Most entrepreneurs started their businesses using capital, a must have resource to launch products and services. Some of them use their own money to organize a company and purchase equipment and supplies, while others may need a loan or line of credit. It is very difficult finding a bank to approve a loan for a startup with no prior business-personal credit history and an impressive business plan.
Providers of Business Loans
- Banks
- Credit Unions
- Family and Friends
- Microlenders
- Angel Investors
- SBA’s Lender Match Program
Prospective entrepreneurs can check with their local bank where they have checking/saving accounts and built a long-term relationship. Search for banks and credit unions that offer online business loans with low interest rates and apply for multiple loans. Ask a family member or friend for a loan to start the business if there is not enough capital.
Investors and microlenders such as Opportunity Fund or Kiva offer business loans to help small businesses financially. Most of them are non-profit institutions and a better alternative to traditional lending.
SBA is a resourceful website to find lenders offering business loans at low interest rates. They work with new entrepreneurs through their Lender Match Program to find a financial institution. Its Score Program provides loan applicants counseling with essential information and connections with experienced business owners for advice.
Banks, angel investors, and financial institutions require entrepreneurs to meet specific qualification requirements and to submit information, including:
- One to two years running the business.
- Complete and submit a loan application.
- Agree to a business and/or personal hard credit check through credit reporting agencies.
- Submit a professional business plan detailing the company’s goal, financial outlook, executive summary, and marketing strategies.
It is possible that a lender or an investor will supply the funding in the beginning of the startup stage, with a full business plan. Approximately 88 percent of small business owners used their personal credit history and score to receive approval of loans, in 2020. With good credit, the chances are high for loan approvals.
A financial advisor has the expertise and knowledge of starting a company and putting together a plan that fits any business sector. Borrowers can expect a lengthier processing time of their loan applications compared to traditional loans from banks and credit unions.