Startup Business Loans – A Primer

You have this great business idea that you are convinced will make a fortune for you. You are willing to put in the hard work required to turn your idea into a successful business venture. There is only one catch – the lack of adequate capital on your part. However, you need not despair. There are a few ways out. You can explore all the opportunities explained below to obtain startup business loans and choose the option that suits your individual needs best.

One way of getting sufficient funds to start a business venture is to approach venture capitalists or angel investors. They are people who are willing to risk money on your venture in return for a stake in your new enterprise. The only catch to taking their funds is that you will no longer be able to make decisions without consulting your fellow investors. You lose your independence and a share of your future profits as well.

If you are not comfortable diluting the equity stake in your startup, you can go in for.

These are offered by banks as well as other financial institutions. As banks consider startups risky, the interest rates are high even when they agree to finance your startup. In fact, a banker decides on financing a startup or providing small business loans based on their assessment of the promoter. The loan is more in the nature of a personal loan to you as your startup has yet to build up a credit history and independent financial identity.

As an entrepreneur you need to obtain your finances at the lowest cost to ensure healthy profits. One way of obtaining low-cost loans is to approach a leasing finance institution. Such institutions will release the funds for you to purchase the equipment you need against alien on the equipment.

There are also special loans for startups by members of minority groups and women. In case your startup qualifies for these loans, you need to first procure a certificate that authenticates your claim. Next, you can approach institutions such as the small business administration and ask for credit business loans.

Sometimes a person with a bad credit history needs a startup business loan. Such bad credit startup loans are much more difficult to get. However, it is not impossible. Of course you will pay a higher interest rate as the risk to the lender is greater.

Whichever mode of finance you decide to use, you have to be well prepared to convince the financier to part with their money. Most banks and financiers will ask for three years balance sheets or in the case of a startup projected earnings for the first day and first quarter. You also need to be prepared to present your business plan and answer any questions on it. If you do this well, obtaining startup business loans to finance your business idea should not be a problem.



Source by Sherry Gain

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