Loans for Starting a Small business

by Caron_Beesley, Community Moderator

  • Created: September 24, 2012, 7:10 am

Not sure you have enough money to start a business? Before you raid your life savings or remortgage your home, you should know about some possible alternatives.

According to the Kauffmann Foundation, the average cost of starting a new business from scratch comes in at just over $30, 000. Of course, the actual number depends on many factors, such as your industry, business model, and even the state where you’re located. To help you ascertain what it will cost you to start your new business, take a look at this earlier blog: How to Estimate the Cost of Starting a Business from Scratch.

If you determine that your start-up venture is going to cost you somewhere between $500 and $50, 000, and your savings just aren’t enough, you might want to consider a microloan. Why? Many start-ups and new small businesses often find they may not qualify for a traditional small business bank loan. Without a proven track-record of 3-5 years under your belt and/or established business credit, many banks simply won’t take the risk.

What is a Microloan?

So how is a microloan different? Microloans are typically offered to businesses with smaller start-up capital needs (usually less than $50, 000). Unlike traditional bank business loans, funding is typically provided via community-based, nonprofit microfinance institutions.

Anyone can apply for a microloan, although these loans often favor people with low cash reserves or poor credit as well as those in rural or disadvantaged communities. However, many micro-financing institutions also offer specific micro-financing programs for women-owned businesses, environmentally responsible businesses, veterans and specific business-types.

How to Find Microloans

Microloans are available from a variety of institutions dedicated to helping entrepreneurs and start-ups, including:

o Working capital

o Buying inventory or supplies

o Buying furniture or fixtures

o Buying machinery or equipment

Local SBA Offices can provide more information about how to apply. Read more about the SBA Microloan Program and find out who’s lending.

Before You Apply for a Microloan

Don’t overlook the importance of a business plan when it comes to applying for any type of loan. Your lender will expect to see that you’ve done your research, understand your market, have a clear plan for success, and that you can demonstrate how and when you will repay the loan. SBA’s guide can help.

You should also make sure you are aware of your credit score, and once you are up and running, take steps to establish your business credit score as soon as possible. For tips read: 6 Ways to Establish and Maintain a Healthy Credit Score for Your Startup or Small Biz.

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2006-06-26 10:12:27 by ArtChain

More likely to get small business LOANS

The US Small Business Administration (SBA) helps businesses get started by underwriting / insuring bank loans. That makes it easier for you to get a business loan, and you will usually pay lower interest.
You need to develop a business plan an submit ti to the SBA; if approved, they'll provide the paperwork you can take to your bank.
If you're interested in this, check (an organization of retired executives who advise small businesses) and see if there is a SCORE office in your community. SCORE has lots of info on SBA programs.
Also, check your local community colleges to see in they offer courses in writing business plans and starting small businesses.

2007-08-14 08:25:34 by caius788718

Small Business Loans and/or Investor

I'm starting my own computer gaming center and I was wondering does anyone have a link to a good bank for a small business loan? I'm looking for about $85,000 and have little collateral (I rent). Also, does anyone know of a good Angel Investors site? I have my business plan finished and ready to go (looked at by the SCORE people), all I need now is the money.

2005-11-14 15:58:36 by Sparky123

Starting micro-loan business

World poverty can be overcome, not by politics nor through doles to starving people, but through small loans to people with a burning desire to succeed. ACCION and others have established offices in most places of the world and offer micro-loans under certain conditions. One, that they agree to learn the basics of entrepreneurship, savings, re-investing and salesmanship. Two, that they actually repay the first small loan to progress to the next.
If you are serious about starting your own business to achieve self employment, this may be a path to success.
I am fortunate in having achieved a bit of success over the years and have access to micro-lenders, who, with the right business plan in hand, may be willing to finance new business operations

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