If you read the stories behind some of the largest companies today, you’ll find a common thread. In each case, the founder wanted to change the world. A combination of entrepreneurial spirit and the certainty that something is missing in the world that only you can provide is the engine that drives startup success. Are you ready to change the world? Here are our top-ranking business loans to help get you started.
Starting a business costs money. Without a well-thought-out plan for how you’ll fund your startup and sustain yourself through the early years, your new business is likely to fail. It’s challenging, but you do have options for financing your new career endeavor. The financing option you choose has the potential to affect how your company is structured and managed.
Once you have your vision articulated in a business plan and have calculated how much you need, you can begin your search. Here are the most common ways entrepreneurs fund their startups.
First off, you can self-fund. This is when you use personal resources to launch your business. You can use your personal savings account, investment accounts, 401(k) retirement funds, or borrow from your family and friends. However, it’s a risky approach because you potentially deplete your retirement and savings accounts.
Here are some other viable options:
Before applying for financing, you’ll need to know your initial costs. When calculating, make it specific to your industry. For instance, if you’re launching a brick-and-mortar business, your costs will be different from those of an online business. Make a list of likely expenses such as:
Once you’ve compiled the list of your anticipated expenses, do some research to come up with a realistic estimate of actual costs. Talk to vendors, service providers, look online, or talk to your local Chamber of Commerce. Some expenses are one-time only, while others are ongoing. Once you have the total of your initial and ongoing expenses, you’ll know how much capital you’ll need to launch your business. Moreover, create a report of your anticipated costs for your loan and grant applications.
SBA-backed microloans are perfect for launching your new small business. Loans range in size from $500 to $50,000, with the average being $13,000. These are short-term, low-interest loans that can be used for purchasing supplies, inventory, equipment, furniture, working capital, and so on. SBA microloans are processed by community-based lending partners. Visit the SBA website to find a list of lenders.
Community advantage loans were created by the SBA and US Department of Commerce to support small businesses in disadvantaged communities. If you’re establishing a company in one of the designated communities, you may be eligible to secure a long-term loan through this program.
Online lenders offer a more simplified application process. They’re less stringent than banks and SBA lenders. This is especially appealing when you need a startup business loan.
With these types of loans, you get all the money in a lump sum. Shortly after, you begin repaying the loan in equal installments plus interest until the loan is repaid.
Online loan applications can be completed online. You’ll still need to provide a business plan and financials, but online lenders consider other criteria when reviewing your application.
A business line of credit is a form of revolving credit that you can get from the bank or an online lender. Once you’re approved, a set limit of funding is available for you to draw from. With a line of credit, you take as much money as you need, when you need it. You only pay interest on the amount you withdraw. As you repay the line of credit, the limit is replenished.
Grants are another way to finance your career endeavor in its early stages. The advantage of small business grants is that they’re not loans. You don’t have to repay them. Therefore, you don’t start your company with debt. You’re free to use the revenue to cover other expenses. Many grants are focused on women, minority entrepreneurs, or startups in disadvantaged communities. The best place to search for government grants is by visiting the Grants.gov website.
Few lenders want to risk lending money to entrepreneurs with no track record of success and no revenue. For this reason, many entrepreneurs use their own resources to finance their new business. Although, as this article points out, it’s not a closed door. There are resources for startup loans, as well as other types of financing to help you get your doors open. Your success depends on your ability to sell yourself and your small business concept.
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