5 Loans to Consider When Starting a New Business
When starting a new business, you should have an outline of the capital needed to launch it successfully. This outline should include the office lease or monthly rent, the amount to use to purchase all equipment and supplies, license fee, transport fee, and salaries for your employees.
Once you have the capital estimate for your start-up, you need to raise this amount before your expected launch date. Assuming that you had not saved, you can fund your business by taking a loan. A loan is a quick way to finance your business. It builds your credit, which is essential for future borrowing. When opening a new company, you should consider taking any of the loans below:
Your business can collaborate with a factoring company, which will help finance your business by improving your cash flow. You will be paid immediately you sell your receivables to them at a discount.
This form of financing is a convenient way for companies that have to wait for long to have their invoices fulfilled. When you transfer your invoices, your clients are the ones to pay back the factoring company. Applying for this capital is easy. All you have to do is find an invoice factoring company you can trust, and they will guide you through the process.
Some lenders offer financial assistance to startups in the form of business loans. You will borrow the amount you need and reach an agreement on the time and amount to pay back, plus the interest. When making this agreement, take time to go through the lender’s terms and conditions. Lenders are quite convenient since some do not need collateral.
Moreover, your loan is approved quickly. Their interest rates are lower. Accessing a lender is also quite easy. Taking this loan can save you, but you should watch out for a lender with prepayment penalties.
The best part about taking a personal loan is that it has a fixed interest rate. This loan is different from a business loan because you need a good credit score to get a personal loan. Also, some banks will require collateral and a guarantor for the approval to go through. Other requirements for a personal loan include proof of identity, proof of income as well as your tax returns.
Loan From Friends & Family
You can ask a family member or a friend for a loan to start your business. Let them know that you will pay back with interest once your business starts to profit. Borrowing from a loved one is easy since you will not need collateral or a credit score. The probability of you receiving this money will, however, depends on how much they trust you.
In case you have no source of income, taking a microloan could be a desirable choice. You do not need a credit history or collateral to qualify for this loan. Microfinance lenders fund small business since they do not lend too much money. This loan targets vulnerable groups in the society such as women or retirees.