How to Find Start Up Business Loans

Start up business loans can be more difficult to secure than expansion loans. Since your business is not yet profitable, a lender will be very wary of extending you funds to get off the ground. You will need to show you are both credit worthy and capable of earning money in order to secure the loans. This involves a two part application process: first, establish yourself as a good borrower; second, establish your business as a good investment.

Qualities of a Good Borrower

As the primary applicant for a business loan, you will need to exhibit qualities of a good borrower in order to convince a lender to extend your debt. Use your application and interview process to show you possess these qualities:

  • You have a good credit history. This includes a record of repaying large debts on time and any applicable business debt experience.
  • You have capital to add to the initial cost of starting the business. Most lenders will require you supply at least 20 percent capital to the venture yourself. If you do not have this kind of cash, consider taking on investors who do.
  • You have assets to cover short-term hurdles in the business cycle. All businesses will experience ups and downs. An owner who has resources to get through the slow cycles is a more desirable borrower because they can cover the bills when the business is slow.

Qualities of a Profitable Business Model

Even the most responsible borrower will be unable to repay a business loan if the business is not profitable. Show the lender your business has a good chance of returning the investment by demonstrating these qualities:

  • You have done research to determine there is a market need for your product or service. Even the best business ideas will fall short without a demonstrated market need. Compile information on your demographic, the need for your service, and any competitors you may face. Show you have the ability to perform the service better than existing competitors.
  • You, or your board, have experience in the area of business you wish to go into, and this makes you suited to run the company. If you are opening a bakery, show you have worked in the hospitality industry or have success with a home baking business. If you are starting a hair salon, demonstrate your ability to manage a retail front or your certificates as a beautician.
  • Your business plan demonstrates a predictable cost and profit analysis. You must show you understand the costs of going into the business you wish to pursue. For example, you should research rent for a retail space, raw material costs for a restaurant or costs to obtain city permits. You should know how you will price your product before you apply for a loan. This shows a lender you have already anticipated your cash inflows and outflows and therefore know precisely how much cash you need to be successful.
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