When you run a startup, there is nothing more delicate than how to manage your finances. After all, you are working with a very thin budget and venture capital investment is very rare if you are not a technology company. The only other way that you can save yourself from the stress of finding the money that your business needs to keep going is to secure a small business loan for your startup. There are many different types of small business loans through so read on to find out what the best ones for budding startups are.
SBA Startup Loans
SBA loans can be some of the best business loans for startups. The reason why you would want to try applying for an SBA loan is that they can significantly increase your odds of being approved by a partner financial institution because they can take away the biggest risk that these financial institutions fear, the risk that you will not be profitable and you won’t be able to pay back the loans.
An SBA loan is essentially a loan that is guaranteed by the United States of America if it deems your business to be beneficial to the US economy. Because they will be guaranteeing the loan, there is no reason why banks should turn you down.
Business Credit Cards
Even though SBA loans are great, it can be a little difficult to qualify for them in the first place. If you do not qualify for an SBA loan, you can always try applying for a business credit card, which is something that has a much higher approval rate. The great thing about business credit cards is that you will only borrow what you actually need and save yourself from having to pay interest on parts of the principal amount that you did not even spend. There are plenty of business credit card options for you so choose the ones with the most reasonable rates.
Friends and Family
If you cannot get funding for your startup through traditional means, you can always try your friend and family. The good thing about borrowing from your inner circle is that they will not have the same trust issues and high metrics that are often sought out by traditional lenders and banks.
Even though borrowing money from friends and family can be thought of as an informal process, you should not treat it as such. Make it a legitimate pitch for a business and offer to pay them back with interest once your company is cash flow-positive.
Ok, so this may not exactly work out as a loan in most cases but one of the best sources of capital that you can try is from an angel investor. An angel investor is an accredited investor that is recognized by the SEC as someone who makes more than $200,000 or has liquidity greater than $1,000,000.
If you pitch your business idea to an angel investor and he likes it, he could provide you with the funding that you need in two ways. It’s either he gives you funding and then ask for some of the shares of your company, or structures the funds as a loan which you have to pay back with interest much like other loans.
So hopefully you are aware by now that it is not hopeless to get funding even if you have a limited credit history. The best loans are out there if you are willing to do your due diligence and seek them out. Always know your unique selling point and articulate to them the reason why you should be funded even though you cannot prove the profitability of your company yet. They are more willing to listen than you might think!