Start Up Business Loans

Starting a new business always costs money and financing a start up business, one of the toughest challenges that a small company owner has to experience. You may have endless possibilities ahead and a solid business plan, but that’s not gonna give you the qualification to acquire a traditional loan. In fact, most financial institutions won’t lend money unless you’ve got a solid credit history. You’ve to prove your years’ old track records too. What you’re gonna do? Are you going to bury all the potentialities that you’ve dreamed of? Naah! Those are the traditional ways, but right now, there are several options to acquire start up business loans in the present time.

At present, several financial providers are there to help start-up business owners. You can acquire your desired loan services from them. But you’ll definitely prefer the best small business loans for startups that require minimal interests, aren’t you?

How to Get A Start Up Loan for Your Business?

You can simply search online and get a bunch of ideas of grants and startup loans. There is a wide range available on google and with adequate information about every scheme. Actually, the financial providers are trying to bring their services at your door. Isn’t that great? You can select one of the schemes that accurately suits your needs. But before you apply, you must show them a strong business plan and cash flow forecast. Hope you’ve got yours!!

How do Start Up Loans Work, and What are their uses?

There is a lot of usability for startup loans. First of all, you can use the money to boost your new business or finance it.

On the other hand, you can also use it for paying some business expenses, namely:

Stock

Workplace rent

Wages

Equipment

Office furniture

Marketing expenses and much more

With the advantage of this loan, you can eliminate future obstacles that can hamper the growth of your business. You can borrow the required amount of money from a business lender by agreeing to repay it, including some interest over a fixed time. Okay, now let’s see how to get started with it.

How to Get Started with A Start Up Loan?

In order to get started, you’ve to first understand the differences between debt and equity. Actually, these are the main two options of startup funding, so it’s crucial to learn about them.

Equity vs. Debt

Equity

Equity Investment is capital trade for the company’s ownership share. In this case, anyone can become an equity investor, your family members, or your friend anyone who is willing to invest some money. But they have to be a venture capitalist or an angel investor mainly.

Debt

Debt financing is the borrowing of a particular amount of money, which will be returned over a certain period of time. This means when you’re borrowing a certain amount of money from the lender, your company will be in debt. But equity financing is entirely opposite to it. Let’s see what other differences these two have! Generally, a lender will evaluate a company’s viability to ensure the chances of repaying the money. This is usually assessed through a company’s business plan and financial statements. But the case isn’t the same for startups and small businesses. As they’re new, they won’t have any financial statements or the required documents.

Still, there are many ways to fund your business. You can use your personal money or savings as an investment in your company. As you’ve got the full ownership of the company, there won’t be any risk. Thus, you’ll be free of debt. Yet, it’s not possible for every business owner. This is where startup loans come in. So, let’s see what types of business loans are available for your startup business.

Bank Loans

A bank loan is a traditional way to finance a business. It’s a popular and more reliable form too. But the problem is that they prefer more established companies over the startups. Banks usually have selective screening criteria, and they perform all their works based on it. Borrowing money from the bank requires lots of time. As we’ve mentioned above, you’ve to show your business plan, financial history, and some essential documents based on their requirements. Bank loans are more secured than any other business loan out there. Due to that, you’ll also have to offer some collateral to them.

Even though they have strict screening criteria, bank loan offers monthly installments and a fixed interest rate. So, you’ll get the maximum security through every business transaction. In spite of all these screening and requirements, some of the banks are still available for providing loans to startups. This type of bank loans is categorized into two forms; these are:

Business Line Credit

A business credit line is a less stringent form of financing. This specific sector has greater benefits for start-up business owners. It allows the owners to borrow the amount of money they need and repay what they have used only. Isn’t that great?

This helps finance operating costs and encourages sluggish cash flows. They are an unsecured business line of credit for the startup, and that’s why there isn’t any need for collateral.

Equipment Loan

An equipment loan is another specialized sector for the startup business, especially for the entrepreneurs. Through this loan, you’ll be able to buy every equipment that can boost your work process. Suppose you need some essential equipment for your business, like coffee machines, production machinery or photocopier, but you don’t have enough money to buy them. As you’ve invested all your savings, there can be a great hassle to buy additional equipment.

In this case, you can use an equipment loan and borrow some money on monthly installments. If you were about to buy all these types of equipment, you might need a huge amount of money to pay for everything, and that can become an obstacle to the growth of your business. But when you’re using a loan, you can pay a little amount from your revenue and avoid the load. In fact, this type of loan can also be categorized as secured loans because the equipment is going to act as collateral. So, if you become unable to pay the loan in the future, they won’t be able to take anything else from your ownership. There won’t be any risk of what you and your business own.

eer to Peer Lending

Well, this an interesting process of lending money. P2P (the short form of Peer-to-peer) avoids the middlemen and contacts directly with the individuals who require a loan. P2P establishes a connection between the individuals and the money lenders, and all these are done online. Thus, your possibilities of gaining a startup loan for your new business will extend to the fullest. Even though if you’re denied by the banks, you can acquire the required amount of money from the online money lenders. However, P2P lending has some disadvantages too. Most of the lenders claim higher interest rates compared to other loans, as there are lesser chances to get back the money from the borrower.

Crowdfunding

It’s actually a trendy option for funding small businesses and entrepreneurs. In the meantime, the concepts of crowdfunding have changed a lot in the UK. These changes and boosts are visible in the equity and investments too. That’s why investment deals have put their focus on the start-up and early-stage investment more than the late-stage investing. Sounds great for you, right?

There two key types of crowdfunding are available in the present time. These are equity crowdfunding and rewards-based crowdfunding. Seedrs, Funding Circle, Crowdcube, and ThinCats are the most popular equity crowdfunding sites nowadays. If you’re looking for equity crowdfunding, you can try’em out. On the other hand, Kickstarter, Crowdfundur.co.uk, Crowdshed, and Indiegogo are categorized as reward-based crowdfunding platforms. In exchange for tangible and intangible benefits, individuals or businesses are allowed to invest in a company or project through these platforms.

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