How Startups Can Get Small Business Loans
Many startups struggle to get off the ground without adequate funding. Very few businesses can survive without a safety net of working capital and the investment needed for initial expenses. If you’re preparing to launch a small business, learn how to create a successful business by utilizing small business loans.
In order to be a likely candidate for a small business loan, you need to show your lender that you are a reliable small business owner who will pay off your debts. With a large number of small businesses failing every year, you need a detailed plan to show you won’t be another statistic.
Startups typically gain more competitive funding if they can stay in business for two years or more. A detailed financial history of doing business is a key indicator of successful loan applications. If you need funding before your business can operate, there are a number of other factors that lenders can use to determine eligibility.
Your credit score and financial projects can help you become approved for a small business loan. If your credit score isn’t as high as you’d like, detailed financial projects can indicate how you plan on running your business, earn income and pay off your loans.
Of course, many small business owners may not have the best credit score. Previous loans, additional credit card applications, and other activities could diminish your score and make it more difficult to receive a business loan.
Another popular strategy for new businesses is asset-backed loans. Secured lines of credit and hard money loans come with less risk because your business is using your real estate, inventory or equipment as collateral. These types of loans are typically short-term solutions, but they can give you the fast cash you need to stay ahead of your bills.
There are also many ways to build your credit score. Taking out personal credit, paying off debts and providing a large down payment for mortgages can all be ways to improve your credit and show your lender that you understand the risks involved and are serious about paying back your debt.
Startups face a number of hurdles in their first few years. Don’t let a rejected loan application be another hurdle you must face, but build your credit score, create a detailed financial history and financial projection and prepare your startup for a successful launch, first-year, and growth to mid-sized business.