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Startup Business Loan - A primer to obtaining a startup business loan

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Suppose you have an excellent business idea that you feel sure you can use to make a fortune, or at least enough to resign from your current day job and become comfortably self employed for the rest of your life. Presume you are aware of the hard work and effort that would be required to make this idea of yours a successful business endeavor, and you are able and willing to put in that hard work and effort. At this point, only one thing can stop you, and it is a common wall encountered by part time entrepreneurs: funding. Any great idea needs money to get it off the ground, and when most people cannot find that money, they resign themselves to putting their great ideas on shelves and going on with the unpleasant but safer routines of their daily lives. However, there are alternatives, and you don’t need to give up your dream of starting your own business up if you are aware of these alternatives. This article will offer an introduction to the financial assistance you may be able to obtain to pursue your business dreams through use of a startup business loan. There are numerous borrowing opportunities available and it is worth considering your options to find the kind of financial assistance that can best meet your individual goals.

One way people trying to start up their businesses obtain the necessary funds is by making propositions to angel investors and venture capitalists. Venture capitalists and angel investors are private individuals or companies who will loan you the necessary money to start up your business or fund your idea in exchange for a part of whatever enterprise you create, should it succeed. The primary drawback to such situations is that you lose some degree of independence in your business, as you will need to consult the people who have invested in your company whenever you wish to make changes or significant decisions regarding the company. Not only do you lose some independence compared to what you otherwise would have had in a self started enterprise, you must also render a portion of profits you make in the future to your investors.

Many entrepreneurs are not fully comfortable with the idea of handing over stakes and equity of their startup businesses to strangers, and as a result, choose to look toward other sources for financial support. In fact, the most common source of loaned funding for small business enterprises is not from venture capitalists and angel investors, but from banks, credit unions, and other financial institutions. However, banks and similar institutions tend to consider startup businesses risky propositions, due to the large number of startup businesses that fail within a year of their inception. As a result, you will likely have to accept high interest rates if you are fortunate enough to have a bank agree to finance whatever business you have propositioned to them. Furthermore, the decision of whether or not to finance a startup company or to provide a small business loan is primarily based on the bank’s assessment of the borrower. In these respects, a small business startup loan bears many resemblances to a personal loan, as the bank cannot look to the company itself to to determine its credit worthiness as well as its history of repaying debts. Instead, the bank examines your financial history to determine the degree of risk they are taking on, should your business flounder.

If you wish to be a successful entrepreneur, your priority will be to obtain the necessary money to fund your business venture while taking on the lowest possible interest rates. This is because the more money you have to pay back, the more strain it will put upon your business to show early and consistent profits. This can be particularly difficult if you are an individual with a poor credit history. In such cases, while you may receive loans from banks or other financial institutions, you will tend to receive higher interest rate offers than similar small business entrepreneurs with better credit histories. As a result, it is worth trying to improve your credit score and balance any outstanding debts before attempting to secure a loan.

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