Easy ways to get a loan for your business
Sencha Credit

Starting a business may be the best, most exciting, and most fulfilling moment of your life, but significant financial investment is necessary and can be a problem if not found.

Funding can be a significant challenge when starting a business, but there are many ways to get good funding for your business, whether you’re just starting or have been in the market for a while. 

According to a Small Business Administration(SBA) analysis, only 50% of small businesses survive beyond five years. Therefore, Banks are hesitant to give loans to small businesses for startups without a proven track record for fear of future failure. 

While that may sound scary, there is always a funding alternative for new businesses seeking financing to start their businesses. 

Business Funding For New Business

Securing a loan as a new business can be tricky. However, there are several ways to get funding to start your business. They include:

  1. Personal investment: The first investor in your business should be you. This can be cash or resources like an office, a table, or other equipment. When lenders or investors see your investment in your business, it shows them your commitment. 
  1. Love funding: This type of funding is obtained from spouses, family, and friends and will be paid back as your business profit increases. However, this is not the best funding as doing business with Family and friends can be tricky. Family may want to have control of a significant part of your business since their funding is among the start-up funding. It's best to stay away from Love funding or do it with official agreements in place.
  1. Venture Capital: Venture capital is a type of funding from Venture capitalists looking for technology-driven businesses or companies with high growth potential to invest. However, venture capitalists always want an ownership claim in the business. This is called equity. It means that venture capitalists give you money to fund your business, and in exchange, they also get to make decisions that affect the business.
  1. Crowdfunding: This is a type of fundraising where the business asks for a contribution from the public, most times in exchange for equity. Businesses can ask for help from the public. However, there are governmental rules to look into when crowd fundraising.
  1. Grants and subsidies: This is another way to get funds to start your business. Grants are given to businesses by individuals or institutions who like the business idea or have a relationship with the owners.
  1. Business Incubators: This is when bigger businesses allow small businesses to use their premises and facilities. This type of business funding is often streamlined to high-tech sector businesses. 

Business incubation fundraising usually lasts two years before small businesses break out to stand independently. The business supported by the Incubation fund has a high possibility of existence after five years. However, qualifications for this kind of funding can be strict.

  1. Private investors: These are wealthy individuals who invest directly in small firms. Most times, in return for their investment, the investor has a reserved right to supervise the company's management practice. They are often involved in the board of directors to receive an assurance of transparency.
  1. Online Lenders: Online lenders are an excellent option for getting money for your business. They offer loans without needing you to put up collateral and might not require a high credit score. Still, it's wise only to borrow what you can easily repay. This helps your business stay safe from any problems later on. 
  1. SBA loans Small Business Association: This is a unique funding program for small businesses to give them a strong start. These programs are made for businesses that are less than two years old. They offer small loans to new businesses. 

Remember, though, that SBA looks for a good credit score and wants you to pay a down payment of 20-30% of the loan. The good part is that these loans have reasonable interest rates, and you get a long time to pay them back. 

  1. Partnership: Another way to get fundraising for your business is to partner with an already existing business, which often requires you to give out equity.
  1. Shares: Another way to get funding for your new business is to sell parts of the business in shares. When you sell your shares, the shareholder gets some money back and further tax relief if they lose the investment.

Essential Criteria to Improve Your Chances of Loan Approval

Getting a loan can be challenging for new businesses and is always highly competitive.

No matter the method of fundraising you want to adopt, there are some specific criteria to meet. 

They include: 

  • A detailed project description, including type of business, structure, and location. 
  • An explanation of the benefit of your project or business to the economy and the Community at large. 
  • A detailed plan for the business and what it's likely to cost.
  • Details of relevant experience to your new business. 
  • If needed, a proposal containing the significance of your business, approach, innovation, and expertise. 

Having clear goals clearly stated inside your business plan alongside what it would cost and how long you can repay the loan will boost your possibility of getting a loan. 

For many businesses, getting a loan to start up has been seen as a sign of success. However, many new business owners don't realize that after getting the loan, they might feel overwhelmed because they lack experience or a financial history. 

Taking time to research appropriately before any spending will save you a lot of money. Seeking Business professional help will be a great help to the growth of your business.