- November 17, 2018
- Posted by: Asheesh Sinha
- Category: Others
Starting a business comes with many joys and challenges. You are exuberant as a first-time business owner to have a company that you can call your own. There are, however, many uphill battles that you must fight to establish yourself as an entrepreneur.
For many, the dream of self-employment stops at the door of finance. You, as a new small business owner, may not have the capital to take your company where it needs to go. Some financial institutions are not willing to take a chance on new business owners for fear of the company closing its doors within the first few years of operations and leaving its debt unpaid. Still, there is hope for startup companies in need of capital. Here are some options regarding loans that you can consider.
Traditional Business Loans
Some banks gladly grant loans to individuals with a history of personal responsibility in the way of finances. You may increase your chances of receiving approval for a traditional loan if you have individual checking and savings accounts with the financial institution through which you hope to receive an advance. Your chances of approval further increase if your personal accounts are in good standing.
A traditional loan requires that you have a business plan that makes sense. You may find yourself denied for an advance if you are unable to show how your proposal is an idea that can turn a profit. Having a low credit score also impacts the likelihood of you being approved for a traditional business loan. It is better to go the way of a standard advance through your financial institution of choice when your company has at least two years of profit on the books.
Some entrepreneurs have great ideas, but some people see their endeavors as nothing more than a hobby. You may want to consider financing your company via a personal loan if your proposal is not enough to convince a lender to grant you a business advance. Credit and income are the driving forces behind personal loan approvals. You should make sure that both of these elements are high before trying for a personal loan.
One benefit of financing your business with a personal loan is the ability to use the income from your company as evidence of your ability to repay the loan. Lenders often show little interest in other factors as long as an applicant can prove that he earns more than enough to pay back the advance with interest. You should be prepared to show at least five years of steady income as a self-employed individual when trying to obtain a personal loan to finance your business.
Those who are denied equipment financing through traditional banks should consider applying for a title loan. There are many perks associated with a title loan, but one of the biggest advantages is the quick approval process. The application is simple and largely dependent on what you already own. You may find yourself approved for financing to upgrade your fleet of vehicles within a matter of days, not weeks, when you go the way of a title advance.
Business Credit Cards
Your company may not be established enough to secure a conventional loan. A business credit card may be the better way to go. The qualifications to obtain business credit cards are not as stringent as the requirements for a traditional business loan. In some cases, a lender may be willing to use your personal good credit as a means to qualify you for a business revolving line.
You should consider using a revolving line of credit wisely when financing your company. Interest rates for credit cards tend to be higher than conventional loans. Also, the probability of you falling into the dreaded debt trap of spending more than your company brings in is higher when you use credit cards to fund your business. Still, a business card is an excellent source of capital when emergencies arise and you need funding quickly.
Did you know that your bank may be willing to finance the materials needed to make your company thrive? Equipment financing may be an ideal option for entrepreneurs who need funds to purchase new items or upgrade old machines. An advance such as this may cover everything from computers to construction tools, depending on the nature of your company. You can only use the money that comes from equipment financing for material. The benefit of such a loan, however, is the repayment term, which is similar to conventional advances.
Your business is one of your greatest treasures. You’ll do well to handle it with care by understanding the many finance options available to new entrepreneurs. This guide will give you the base knowledge that you need to make the best decision to take your business to the next level!