Starting a new business loans is exciting! But expensive! Start up business loans are considered high risk. Essential many banks stay away from them. However, you don't want to start a business off under funded because you are almost guaranteed to be forced out of business. Having start up business financing is difficult and you ought to make sure that you have enough funding to get thru at LEAST 6th months to a year if your business made $0 profits.
That means having the working capital, staffing budget and equipment financing proved helpful out well in advance of starting your doors.
There are many types of start up business loans. Here are the most common ways people finance their new business.
The SBA - the SBA program is where most new business start looking for financing. There are several SBA programs but the primary 3 are the SBA 7A, SBA 504 and SBA 8a programs.
Additional apply for the SBA 7a program. Is actually the most common program. The SBA 504 program can be used for large purchases like land, heavy equipment etc. The SBA 8a program is for minority run businesses and is very similar to the SBA 7a.
The SBA program is a bank guarantee. The SBA doesn't really concern loans. They work with banks and financial institutions across the country. The guarantee makes sure the bank gets back up to 70% of the money they put out if you default. For this reason most banks will ask for that you put down 30% as security. Hence making a SBA backed loan to a new business relatively "safe".
To get approved for a SBA loan you should have good to excellent credit, be a homeowner, and also have about 30% of the total amount you need available to use as a down payment.
When I used to work with a SBA loan lender, we would advise our new business owners to reserve the money they get from the SBA to use as working capital. We might get them the equipment they need by using an equipment rent. Why? Working capital loans are almost non-existent for a new business. You don't want to place your entire capital in equipment. You may need it later on to protect salaries.
What is an equipment lease?
A start up business equipment lease is relatively easy to get approved for. Unlike a SBA loan. You don't' have to have good credit. The down payment is generally 2 payments down. And they like for you to have experience in the industry.
How to get a start up business loan
You can start with sites like Startupbusinessloans. com they work with a lot of different banks and are experts in helping start up businesses.
You can also go to your local bank and before you fill out any loan paperwork question them if they finance set up businesses. Not really everyone does and you don't want to have them pulling your credit if they won't be able to finance you.
A whole lot of start ups also use personal credit cards and personal loans to get financing. Since your business has no credit, you should have to be able to provide a personal guarantee anyhow for any form of financing. The rates provided to personal loans and personal charge cards are lower then what is given to begin up businesses IF and ONLY IN THE EVENT you have good credit. If you have bad personal credit the rates will be high and you may well not get approved.
