How to get a startup business loan

How to get a startup business loan
How to get a startup business loan

5 min read
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Startup business loans are often the only way for an entrepreneur or small business owner to turn an idea into profit-making reality. The secret to startup success is that it doesn't happen overnight. It comes down to planning, hard work and, sometimes, being in the right place at the right time.

Finding out how to search for startup business loans is a really important part of weighing up your finances, and discovering what you can and can't afford. Below are the three key stages for any small business owner looking for advice on startup loans.

What are startup business loans?

Small business start up loans are exactly as they sound. They come from a bank, finance company or individual lending you the money to help make your business a success. Anything that you need to boost your productivity and increase your sales falls under the banner of working capital. From office supplies and computers to machinery, specialist equipment and telephone bills; these can all be covered by a business loan.

Finding the finances to support you in the early growth stages of your business is vital for ensuring you survive, and thrive, in the long term. There are a lot of loan companies out there who will be more than happy to part with their cash for an often hefty return. Working out which companies offer the best interest rates or which seem the most trustworthy can often be a bit of a minefield.

It's up to you to decide how much you need and for how long. Often banks will give you sensible rates and won't require funds to be paid back too quickly with extortionate interest. Other online or high street lenders can look like an easy fix but can end up costing huge amounts in accrued interest over a very short space of time.

Try to think outside the box when it comes to figuring out how to get a startup business loan. Ask friends, family and professional contacts first if they might be willing to help you out financially. The interest rates will be much better and you might also be able to make money for them once the business is up and running. You're what they're investing in. Work out your business plan and be honest about how and when you can pay the money back.

Coming up with a variety of different methods of obtaining a loan can be just as exhaustive as learning how to come up with a business idea. First and foremost think about what you already have, and then think about what you need to move forward.

How do I get a startup business loan?

If you're a small business owner, you can apply for startup business loans via a scheme that's run by the government. This gives you an opportunity to take out anything from £500 - £25,000 to help you invest in the early stages of your business. Rather than being a professional loan it's more like a personal loan. The scheme also offer advice and professional support as part of the service.

Business credit cards are another way to get a loan to help your startup get off the ground. They're a good alternative to a specific business loan from a bank but you will need to have a positive credit rating to qualify, the same as with a bank loan.

If you're savvy you can choose a credit card with 0% interest rate for a year then swap to another 0% offer to pay off the original card. You will need to keep on top of repayments at some stage however, this is not a never ending way of making money. Your business does need to succeed in the long term thanks to this initial outlay.

If you need a startup business loan purely for buying equipment and/or machinery, there's a specific loan for just this type of thing. It's often a good rate of interest with monthly payments made over a set period of time before the cost of the equipment is finally paid off.

Loan companies will often put these physical assets up as collateral if you can't pay off the loan. Alternatively, you can lease the equipment rather than getting a loan. A wide variety of office and outdoor equipment can be leased at a much smaller price than taking out a loan.

What if I have a bad credit rating?

Credit scores are the key to getting a startup business loan from a bank or from the government-backed scheme. If you have a bad credit rating it's advisable to explore every avenue before going to a high interest loan company. Crowdfunding, friends, family, investors are all options that are well worth checking out first. You never know who will be ready and willing to invest in you.

A quick recap on startup business loans

Make sure your business plan is a solid proposal before finding out how to get a startup business loan. Also, check your credit rating to make sure you're not in for any nasty surprises. It's always best to be prepared so do your homework and make sure that your ideas are all set to succeed.