So you are on your way to start a new business venture. You are hopeful, confident and willing to take the plunge of being a new age entrepreneur. You are smart,active and understand the market enough to build your own company from start. But have you ever thought of how would you fund your business?
Lets face it, no one comes to the business for free service. If you are an entrepreneur then you will definitely want to reap in profits but before you do so, you will need working capital to have a perfect flying start to your dream business. To understand better we have asked three questions here:
What is a loan?
Loan is a debt instrument. It entails borrowing a specified amount of money from various financial institutions,lenders or investors in lieu of repayment with interest and time.
What are the various types of loans?
There are various types of loans depending on various requirements of the borrower.
This type of loan entitles for a collateral or asset from the borrower in terms of house,car etc. as as secured deposit against which a loan is provided. If the loan is not repaid back within the agreed terms and conditions, the lender has the right to repossess or sell the collateral to regain its lost money. The interest rate is normally lower compared to other methods of loan options available.
Unsecured loans are those type of loans where the borrower is not secured by its collateral or any other assets. Various banks and other financial institutions provide unsecured loans in cash to the borrower. Needless to say, the interest rates are comparatively high and depends on the type of funding and the business scale that you are looking to set up.
In order to promote small scale business, the government has empowered them to avail various types of SBA (Small Business Administration) Loans. Here the government has its own set of approved lenders through which your small business loans can be qualified. There are various criteria that your small business must fulfill in order to be a part of the various SBA Loan programs. From being rejected for private funding, meeting the guidelines for government defined small business to meeting the qualifications of the government approved lenders, there sure are a long do’s and dont’s for securing a SBA loan.
Which brings us to the final question
How does one secure a business loan?
Lets talk straight here. If you want people, lenders and financial institutions to lend you money for your business then you have to convince them about ROI (Return On Investment). Its simple, if no one sees any return on there investment, no one would lend you money. So the first step is to get a business plan in place.
Business plan will help your potential investors to understand what your business really is from ground up, the opportunity that it has as a real time business and the various growth opportunities it posess in terms of ROI and growth. Business plan not only manages to get your business a strong foundation but also helps others to understand what kind of funding would be best for your business, the scalability it offers in the long term and how it stands out from the clutter of other existing businesses in the market. In short, your business plan is the blueprint of your business.
Understand the requirements
When you are out asking for money, understand how much would you actually need. Sometimes you end up asking more that it is really required and hence you end up in the rejection list. Put yourself in the shoes of the lender and think why and how would you finance your business. This is important as it gives an insight into your business fundamentals in real time.
Core list of lenders and type of lending
You have to pull your socks and firstly understand the type of loans you are looking for. Secured or unsecured. There are various types of loans out there apart from traditional lending pertaining to your varied requirement. Lenders normally look at your credit rating, your cash flow status and collateral you can bring on the table. You have traditional banks, financial institutions, angel investors who can make your work easy. Make a list of genuine options you have, look around and you will find a suitable investor. Never give up.
Founded in 2007 Biz2Credit is a leading credit marketplace connecting small- and medium-sized businesses with lenders, service providers, and complementary business tools. The company matches borrowers to financial institutions based on each business’s unique profile — completed in less than four minutes — in a safe, efficient, price-transparent environment. Biz2Credit’s network consists of 1.6 million users, 1,100+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers.
Having arranged $800 million in funding throughout the U.S., Biz2Credit is widely recognized as the #1 online credit resource for business loans for women, lines of credit, equipment financing, working capital and other funding options. Visit www.biz2credit.com, follow on Twitter @Biz2Credit, and “Like Us” on Facebook at http://www.facebook.com/businessloan.