Loans for a business startup are designed to provide the necessary funds to start a business. Because of the direct nature of helping a business get off the ground, the funds can be used for a number of business related functions such as inventory, supplies, equipment, and the building space itself. Another option for the business owner can be to take advantage of business credit, and loans guaranteed by the SBA. Today, we will go over a few of the more common business loans an owner can take advantage of.
1. Equipment and Machinery Loans
As a business owner, you can begin to grow by obtaining an equipment and machinery loan. These loans allow the owner to purchase necessary equipment and have the same loan requirements as a traditional bank loan. The difference though is that the funds get used only for needed equipment used for the business. This makes the loan more obtainable due to the decrease in restrictions due to the equipment also becoming the collateral in case of default.
As you obtain an equipment and machinery loan, remember that many other items are leasable as well. Some other possible leases could involve furniture or computers.
2. An SBA 7(a) Loan
Traditionally, the SBA only makes guarantees for a business loan obtained through a lender who works with the SBA though its many loan programs.
The SBA allows a variety of loan types including their widely used 7 (a) loan. This loan program permits a business owner to borrow millions of dollars for their business. It is obvious that a guaranteed loan is possible though the SBA because, just in 2020, the majority of the fiscal funds available went to business startups who utilized a 7(a).
Just like any other type of loan through other financial institutions, a business owner needs to qualify the same way as any other loan type. For the 7(a)a personal credit score can be anything, but the FICO SBSS has to be at a minimum of 155 so that credit won’t have to be reviewed manually.
A startup loan under the SBA 7(a) will also mostly go to a business owner who has a significant amount of industry experience or owners who want to extend their business by purchasing another. With terms being in a business owners favor, this loan type is one of the better options available.
3. A Microloan
A microloan from the Small Business Administration is able to provide funds from an Intermediary. These entities usually consist of non-profits who cater to small businesses. With maximum loan amount of $50,000 for a microloan, an average amount is actually near the $15,000 amount. You can expect the microloan to be governed by a 5 year term although it could be less. The borrowed funds can go towards both the capital and any and all supplies the business may need.
4. Microloans from Third parties
Besides a microloan though the SBA, other micro lenders can also provide loans on small amounts for businesses. When you decide to go through a micro lender it is important that you become familiar with their loan programs, what they require and what kind of qualifications you will need.