4. Research and Compare Lenders
Depending on your personal and business qualifications, you may qualify for a startup loan through multiple lenders. To identify the best startup business loans for your needs, consider these factors when comparing lenders:
- Annual percentage rates. In general, business loan APRs start around 9%, but rates may be higher for startup business loans, and they can even be lower for the most qualified applicants. Visit each lender’s website or contact a customer support representative to determine available APRs.
- Fees and other costs. Business lenders often charge origination fees ranging from 3% to 5% of the total loan amount to cover the costs of handling paperwork and verifying application information. Others also charge prepayment penalties for borrowers who pay off their loans early or late payment fees for those who miss their due date. These fees can increase the overall cost of borrowing, and some lenders eliminate them to remain competitive.
- Lender reputation. Even if a lender looks good on paper, take time to read online reviews to evaluate its reputation among current and past borrowers. Likewise, reach out to other members of your business community to learn about others‘ experiences with the financial institution. Consider choosing another lender if your research reveals any red flags, like negative customer support experiences.
5. Submit Your Application
Once you choose a lender, familiarize yourself with its application process and make sure you compiled the correct documentation. Application and underwriting processes tend to vary by lender, so look into whether you can apply online or via telephone-or if you’ll need to visit a branch. After you submit your application, a lender representative may contact you to request additional documentation such as proof of collateral or further financial records.
If you’re rejected for a startup business loan, there are a number of things you can do to fund www.maxloan.org/payday-loans-me/ your new business. Start by contacting the lender directly to find out why your application was rejected. This information can provide insight into changes you can make to improve your credit profile and future approval odds. Then, continue to develop your business‘ finances until it is established enough to qualify for a startup business loan or other financing.
If you don’t have time to improve your credit score or build your business before reapplying for a business loan, consider an alternative form of financing.
Startup Business Loan Alternatives
Startup business loans can help cover the costs of getting a new venture off the ground-or growing it into a larger operation. However, strict qualification requirements can make it difficult to get a traditional business loan. These are some popular startup business loan alternatives.
Business Credit Cards
Business credit cards let business owners access financing on a revolving, as-needed basis. Funds can be used for a wide range of purposes-including everything from buying furniture and other office supplies to larger purchases like equipment-and the application process is more streamlined than for business loans. Because lending decisions are based solely on the borrower’s personal credit score, it’s often easier to qualify for a business card than a loan.
APRs range from around 13% to 25%, but some cards offer introductory 0% APRs that let business owners make interest-free purchases for up to two years. What’s more, cardholders only pay interest on unpaid balances that carry over to the next billing cycle. So, credit cards can help startups cover monthly operating costs while avoiding interest.
Personal Loans for Business
Startup founders who are unable to qualify for a business loan may have better luck applying for a personal loan. Not only is the application process often less rigorous than for business loans, but personal loan qualification requirements are also generally less robust.