Loan Advice for Startup Companies
You have a great idea. You know how you’re going to create your product. You’ve even thought up some awesome marketing strategies. Now, you just need financing. If you want to get your small business idea off the ground, check out these tips for getting a startup loan.
Fix Your Own Credit First
It’s a sad reality, but your personal finances matter when you’re trying to get business funding. The better your own credit score is, the more likely it is that you will receive funding for your startup company. Before applying for a loan or other financing, pay off any debts. Next, check your personal credit reports and fix any errors on it. If you have no credit, apply for a credit card with a small limit. Use it and pay it off immediately each month to raise your score.
Create a Strong Business Plan
Applying for a startup loan often requires a detailed business plan. You may hear it referred to as a “five-year plan” since most lenders want to know what your ideas are and how you intend to run the business for at least that long. Your plan should include research that shows why you think your product is important, how you intend to manufacture and distribute it, and how you want to market it. Be sure to include a list of measurable goals.
Shop Around for Lenders
You’d shop around to make sure you were getting a good deal when buying a new car, and you should do the same thing when applying for a business loan. The loan amounts, interest rates and payback terms vary from lender to lender, so it is important to choose one that works well for your budget and business goals. Always read the fine print before signing a contract with a lender.
Consider Alternative Financing
If you don’t qualify for a loan, or if you hope to keep costs down, consider alternative methods of securing financing. Friends and family may be willing to help if you have a strong plan and are willing to pay them back. Sometimes, small business owners use credit cards to fund their operations. Many others use crowdfunding, which has helped to bring everything from board games to unique motor vehicles to fruition. Finally, if you or your business idea meet certain requirements, the government or a private foundation may supply you with a small business grant.
By creating a solid business plan, fixing your personal credit and shopping around, you are more likely to get the startup loan you need to get your company off the ground. Even if you don’t, remember that you can try alternative funding options. No matter what, don’t give up.