The challenge of where and how to obtain startup financing is something that many early stage companies face. These organizations have an idea of what they want to accomplish and how to move forward, but don’t yet have the money for doing so.
Fortunately, there are many financing options that will allow you to get up and running sooner rather than later. By considering every option, regardless of the perceived pros and cons, you can quickly determine what is best for your startup and which steps should be taken to secure the appropriate amount of money without delay
Startup Business Loan
With a startup business loan, you are able to obtain the financing necessary to achieve your goals without having to tap into your personal cash. Additionally, this allows you to avoid bringing on outside investors who will take equity in your business.
Applying for a startup loan is a simple process, however, it is not one that should be taken lightly. You need to be aware of the pros and cons, as well as the finer details of how the loan will impact your company now and in the future.
Here are three questions to ask before completing a startup business loan application:
- Is this the best financing option or is there another idea that should receive consideration?
- How long will it take to pay back the loan and could this become a problem at some point in the future?
- What is the process of applying for a startup loan?
Once you answer these questions, you can turn your attention to two additional details:
- The lender you are going to do business with
- The type of loan that is best for your startup
With hundreds upon hundreds of options, you must pay close attention to what each lender has to offer. From the amount of the loan to the interest rate to the customer service, don’t sell yourself short by rushing through the process.
Moving on, you have to become familiar with the two primary types of startup business loans:
- Unsecured – no collateral is required
- Secured – collateral is required to receive financing
Both have their advantages, so be patient as you compare the details of each one.
Is Every Startup Loan the Same?
Once you decide between an unsecured and secured startup loan, you may begin to think that every loan from that point on, regardless of the lender, is the same.
This is a common downfall that plagues many startup organizations. There are several differentiating factors including but not limited to:
- Term of the loan
- Interest rate
Note: the terms and conditions of a startup loan can and likely will differ from one lender to the next. By comparing multiple loans, you can determine which one best suits your company in its current state.
Final Questions for the Lender
Before signing on the dotted line, you should ask your lender these questions:
- What is my monthly payment and when is it due? You need to be comfortable with the amount you are paying and when you have to send the money.
- When will be loan be paid in full, if I only make the monthly minimum payment?
- Is there a prepayment penalty? You may not be planning on in it, but you may find yourself in position to payback your loan earlier than expected.
If startup financing is on your mind, don’t let anything stand between you and receiving the money you need to achieve your goals.