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Determining the type of loan you need and the amounts of financing you qualify for is no easy task. Your FICO score may not be at the magic number of 680, which is needed for most loans. There are different types of business loans to assess that may help you get up and running.
Step 1 Apply for a SBA loan
Obtaining business credit is not as simple as delving into a personal savings account. Banks and other lenders are often reluctant to lend money to new or struggling banks and prefer to finance firms with an operating history that span at least five years and can maintain a strong sales record. To circumvent this dilemma you may consider applying to the Small Business Administration’s loan guarantee program, which guarantees loans to first-time and small businesses.
Step 2 Obtain funds through your business
Like many business owners, you may also consider raising capital through ownership of your business. Such action, however, requires a change of business structure to c-corporation and the establishment of a Board of Directors, if your business does is not already incorporated accordingly
Step 3 Let others invest in your business
Another option to obtain business credit include angel investors, however, this alternative requires a solid business plan and at between five to seven years of shared ownership.
Step 4 Seek online help
The final source that many small business owners are seeking is online person networks such as prosper.com or lendingclub.com. This selection is ideal for short-term loans with roughly 10%-15% interest. Such loans are easier to obtain than many secured loans.
Step 5 Fund your start-up
There are three loan types to consider-collateral, secured, and unsecured loans. Collateral is the asset that a lender can confiscate or hold if payment is not forthcoming, like home equity. Secured loans are loans that have a guarantee for payments, such as mortgages. Examples of unsecured loans include a line of credit or credit cards. Unsecured loans are the option many business owners choose to finance business operations.
Pick the alternative business credit funding options carefully as the monies need to be repaid.