Items that you own are classified as assets and can be used as collateral for your startup loans.
It’s important to include your ongoing expenses for at least the first 6 months of operation until your cashflow gets going. Expenses are areas you have to pay for but don’t get to keep. These cover things like payroll, rent, inventory, marketing, and insurance. Remember to count your business loan repayments among your expenses, too.
The Top Lenders at a Glance
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Alternative Ways to Get Funding for Your Startup
As well as considering taking a business loan from one of the top lenders, there are a few other options for kickstarting your new business. You can usually qualify for business credit cards and business lines of credit much faster than regular loans, but if you have a poor credit rating, you'll face a much higher APR. Microloans and SBA government-backed loans usually carry the most attractive interest rates. On the downside, they are usually only for small amounts and can be difficult to qualify for.
Financially, scoring a grant or capital venture investment leaves you with the lowest amount to repay. You could also turn to crowdfunding, or borrow money from friends and family. Although the latter probably won’t charge you interest, you run the risk of ruining your relationship if the business doesn’t succeed. Finally, some entrepreneurs finance their business by taking out a personal secured or unsecured loan. This is highly ill-advised since it increases your personal financial risk.
How to Apply for a Business Startup Loan
When you apply for a business startup loan, you're likely to have to give a personal guarantee, which requires you to have good personal credit, probably 680 or over. Startup business loans tend to go up to $750,000 with the average APR between 7.9% and 19.9% and repayment terms from a few months to several years. You can get lower rates by using your business equipment as collateral for the loan or by getting an Equipment Financing loan, which lets you register your equipment as collateral and use it while still paying off the loan.
You’ll usually need to submit a business plan and list your assets as well as complete the lender’s application form and undergo a credit check. You'll have to send your most recent business income tax returns if you have any yet, and your personal income tax returns for the last three years if you don't. Your business' legal documents, verifiable details, and business financial statements (if you have any) will be requested, as well.
The 3 Top Lenders for Small Businesses
- 10 different loan types
- No minimum credit score
Lendio is an online small business loan aggregator that brings business owners and lenders together on one platform. The site is free to use, and offers over ten distinct loan programs, for every business need, from business acquisition to funding for commercial real estate, increasing your chances to find both a lender and a specific loan program that suits your needs.
- 24-hour approval
- Excellent customer service
OnDeck offers conventional business loans and lines of credit, allowing flexibility to get the loan you need. Best of all, you can have your money within 24 hours with fast approval and excellent customer service.
- Quick application & approval
- Multiple financing options
Founded in 2005, Rapid Finance advertises its dedication to “entrepreneurialism” and has extended over $2 billion in funding to companies. Operating as an alternative to banks and other traditional lending institutions provides Rapid Finance with the flexibility to work with businesses of all sizes across a broad range of industries.
Startup business loans of one sort or another are a great option to get your new business idea off the ground. Now that you have these insights into the startup loans offered by 5 online lenders, you can make an informed decision and get the startup business loan that’s right for you.