How to Qualify for a Business Startup Loan
Starting a new business can be an exciting endeavor for an entrepreneur. However, starting a company often requires a significant amount of capital. The following guide provides simple tips and tricks on how to qualify for a business startup loan. When applying for a business startup loan, it's important to understand the differences between private and government loans. In some cases, federal or state government will provide loans through the Small Business Administration (SBA) to entrepreneurs. However, these loans require extensive documentation. The government may also offer grants for businesses in specific industries in which there is an unmet need, but this can vary significantly based on a wide variety of circumstances. When applying for a federal or state loan, you'll need to provide a lot of personal information to loan officers. This may include several years of tax returns, bank statements, a business plan, a listing of all current assets / liabilities, a statement of financial solvency, and more. These documents are used to ensure that loans won't be used for fraudulent purposes. It also helps the government ensure that any loans it makes will eventually be paid back by the borrower. Private business startup loans may have lower requirements, but they can subject to higher interest rates and fees than a government loan. While government small business loans may be available at interest rates of less than five percent, private business startup loans can have interest rates as high as 25 percent. If a business loan is only available at a high interest rate, a personal loan may also be a good idea. However, it's important to be careful when using a personal loan for a business startup. If the startup fails, you may end up on the hook for a significant amount of money. To reduce the odds of this happening, it's a good idea to avoid utilizing too much credit that originates from a
personal account or other source. Finally, angel investing and venture capitalist investing may be a good idea for some startups. Angel investing is not the same as a traditional loan. It's more like a government grant. Angel investors usually don't ask for repayment of a loan. They also don't ask for partial ownership of a company. However, angel investors are usually only interested in companies that they feel have a lot of potential. If a startup is operating in a traditional field, it can be difficult to get the attention of angel investors.
Phil Shawe is the Co-CEO of TransPerfect.