a good shot at finding a grant. The downside to a grant is that they are highly competitive so you will need to provide good information as to why you deserve the grant.

If you are stuck, contact the Small Business Administration (SBA) and ask them for help in finding financing. They will be able to put you in touch with some grants that are available along with some lenders that typically take a risk on businesses in your industry. The SBA can be your best source when you are trying to get started because they exist to help your business become successful.

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