Have you finally decided to turn your passion or expertise into a viable business? Great! But starting a business takes a certain amount of capital.
From the physical establishment to the equipment, to employers, to marketing and beyond, starting a business can be expensive when you’re trying to get it off the ground and running.
Luckily, there are startup business loans available to help you start your business from the ground up. Read on to find out more about these specialized loan products and how they can help you realize your dreams of starting and operating your very own business.
Avoid these common business loan application mistakes.
Not every business is the same, and as such, there are different startup business loan products available. Here are a few of the options you may want to consider based on your specific type of business.
A business loan that does not require collateral is a form of an unsecured loan. These loans are riskier to lenders, and they tend to come with a higher interest rate to offset this risk.Â
Business loans that require collateral to back up the loan are secured loans. You can put up a valuable asset to collateralize the loan. This includes your accounts receivables, machinery, or any other tangible business asset. Just keep in mind that you could lose that asset if you default on the loan. While secured loans are a risker option, they are easier to qualify for and can land you a lower interest rate.Â
If your company accepts credit card payments from customers, a merchant cash advance can be helpful. With this product, you would be granted a lump sum amount from your lender in exchange for a percentage of future credit card sales. This form of credit is extremely expensive but fast and easy to qualify for. Moreover, your payments will adjust according to your credit card sales, which makes it a good option for those who experience high and low seasons.Â
An equipment loan is a form of a secured loan. An equipment loan actually uses the equipment you buy to run your business as collateral for the loan. This form of credit is easy to qualify for and typically has low rates. However, it’s important to remember that lenders will usually finance up to 80% to 90% of the equipment. Meaning you’ll have to finance the other 10% – 20% or find another lender to lend you the rest. Like a regular business loan, you’ll make monthly payments for a period of time. Once the loan amount is paid in full, you will outright own the equipment.
Somewhat like a credit card, this type of revolving credit allows you to borrow any amount of money up to a certain limit whenever the need arises. Once you pay back the amount you borrowed, you can borrow against the credit line again and again, only paying interest on the amount withdrawn. This is a great option if you need to cover cash flow issues from time to time without having to constantly take out a new loan.
When you take out a startup business loan, you’ll be committed for a certain amount of time. And during that time, you’ll be required to make regular timely payments.
As such, you’ll want to make sure you take out the right loan. To do that, you may want to look at specific factors of business loans, including the following:
Like any other type of loan, a startup business loan has certain requirements that you’ll need to meet in order to qualify. That said, the requirements may vary depending on your credit health and the lender:
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The amount of money needed to start a new business can vary a great deal. To help you determine roughly how much you can expect to spend, here are some steps for calculation:
Consider your startup expenses – Here are some one-time costs you should factor in:
Factor in the assets required – Certain assets will need to be purchased at the forefront, including the following:
Estimate ongoing operational costs – To keep business running smoothly, you’ll need to dish out a certain amount of money per month to cover any one of the following:
Tally up all of these expenses to come with the amount you request from your lender in the form of a startup business loan.
Applying for a startup business loan is a great way to get the financing you need to get your business off the ground. In order to get approved for a loan that best suits your needs, it’s important to come up with a business plan and make sure your finances are in order.
If you’re ready to take out a startup business loan, call Loans Canada and we’ll put you in touch with the right lender. Get in touch with Loans Canada today!
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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