You have a brilliant idea you can’t wait to get off the ground. Nothing can stand in your way except one thing–your genius idea needs funding. While funding can be challenging, it doesn’t have to be a roadblock. Instead, keep these steps in mind and consider securing funding through a startup business loan.
Steps Towards a Startup Business Loan
Preparation is the key when it comes to seeking funding for a startup, such as researching the type of loan you need and gathering documentation. Applying for a business loan requires this and a few other essential steps.
#1. Assess Your Funding Needs
First, evaluate how much funding you need and what you’ll use it for, such as purchasing equipment, covering operational expenses, or building inventory. It’s critical you only borrow what you can comfortably manage for monthly payments, especially with the instability starting a new business often brings.
Knowing how much funding you need and what you need it for can also help determine what type of loan will work best. Startups may have access to a variety of business loan options and you may find one type is a better fit. Funding options may include:
- Business lines of credit
- Term loans
- Small Business Administration (SBA) loans
- Commercial real estate loans
- Microloans
- Equipment financing
#2. Create a Solid Business Plan
Lenders may ask for a comprehensive business plan that outlines your company’s goals, target market, competitive analysis, marketing strategies, and financial projections, plus financial statements, projected income, expenses, and cash flow.
#3. Check Your Credit Score
Before submitting an application, it’s also a wise idea to evaluate your personal credit score. Credit scores play a significant role in securing a startup loan and lenders check your personal credit history, plus business credit score (if you’ve established one). If you check your score beforehand, then you can take necessary steps to improve it, such as paying down debt or fixing errors on your credit report.
#4. Shop Around and Compare Lenders
Once you’ve decided which loan works best for you it’s time to look for lenders that specialize in startup business loans. You can apply for loans with a credit union, traditional banks, online lenders, or the Small Business Administration.
It’s essential to compare interest rates, terms, and eligibility requirements to find the best option, but other conditions such as funding times, the application process, and lending fees are also vital to the decision making process.
#5. Gather Documents and Submit Your Application
Next, gather essential documents, including your personal identification, financial statements, tax returns, business plans, legal documents, and any collateral details.
You’ll need to complete the loan application with accurate and detailed information. Make sure you’ve also attached all required documents, since missing paperwork or misinformation can delay the application or decision process. After you submit the information, be prepared to answer the lender’s questions about your business and its financial projections.
Bear in mind that lenders can take time to review your application. Once they do and you have a decision, then make sure you review the loan terms and conditions, use the funds according to the business plan, and start making on-time payments.
Don’t let funding stand in the way of launching your dream business. Talk to the business lending experts at Space Age Credit Union today to find out how we can help get your business off the ground.
