Unfortunately, when it comes to startup loans, there is so much that you must do to prove that you meet the loan requirements and are worth the risk. Typically, if you can explain why you need it, how you plan to use it, and a plan to repay it, you are more likely to qualify. In this blog, we’ll explain what you need to know to get a business startup loan.
6 Steps to Getting a Business Startup Loan
There are 6 basic steps to getting a business loan. They are as follows:
Write a Business Plan
The very first thing you need to do to ensure success is to create a business plan. When you have a plan for attracting and retaining customers, making money, etc, you show lenders how a loan fits your needs. You will also need to show your plans for generating revenue, current working capital, and growth potential. Be as detailed as possible to prove you will be a good borrower.
Itemize Business Costs
This seems simple but requires careful detail. There are a lot of startup costs you must take into consideration. You will have some recurring costs you’ll want to include:
• Employee benefits
• Miscellaneous costs
You will also want to consider one-off costs, including:
• Outside training
• Market research
• Miscellaneous costs
You will want to take a close look at your expenses so you can also find hidden costs because no matter how small, they can add up. You want to be careful how you’re spending money and you want to know how much you need to request when you do request funding.
Prove You Qualify
Now that you’ve explained why you need the money, it’s time to prove that you qualify. A lender will want to see your cash flow, including revenue, working capital, sales history, etc. They will also look at your debt-to-income ratio, how long you have been in business, collateral, and your assets. The more you can show them, the more likely they approve of you.
Decide What Type of Loan You Need
Now that you’ve created a business plan and have proof that you’re a good risk for the lender, it’s time to consider the type of loan you want to apply for. After all, you want to make sure you can meet the terms. The good news is, that you have plenty of options.
If you qualify, a traditional loan through your bank is best because they have the best rates. However, if you’re just getting started, this may not be an option. Other options may also help you build your credit. These are:
• SBA loans
• Cash loans
• Peer-to-peer lending
• Invoice factoring
• Equipment financing
• Lines of credit
• Merchant cash advance
• Real estate loans
Consider other options
If none of the above are an option for you, you might want to consider one of the following options:
• Business credit cards
• Venture capital
• Angel investors
Choose your lender carefully
Make sure that when you’re weighing your various options, you also consider the lender and the terms they are offering. You want to determine if it’s something you can handle because even if your business fails, you often are still required to pay back the funds.
When you need a business loan, finding the best option can be a tedious process- but these steps can help make it easier. When you get the funding you need for your startup, you may be surprised to see just how far you can go. If you need help with business funding, contact Point High Finance. We can help you learn more about your options and then help you with the application process.