Start up Loans for Small Businesses

Start up loans for small businesses can be acquired a number of ways, but always require a thorough business plan and loan proposal. The business plan should specifically outline exactly where the money will be spent and why, as well as income projection to ensure the lender you are capable of repayment.

Local lenders typically provide small business loans, but depending on credit history including previous loan repayments, your application may not be approved. A solid personal credit score with a history of on-time payments will give the lender confidence that you will be able to repay the business loan. It is therefore advisable to thoroughly research personal credit history before requesting a loan.

Banks are also more likely to loan money to a business than an individual, so building excellent business credit is preferable over personal credit. If your credit score is lacking and your application is denied, you may request that the lender submit your application to The U.S. Small Business Administration, which can guarantee up to 80% of a small business loan.

The SBA offers a variety of flexible loan guarantee programs for small businesses but have a specific set of criteria that must be met to qualify. In addition to the business plan and solid credit score, you must be able to show you are placing your personal finances at stake with the business startup. This will not only prove to the SBA you are determined and serious about the business, but will undoubtedly work harder to bring in consistent income when your own money is involved. Depending on the amount of capital need required from the borrower at startup, a refinancing of personal property or liquidation of stocks, bonds, etc. is often required.

Several more specific loans exist for small business startup. Development financing loans are available to cover startup costs for major assets like land acquisition, utilities, landscaping, any renovation of existing property or even the construction of new facilities. These loans benefit not only the small business owner but are intended to contribute to the general economic development of a given area.

For Franchise financing, the SBA can offer assistance but most turn to the franchise companies, who generally assist the borrower in finding a suitable bank or outside lender. Depending on the size and resources of the franchise company, many will offer financing themselves.

If a smaller amount of money is required for startup, Micro loans might be a more preferable choice for the small business owner. Micro loans range from $35,000 or less and because of the lesser risk involved are generally easier to obtain. The downside to these comparatively small loans is a correspondingly smaller repayment period, usually less than 6 years, with varying specifics. These Micro loans also require a personal guarantee on behalf of the business owner, i.e. some kind of collateral to put the lender at ease.

Considering the wide variety of small business loans available, a proper assessment of what is specifically required for your personal startup is advisable before requesting any of these small business startup loans.

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