Business Loan Tips- How to get a loan for Startups in 5 Simple Ways

Business Loan Tips

Business Loan Tips

A successful business owner is a dream of every start-up!!

Owning a business and letting it grow are two different things.  And, the essential thing in the process of growing that cannot be overlooked is Cash.

It is one of those things that enable the company to move in an accurate and positive way.

No one in this world can lend you a large amount of money, hence, there is a need to look for other ways to have cash. From all the options available, taking a Business loan is the best deal!!

The SME business loan is the most reliable way to finance the growth and its associated expenses.

But, before settling for the business loan, it is of utmost importance that you must know your requirement and the end-use of the loan. Applying for a business loan is not certainly a complicated process, however, more reliable preparation can guarantee more probability of success.

The business loan can be used for different purposes; it can be the purchase of supplies, equipment, inventory, or also, for working capital.

The basis of the SME micro loan will determine the nature of the loan probable and the bank that is ready to assist you.  We hope that you are convinced to buy a business loan for the start-ups.  Although, to get a loan for Startups is not an easy task, there are five easy steps that you need to follow to get that.

Table of Contents

Different Ways to Get the Business Loan for Start-ups

  • Know which loan type you Require
  • Correlate Different Business Lenders
  • Consider microlenders only when:

Know if you Qualify

  • Find out the credit score
  • When you have started the business?
  • Is your business making sufficient money?
  • Will you be able to manage the payments?

Compile the Documents

Apply Now!

Concluding Remarks

Different Ways to Get the Business Loan for Start-ups

1. Know which loan type you Require

First and foremost, it is essential to know why you require external financing and the answer can let you dug into four sections:

  • To begin the business
  • To handle day-to-day expenses (consider inventory and payroll).
  • To improve the business
  • To give a safety net

These reasons will reveal to you what small business loan type you can have. As you are starting up, it is practically not possible to have a loan from the online lender or bank in the company’s initial years.

The lenders need cashflow for supporting the loan repayment, hence, the start-up is not qualified from financing typically.

Even though you will need to depend on the lending money from the family, friends, or using credit cards, personal loans, crowdfunding, or some other start-ups financing types.

The businesses with more than a year of history and revenue can have immense financing options, such as term loans, government-backed loans, invoice factoring, business lines of credit (LOC), etc.

2. Correlate Different Business Lenders

Generally, three types of lenders are there that can finance your start-up business, they are:

  • Banks;
  • online lenders;
  • Non-profit microlenders.

The above-mentioned lenders provide you products, such as Accounts receivable financing, lines of credit and term loans, etc. It is recommended to leverage the online lenders, only when:

  • There is a need for collateral
  • Require more time in business
  • Require funding promptly

The online lenders offer you the loan and the LOC of $1,000 to $5 million approximately. The annual percentage rate on the loan lies between 6% to 99% approximately. The appropriate amount relies on the many factors, such as size and type of the loan, lender, the borrower’s credit history, length of the repayment term, and if the collateral is needed or not.

The APR of these lenders is unusually as low as that of conventional banks, however, the approval rate is more and the financing speed is faster than that of banks; it is up to 12 hours.

It is recommended to leverage the banks, only when:

  • There is a need for collateral
  • You own a good credit
  • Do not require funding promptly

The conventional bank’s options are; lines of credit, commercial mortgages, and term loans, etc. to get the finance or to buy the property. The start-up businesses even have to face some challenges, such as cash reserves or lower sales volume to get approval. Integrate it to the no collateral or bad personal credit (like, a real estate to get the loan) and even, some start-up cannot get anything. Receiving cash takes more than the usual as compared to the other options, generally, two to six months.

3. Consider microlenders only when:

Your company is small and you cannot have a traditional loan. Microlenders are non-profit organizations that usually lend out short-term loans of not more than $50,000. The actual annual interest rate of these loans is usually more as compared to the annual interest rate of bank loans.

The application could need financial statements, comprehensive business plans, and details of loan usage, which will lead to the long process.

And, by definition, the scale of loans is “micro”. However, due to limited operating history, poor personal credit, or lack of collateral, these loans may work well for smaller companies or start-ups that cannot fit in traditional bank loans.

Know if you Qualify

Four issues are there that lets you find out if your company is eligible for the business loan or not. Find them below:

●    Find out the credit score

The credit score can be determined in free from any of the leading credit bureaus, the personal finance websites, or from the credit card issuers.

The banks like to provide the business loan at a lower rate to the borrowers owning a credit score of more than 680. And, if in any case, the credit score is not under the mentioned threshold, then, the chances of lending the SME microloan become less.

●    When you have started the business?

After knowing the credit score, the lender prefers to know when the company has started. It is mandatory that your business has to be one year old to get the online business loan or two years old to get the loan from the banks.

●    Is your business making sufficient money?

Several online lenders require less annual revenue, which can range from $50,000 to $250,000. Determine the revenue and know the less the lender needs before applying for the loan.

●    Will you be able to manage the payments?

Also, it is vital to look after the business finances, particularly the cash flow. Then, know if you can repay the loan amount every month. Few online lenders need the daily repayments to guarantee you can factor that within.

Compile the Documents

Certainly, before applying for the business loan, you have to assure that every single document is there. Gather the files and make them easily accessible to streamline the overall process.

According to the SME business loan lender, you have to submit the sequence of the below documents:

  • Business plan
  • Business financial statements
  • Business and personal tax returns
  • Business and personal bank statements
  • Business legal documents (such as commercial lease, articles of incorporation, and franchise agreement).

Apply Now!

The last step here is to decide which type of lender is best for you, and then watch at two or three related options according to the annual interest rate and loan term.

APR is the gold standard for analyzing loans.  It is the best way to check the entire borrowing costs of the year as it covers every loan expense except interest rates.

Among the loans, you are eligible for, prefer the loan with a less annual interest rate (the loan should be processed for the longest possible period), and then, apply according to the agreed documents.

Consider that the credit bureaus do not prefer to distinguish personal and business inquiries. If you use personal credit history, your credit score may be affected when implementing a  business loan, that is why it is best to choose the best.

Concluding Remarks.

The most reliable way to obtain a business loan is to spend time on basic work before applying and, then, follow the mentioned steps.  Also, you can approach the best moneylender Singapore; they basically hold the years of experience, trustworthiness, and professional staff to give you the best deal.

We hope that you have liked this article. In case, you have some queries or suggestions then, let us know in the comment section below.

Thanks for reading!

About Charles Yee 1 Article
I’m Charles Yee, working as a Director and content writer at Cash Direct Pte Ltd, a well known Finance Company offering personal loans, wedding loans, study loans, home loans, car loans, and other financial schemes

1 Comment

  1. Thanks for the informative article, Its good to see that lot of NBFC’s like Lendingkart offers business loan for startup’s offering quick and online application process.

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