5 steps for getting a startup business loan
Getting the capital you need as a startup can feel daunting, but you can tackle the process step by step.
1. Determine how much funding you need
Be realistic about how much money you need to get things off the ground. Consider marketing costs, bills, inventory, programs, products and other factors. Add up what you might need and use the total as the starting point for your loan request.
2. Confirm your eligibility
Review the requirements from the lender. Confirm that you meet the criteria before proceeding.
3. Research and compare lenders
Choose three to five lenders and find out if you can get prequalified without a hard credit inquiry. Compare rates and terms and whether they offer what you need. Pay attention to the maximum loan amount and whether the lenders require repayment daily, weekly or monthly.
4. Compile documents and apply
Gather your documentation, including business information, financial statements and personal information. Ask the lender what documentation it needs to move forward and create a checklist. You will receive offers and approvals faster if you have the necessary documentation from the beginning.
5. Review your offers
Once you have your offers, review the terms. Make sure that the contract meets your expectations and that the cost (interest and fees) is reasonable for what you’re getting.
After receiving approval, sign the loan agreement and provide your business bank account information for the transfer of funds.
More: How to Apply for and Get a Business Loan in 7 Steps
What to do if your application is denied
It can be frustrating when your business loan application is denied. Start by requesting more information from the lender. Ask what you could have done differently and find out the steps you need to take next time you apply.
In the meantime, you might need to re-evaluate your funding needs or consider scaling back until your business is on firmer footing. You might also be able to get a different type of loan. Shop around for quotes to see if you qualify for financing from a different lender.
Alternatives to startup business loans
Consider alternatives to startup business loans if your application is declined or if you’re concerned about the cost of borrowing.
- Startup business grants: Some states and cities offer business grants if you’re in a revitalized area or have a plan to bring jobs to the region.
- Business credit card: Small business credit cards can be ideal for recurring expenses.
- Personal loan: If you don’t qualify for a business loan, you might be able to get a personal loan and use it to start your business.
- Crowdfunding: Raise money from your network to fund your startup idea. Depending on the platform, you might have to offer ownership in your business or provide another benefit.
- Friends and family: A loved one might be willing to help you with startup costs. They might provide you with a low-cost loan or even gift you the money you need.
