Where to look for a business loan to push your startup towards success

Where to look for a business loan to push your startup towards success

If you're just starting off, you'll likely need to have some sort of funding in order to build up your company.  Now, you may think you're just going to be a millionaire right off the start, but that's not likely the case because you don't realize how much work goes into a small business, so you might have to apply for some sort of business loan in order to get to the point you wish to be at.

A business loan needs to be paid off, for the most part, some are given with the idea you're going to help the world and create more jobs, but those types of grants are difficult to obtain since there are likely thousands of submissions for the same grant.  You should always apply for grants that don't need to be paid back before getting a loan that does, but you should always have a game plan for obtaining a loan, and below are a few things to think about when it comes to that loan you need.

SBA gives out loans, sort of
The SBA doesn't really give out direct loans, instead, the work with partner lending companies who give out the loans and they agree to abide by the guidelines set forth by the SBA.  It's not super difficult to get a loan through the SBA partner companies, but you need to abide by all the guidelines and have all your documents at the ready for the application process.  Not only does the SBA have great loan rates that are very competitive, they have a vast amount of information that could help you throughout your journey.

A nonprofit microloan
These types of loans usually fall in the range of $750 to $75,000 and you might not have to pay any interest on the loan you get.  Usually, the amount of the loan and the interest on it depends on how much you need.  Some companies will give you $45,000 and not charge you interest, but if you needed $45,000 you might be paying a 5% to 9% interest rate.  So know exactly how much money you need as a loan and it could actually save you money in the long run because you might not have to pay any interest on the loan

Give away some equity in exchange for funding
There are some platforms out there that will give you the amount of funding you're looking for, but they will ask for some equity in exchange for their money.  These types of investors will become your partners, and they likely won't tell you exactly what to do with your company, but you can always tap into them and ask questions.  Now, if they're giving you hundreds of thousands in the beginning, they might become a partner that you need to listen to.

Get a business credit card
One of the easiest ways to obtain funding for your business is to just get a business line of credit.  The amount you get will be determined on how much is actually in your account and how much cash flow you have.  If you have $45 in your account and only $5,000 flowing through it each month, don't expect to get anything higher than a $4,000 line of credit.  On the other hand, if you have $450,000 in your account at all times and there's much more flowing through, you may get a $750,000 line of credit to boost your company.

Rollover Business Startup (ROBS)
If you have enough money in your retirement fund, usually $75,000 or more, you can try a rollover for business startup.  This will allow you to start your company without having any sort of debt attached to it, which can be a great thing to start with, but you'll need a few things to get this going.  You'll need a lawyer and an accountant who can help you through the steps it takes to transfer your retirement funds to a new 401k in your company's name.  This money will then be used to purchase stock in your own company, and then it will be sold, and once it's sold you will have the funds to start your business.

Get a personal loan for your business
If your credit score is above 580, which isn't a difficult thing to do, you can usually qualify for a business loan on your personal credit.  The problem with this type of funding is it's tough to keep your personal and business finances separate and these loans usually cap out at just $60,000 which might not be enough for some people.

Apply for a business grant
Everyone wants to get a grant because it doesn't have to be paid back.  The one thing that comes with a business grant is that you need to agree and follow some stipulations in order to actually get it.  You could get a grant to buy product or equipment to help your company out, but you won't get one from the SBA to simply start up your company, but if you look near the top of this discussion you'll see how you can actually do that

Get a home equity loan
If you don't have a business history or a very good credit score, but you have a home, you can apply for a home equity loan and see if you can acquire enough funding to run a new business you wanted to set up.  These loans are easier to get because you're putting your house up to get the loan, which means you'll likely lose your home if you fail as a business owner.  The bright side of these loans is they have lower interest rates and a quicker approval process so you have your money in a shorter timeframe and you don't have to pay as much back as other conventional loans out there.

Use your own equipment to gain financing
Do you already have a business that uses plenty of equipment?  You can likely get a loan by putting those piece of equipment up just like it were a home equity loan, but with machinery.  A lot of construction companies, lawn care companies, and essentially anything with machinery or vehicles will go this route because it's easier for them.  Depending on your situation, you could likely go through Wells Fargo and get up to $450,000 which needs to be paid back within 6 years.  That means you would need to pay back $5,472 a month for the next 6 years just to break even, and that's not even including the interest rates.

Tap into your friends and family
This isn't the best way to go about getting funding, and that's why you should think of it as a last resort, mainly because if you screw up you won't be able to pay anyone back that you are close with.  You could essentially be ruining friendships or even divorcing your loved one because it caused too much of a strain on your relationship.  On the other hand, if you have a wealthy family or friend who doesn't mind investing in your business idea, hit them up for some cash and be successful!


In conclusion
A lot of businesses need funding, in the beginning, to be successful later on.  It's difficult to bootstrap everything and push your website to the top of your industry, and that's why there are so many ways to acquire funding from lenders.  They know you have a decent business plan in place and you will pay them back when you're successful, if you don't pay them back you could lose your house, but that depends on what type of loan you're actually getting.  Loans tend to come with interest rates, so be sure to shop around, or you can get a grant that usually doesn't have to be paid back but has to be used for specific things like purchasing goods and new equipment for the business and not just starting one up.


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Tommy Carey