As an entrepreneur or business owner, finding funding can be problematic but certainly not impossible. If you have solid financial history and can demonstrate the feasibility of your business idea, you can apply for small business loans from several resources such as banks, credit unions, and the government.
Demonstrate your business
When applying for a business loan, the first thing the lender will ask for is your business plan. A strong business plan demonstrates what your expenses will be, how you plan to make money, how you plan to offer your products or services in that market, and where your market is located. Additionally, depending on the size of the loan, the lender may require that you submit accounting records and financial statements. Therefore, make sure that they are accurate, up-to-date and thorough. Strong accounting and financial statements should include cash flow and income, debt-to-income ratio, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), accounts receivable and accounts payable. If you are uncertain about your business’ financial health, consider having an accountant review or prepare these statements to avoid any issues with your loan application.
Look for all available loan programs
There are various financing options for small business owners, so before choosing a loan it is important to understand your businesses’ specific needs as well as the terms and length of the loan. New businesses are often provided with loans from state and local governments. Do a thorough search and see if the county or state government where the business will be located has any resources available for small business owners. For instance, New Jersey has offered multiple loan and loan guarantee opportunities for small businesses, with additional funding options in different sectors such as life sciences, technology, and manufacturing industry.
Banks and credit unions
If you have strong personal finances and a solid business plan, you may find that your bank or credit union would be more than happy to provide your new business with the money it needs. In other cases, they may be willing to lend you money if you have collateral, such as a home or other property. Lenders tend to view collateral-based loans as less risky, so they often have lower interest rates and are easier to get. If you have a good credit rating, you may be eligible for a personal loan. However, with a personal loan, you are responsible for paying back the money even if your new company goes bankrupt.
Launching your startup with startup loans
Use these startup loans wisely, and you will see your business credit improve over time. This can open up better financing opportunities such as SBA loans and the Paycheck Protection Program (PPP), which are known for their lower interest rates.