small business startup loan

Startup Small Business Loans

Lack of funds can limit your startup’s growth. It’s time to look into small business startup loan and see how far they can take your business. 

It’s difficult to convince people to invest in your idea, even more so when you’re a startup just beginning to make a name. Most investors won’t take a second look at amateur companies when there is a sea of other promising portfolios. 

But this isn’t an end-all for aspiring entrepreneurs. In fact, several successful brands today are from humble beginnings. They just got creative in acquiring financial support.

Startup funding has always been an issue for small and large businesses alike. There isn’t a one size fits all solution when it comes to financing. You need to assess the personal financial situation and vision of your business. If you’re just starting to get your feet wet, it’s best to look into small business loans.

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What is a small business startup loan?

A business startup loan is a form of financial assistance that is granted to new businesses. Small business loans for startups are easier to obtain and their payback terms are ideal. It can be used as working capital, for the purchase of supplies, or for other business needs.

loan for startups

These are some areas in your business that a loan can be used for:

  • Purchasing of equipment, machinery, supplies, and other resources
  • Payment of commercial mortgage on buildings
  • Financing leasehold improvements
  • Refinance existing debts
  • Business credit built-up

Where to get a small business startup loan

Startup Consultants

To successfully run a business requires foresight. You need to ensure that you have the financial capacity to not only launch your business but to also sustain it long-term. The reality is 90% of startups fail when they’re not built on a firm foundation. 

And a lot of them fail because they lack the right amount of funds to properly launch and maintain their operations. Startup consultants also give some great startup cost reduction tips

Startup consultants are the ones who cover the financial aspect of your business. They charge a premium to connect you with funding sources and checks the viability of your company for acquiring loans. They also make sure you’re covered with all the basic services such as budgeting, business insurance, business plan, and more.

Equipment Financing

Banks have strict standards when it comes to lending. Traditionally, the majority of their loans are granted towards large corporations. Hence, it won’t be easy to gain a large loan approval without a very impressive portfolio.

However, for starting businesses, they may grant equipment financing. This is the type of loan that lets you offer equipment as collateral. The bank can seize your equipment in exchange for lost money. Similar to conventional loans, the payment term of equipment financing is repaid monthly over a long period.

Business Credit Cards

If you have a good personal credit score with a decent amount of income, you may be able to qualify for a business credit card. Business credit cards are a great option to help you get on track. Most business credit cards have the added bonus of great rewards programs and sign-up bonuses.

Choose a card that has a 0% introductory offer. Through this, you can purchase and carry a loan balance of up to 15 months without interest. This builds up revenue without the burden of constantly paying back the money.   

SBA Microloans

The U.S. Small Business Administration (SBA) also offers microloans on top of their other loan programs. Through community development financial institutions (CDFIs) and non-profit organizations, they offer loan amounts of smaller increments to startups. You can avail an amount of up to $50,000 and use it as capital or for equipment purchase.

Microlenders

Non-profit microlenders are also a good option. They typically offer loans of up to $50,000 for startups. The great thing about them is that they provide pro bono consulting and training to help small businesses thrive. 

Keep in mind that because microlenders rely on grants and donations, what they can offer you is limited. The most popular microlenders are Accion and KivaZip.

Crowdfunding

Crowdfunding has become a popular choice for startups looking to raise money. Companies like KickStarter have created a platform for entrepreneurs to present their business and invite people for support. 

This allows the business owner to campaign towards a large group of people, asking for donations and endorsement. It’s a lot more time-consuming and may require you to expend a lot of energy in marketing. However, the rewards are promising. A lot of startups grew their customer base from crowdfunding.   

Personal Funding

Although it’s the least ideal, personal funding is a viable option. Compared to the other alternative funding, using your own money is riskier. You need to make the right calculations to support your operations. 

Keep in mind that you are gambling the possibility of losing your own hard-earned money if the business doesn’t do well. This is why a lot of financial consultants would suggest taking a loan instead. The best way to grow your startup is by establishing your business credit and leveraging all types of funding options.

In the meantime, if you’re considering personal funding, here are your options:

  1. Personal Credit Card – If you weren’t granted a business credit card, your own credit card can function as a temporary source of funds. It may only give you limited funds but it can still kickstart your operations. In fact, Full Scale founder Matt DeCoursey actually started his business with only an American Express card with an $8,000 limit. It’s all just a matter of being creative and working hard for your vision.  
  2. Savings – Using your savings poses even greater risks, but if you’ve already put aside a decent amount then it might just work in your favor. The upside to using your own money is acquiring all the profit when it works out.
  3. Friends and Family – If you have friends or loved ones who are willing to lend you the money, then take the opportunity. They are willing investors who have your best interest at heart. Just be sure to pay them back once you start earning.

How to apply for a small business startup loan

Startup Hustle, A Podcast by Matt Watson and Matt DeCoursey

Now that you know your options for a startup loan, you can start preparing your application. Depending on the type of loan you’re going for, loan companies may ask for specific documents and endorsement from certain bodies.

 Here is a list of common documents required: 

  • Updated business plan
  • Business and personal credit report
  • Business forecast
  • Tax returns and supporting IRS documents
  • Any applicable state licenses and registrations
  • All financial documents that would be deemed relevant (bank statements, credit card sales, unpaid invoices, and accounts receivable)
  • Legal contracts (franchise, incorporation, leasing)
  • Documentation of underserved representation

Alternative Startup Funding 

Want to learn more about small business startup loans and other ways to fund your startup? Establishing your business from scratch can be quite challenging. You need a solid foundation to successfully launch your startup and to keep it running for a long time. This is why a lot of aspiring entrepreneurs turn to experts for advice.

Full Scale’s founders. Matt DeCoursey and Matt Watson, are passionate about helping startups succeed. They’ve founded Full Scale to provide affordable resources for business launch and growth.

Full Scale is an offshore software development company headquartered in Kansas City. We offer a wide range of software development services to help you scale up your business. Contact us today to get started.

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