Get Prepared Before You Pursue That Startup Loan For Your New Business

Weigh the risks against your options – and get that loan

Veteran business owners will tell business people who are just starting out that they should fund their businesses with other people’s money, including business loans and credit cards.  Others will tell them that the risk associated with taking out loans and credit lines for a new business is just too high. Startup loans are a complicated matter, especially when no one is sure which direction the economy is going.

The first place new business owners look for startup loans is the bank. These days, it is difficult to get approved for a startup business loan because of the number of businesses that fail – nearly a half million, according to the Small Business Administration.

In order to obtain a startup loan, you must be prepared with an airtight business plan, a great credit history, and experience which that indicates your idea will make money. If you are denied by the bank, you can apply for a startup loan with the Small Business Administration, which the government backs in part. These loans are easier to acquire due to the government backing.

When you are unable to get money from a lender, many entrepreneurs use their own savings, or from family and/or friends. But loans from loved ones come with their own set of problems.

Other options for startup loans include government grants. For example, if your business is one that will help others, you may be eligible for a government grant. In the case of a business that produces a product, small business startups can sign over purchase orders and invoices to individuals and other businesses in exchange for seed money. When the distributor or retailer pays the invoice, the money goes directly back to the lender until the loan is repaid.

Before you pursue a startup loan, you must remember that your personal name and assets are at stake. You could be liable for a loan that requires your personal guarantee, even if you are a corporation. Don’t assume that because an SBA loan is guaranteed by the government, that you are off the hook. The bank will still seize the personal assets you put up at the time of the loan approval, and the SBA will only have to make up the difference.

So don’t take startup loans lightly – but do look at the options and determine what’s best for you. You have a responsibility to your creditors and investors to do everything possible to repay your loan.

This article was written by Angye M. She is the contributing editor for AmericaOneUnsecured.com. They help people get personal loans and small business loans across the United States.