Is It Possible for Startups to Get Small Business Loans?
As an entrepreneur, one of the greatest challenges you may encounter is the financing you need to get your business off the ground. Startups are a wonderful opportunity for the economy, but unfortunately they typically present a huge risk to lenders. Whether you are just getting started or you have started down the path of operations, getting funding will be a crucial part of keeping your venture successful. While the applications and criteria can be tough, there are several tips that can provide your small business secure a loan.
- Know what lenders require.
For every loan a lender issues, there is a certain level of risk the financer assumes. With new businesses, the risk level increases, as more than half of startups fail within the first year of operations. As such, the length of time your business has been in operations will be a primary consideration on the application. Additionally, lenders will be looking at your personal or business credit score, as well as any potential assets available to be used as collateral. By carefully selecting a qualified applicant, the lender minimizes the risk assumed with the loan.
- Check into Small Business Administration (SBA) loans.
One of the goals of the SBA is supporting entrepreneurs and infusing the economy with new business and employment opportunities. As such, the SBA partners with certain banks to offer low rate and convenient terms for small businesses who might not be approved through a traditional loan. There is plenty of competition for the SBA loans, but the benefits to small business owners makes this an application worth filling out.
- Know the alternatives to a loan.
While you should remain hopeful about loan potential, it also helps to be realistic. Rather than placing your entire financial future on a loan, become familiar with the others possibilities of financing. Many new business owners will turn to family and friends for financing or personal loans. These should be treated like the other financing ventures of new startups. Keep your friends and family updated with business news and treat them like an official investor. This will preserve your relationships while also driving your business toward success.
If you are an entrepreneur or are considering going into business for yourself, take an inventory of the financial needs you will encounter along the way. Startups require a significant amount of funding, and fortunately, there are many options out there. Research which one will be best for you.