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Small Business Startup Loan
So you have an idea and want to start a business from it but is an idea enough? What happens when you have a wonderful idea but no clue about what your next step should be? This article will cover different ideas for starting a business as well as other things you will need to obtain a business loan.
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What Do I Need to Start a Business?
Almost all businesses start with an idea. This idea can be new or can improve upon something that is already out there. It is not always necessary to start a business from the ground up. There are franchises out there that already have a business plan and model that owners can follow that may lead to success. Once you decide on whether or not you are going to buy a business, start one from scratch, or buy a franchise then you need to determine the location of your business. Some people have started small businesses from their home in the form of a home based business then have moved it to an outside location as the business grew. Once you know what type of business you are going to start and the location of it then you need to obtain small business insurance, some small business accounting software, and some supplies to get started such as office equipment, computer, pens, paper, etc.
The Small Business Plan
The first step is to write up a business plan for your idea. The small business plan is a comprehensive report of what your idea is, why it is needed, and how you plan on getting it out to your defined market. Your business plan should include research for the industry that your idea is in for example if you want to start a flower shop then you would need to show the need for one and how you plan on helping it make a profit. You must keep in mind that if your business is to thrive then you need to cover any problems that may arise. The business plan shows how well you anticipate that you will cover these problems. The plan also shows that you are qualified to start the type of business you are proposing or that you have people to help you in the areas that you lack the abilities necessary. A business plan also shows who your management team will be, the type of company you will have (corporation, sole proprietorship, or partnership), what you plan on doing with the funds, and how you anticipate paying the funds back.
Where Can I Obtain a Loan?
Angel Investors/Venture Capitalists are a source of private funds for business loans. They are normally individuals or private companies. These sources are more likely to loan to companies who are just starting out but they look for opportunities where they can get a higher return on their money therefore they normally won’t lend small amounts. Angel Investors/Venture Capitalists will also require paperwork but since most of their loans go to startup companies, they will require estimated paperwork based upon reasonable expectations of the company and their response time varies the same as a bank.
Commercial Finance Companies also make loans to small businesses. These places are concerned with your ability to repay the loan but may look more toward the collateral that you put up to secure the loan to make their decision. Finance Companies are normally approached when bank financing can’t be obtained. These companies usually have an interest rate that is considerably higher then those of banks but their requirements for obtaining the loan may not be as strict although their response time can be similar to that of banks and Angel Investor/Venture Capitalists.
Other sources for a business loan could be family and friends as well as personal funds such as a loan from a 401k plan or a home equity loan. What better way to show how much you believe in your business than to obtain a loan on the equity you currently have in your home or from your closest friends and family members? The advantages to these types of loans is that your friends and family know you personally and probably already know about your business therefore their response will be almost immediate. The best way to obtain a business loan is to shop around for what fits your needs and requirements.
What do I Need to Obtain a Loan?
The first thing mentioned in this article was a business plan. This is the first step because it will show potential lenders that you know what you’re doing. Good credit is recommended because some lenders will expect the owner of the company or the person applying for the loan to personally guarantee its repayment. Some government small business loans don’t require good credit because the government guarantees the loan if the business idea is a good one.
What Else Should I Know?
It is important that new entrepreneurs know where to turn for information they don’t know. The Internet is a great place to find information on government loans, small business consulting, small business grants that don’t need to be repaid, and countless other things that may be needed in the new business. The Internet is good for comparing insurance prices, supplies costs, and for finding which companies provide a small business phone service in the area of the small business. Research is important to any business venture and it starts with the small business plan.
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