Launching a startup is a milestone for an entrepreneur’s career. As the founder, you’re the one who came up with the idea for a mobile app and as a business manager, you’re the upper hand and the person who will drive the business to success. However, you’re aware that the road success isn’t just an easy, with a series of challenges bound to meet you along the way. One of the major hurdles is, as you may have already guessed, is getting the money to fund your venture.
If you’re a technopreneur, you may feel some anxiety before you introduce your product to the market. You want to be able to reach customers, and you want them to be able to relate to and to recognize your product. Before launch, you need to be prepared. You must have a solid product, and you need funds to pay your people, and of course, to market the product. At this stage, a business loan can be a huge help to your startup company.
Big companies take out business loans, anywhere in the world, loans are being made more accessible to small business owners. Find out about loan programs in your city or country as this can help you get the money to fund your startup expenses at the beginning stages.
Business Loan Application: Check or Reject?
Business loans have similarities with personal loans. Lenders may not solely base their decision to your credit ratings, whether it’s positive or negative. But they will surely look at the possibility that you can repay the money they will provide you. Personal loans are unsecured debt, meaning there are no collaterals involved. Business loans, on the other hand, will need a collateral for the money that you will be borrowing.
Although banks and loan companies are made to help people for their financial needs, they don’t want to lose money by taking too much risk. As an owner of a startup, you should know if your company is a jeopardy or not.
Getting an approval for any type of loan is hard especially if your business is only just about to take off. The very thing left for you to do is to work harder so that you’ll get your small business loan approved. If your application has been rejected, you may also ask your families or friends to help you with your financial troubles.
Business Loans for Startups?
Small Business Administration (SBA), a United States government agency, provides loans and grants to entrepreneurs who need financial assistance for their startups. But an article from Entrepreneur.com says that the program doesn’t really provide free money or no-interest loans, so that might prompt you to do more research before signing up for anything.
What really are these programs all about? Let us take a closer look at the terms and conditions of the loan programs of SBA and how these are tailored for startups in need of financial aid:
7(a) Loan Program
This loan program provides the small-business owner up to USD 750,000 from a local 7(a) lender that is partially guaranteed by SBA. The hefty amount of money being borrowed is the reason why it is the most popular among SBA’s program.
The business owner who applies for this type requires 20% or more ownership stake in your business. When the administration becomes the guarantor for the loan, the risk lowers and the lender is more likely provide you with the financing. This loan is normally used for asset purchases, leasehold improvements, and working capital. The drawback is that not all companies and businesses are eligible to this program. Only small companies with less than USD 7 million tangible net worth and income of less than USD 2.5 million are qualified to apply.
504 Loan Program
This program is designed for funding asset purchases like land or equipment. This is basically for manpower-based businesses. This loan is granted by banks or lenders in your area along with a second loan from a certified development company (CDC) that is SB- guaranteed for up to 40% of asset’s value.
The loan provides up to USD 1 million and a 10% contribution from the borrower’s equity. The eligibility of this program is similar to 7(a) loan, however, this is exclusive only for service businesses that need to purchase land or equipment.
7(m) Microloan Program
This is ideal for startups and can provide you with a loan worth up to USD 35,000. It’s not too limited unlike the first two mentioned programs, in terms of conditions and has a wider range of purposes ideal for starting or growing a business. The funds from this program comes directly from SBA and the non-profit community-based mediators are the people who manage the money given to business owners.
The downside for this loan is it requires the borrowers to enroll in technical assistance classes ran by the micro-lender intercessors. This can be helpful for some, but for those who are in need of money as soon as possible, this program can be time-consuming and needs a lot of effort for training.
Face it. When you’re out of financial resources, it can be quite difficult to realize your business goals. Ensure the success of your launch with the right business loan, which you can use to fund your development, operations, and marketing efforts. There may be different ways to get funding, but if you run out of options, getting a can present a great opportunity for you. Get your mobile app out there and start reaping the benefits of your hard work!