Startup Business Loans: How to Get Started | PhoneReporters

Startup Business Loans: How to Get Started

Startup business loans make up an important factor for the growth of any business. It can cover up for losses or slacks in your working capital.

Thus, at some point in the life of your business, you will be required to source out for loans to keep up with its daily inventories.

A business loan is not all that bad!

It’s all about knowing the kind of loan that best suits your business, and when to go get one.

In fact, startup business loans make up one of the top 10 financial sources for small business funding as described by professionals.

How to Get Started with Startup Business Loans

Getting started with startup business loans, here are some important questions you should ask yourself:

  1. What is my business type?
  2. Do I qualify for a startup business loan?
  3. When is the right time to apply for a startup business loan?
  4. Where to get startup business loans that suit my business type?

#1: What is My Business Type?

The different types of businesses include:

  • Sole proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation (C corp)
  • S corporation (S corp)
  • B corp (Benefit corporation)
  • Close corporation
  • Nonprofit corporation
  • Cooperative

Each business type is structured differently, and this goes a really long way in determining whether or not your business qualifies for startup funding.

#2: Do I Qualify for a Startup Business Loan?

If you ask me, almost everybody qualifies for a startup business loan, so long as you meet the following minimum requirements:

  • You must meet the minimum age requirement of 18 years and above to even qualify for any kind of funding
  • Your business must be registered officially under any of the above-stated types
  • You (the business owner) must have a good credit score or rating
  • You must have a good personal to credit ratio (credit utilization). This is because lenders may consider turning to your personal finances should in case your business runs out of money
  • Most startup business loans require applicants to have been operating their small business for the last six (6) months before applying
  • You must be able to show proof of annual revenue
  • To make sure that your company can meet the loan settlement requirements, some lenders may look for a total income analysis or stats that is at least 1.25 times greater than your total business expenses.
  • You might be required to provide some form of security or collateral for the loan offer. This could come in the form of a reasonable asset such as business equipment, inventory, or real estate that the lender can come back to should in case you default on your settlement

Now, some personal requirements to qualify for startup business loans may require you to be a citizen of the country from which you are applying for the loan offer, or at least have your business operating in that country.

You will also be required to have a bank account in the country from which you are applying.

Thus, when applying for a startup business loan, you’ll be required to fill in the following set of details:

  • Your full name and contact details
  • The full name of your business, where it is located, and all the necessary contact details that relate to it
  • Your business type (industry) and the time at which you started your business
  • The annual (yearly) revenue of your business. For a startup though, this could come in as the future financial projection or revenue generation model of your business
  • Your personal bank details
  • Your salary (if necessary)
  • How much you are looking to get in business funding
  • How will you be using the startup business loan

After application still, you’ll be required to submit the following set of documents:

  • Bank statements
  • Revenue statements
  • Business plan
  • Business and personal tax returns
  • Balance sheets
  • Personal financial details
  • Personal credit score
  • Collateral or insurance

#3: When is the Right Time to Apply for a Startup Business Loan?

The first thing you should know about a loan is that a loan is not a grant!

It is not money given to you as a gift!

Thus, to ensure that startup business loans are not considered as any of these, lenders structure their different loan offers to suit either any of the following two (2) categories:

  • Secured
  • Unsecured

The best time to apply for startup business loans all depends on the financial needs of your business.

Generally, you may apply for a startup business loan under the following conditions:

  • You need money to scale
  • You need money to cover the purchase of equipment
  • The perfect way to avoid accruing large amounts in government taxes
  • To maintain steady business cash flow

But note, borrowing more money than your startup actually needs can pose a huge threat when pitching to investors.

This is because, when a startup business has an excessive amount of working capital over a long period of time, investors may think that such a business is not managing its assets effectively to suit its everyday business purpose.

Also, you can choose to take up a loan for your business to avoid being taxed by the government. This is because loans are generally considered non-taxable income by the government.

#4: Where to Get Startup Loans that Suit My Business Type?

Just as there are different types of businesses, there are also different types of loans for small businesses. Some of these include:

  • Installment loans
  • Lines of credit
  • Equipment loans
  • Working capital loans
  • Invoice factoring

By meeting up the minimum requirements for funding, the next step involves checking to see what your business really needs or is lacking.

Next, you now need to relate your current business needs to any of the above-stated types of loan offers to see the best loan offer that your business is ripe for.

Each loan offer comes with its various terms and interest, so it would be bad if you take up a loan offer for the wrong purpose and end up paying up more than you actually budgeted for, when rather, you’d have taken the right kind of business loan offer for that specific business need, and settle the payment accordingly.