Small business loans for startups- What are my options?

  • small business loans for startups

Setting up a successful business takes more than just an excellent idea, it takes backing. Backing can be defined in millions of different ways, but here are two key forms of backing.

Customer Backing

No business in the world could survive without demand for the product or service being offered. If your idea doesn’t sell then you won’t earn and the business won’t survive.
No business in the world could survive without demand for the product or service being offered. If your idea doesn’t sell then you won’t earn and the business won’t survive.

Financial Backing

While you need the consumer to back your idea, this has to be financed in some kind of way. You might have a $1million idea, but if you don’t have $10k to get it off the ground then you’re going nowhere. Similarly, you might have 1 million customers wanting your product, but if you can’t finance the supply of these 1 million items then your business is over.
While you need the consumer to back your idea, this has to be financed in some kind of way. You might have a $1million idea, but if you don’t have $10k to get it off the ground then you’re going nowhere. Similarly, you might have 1 million customers wanting your product, but if you can’t finance the supply of these 1 million items then your business is over.

So, with this in mind, Financial Backing is crucial to any business, and more specifically, to any start-up. Start-ups are vulnerable by nature, defined as:

“A new, fast-growing business that offers a line of services or products. Start-ups could be sole traders, organisations or partnerships that work on a certain business model. Additionally, a start-up is defined by change and development. Technically speaking, a start-up isn’t a self-standing business, per say. In fact, it is in the process of becoming a successful business.”

The final line is the key phrase here because there is a fine line between an idea growing into a successful business or a failure.

How to build a successful startup

So what about small business loans for startups?

We have established the importance of financial backing within a business startup, which brings us to the topic of business loans. So why get one?

“Business loans are scary and just place you in heaps of debt”

INCORRECT. Business loans are fantastic opportunities to get a small business off the ground. Pay your loans on time and you will never have any issues. A small business loan can propel your business from nothing to a big deal in very little time. The reason people get into difficulties over small business loans is because they are not organised with their repayments, they take out more than they need, or their idea never had legs in the first place.

There are plenty of small business loans for startups to choose from, and it’s up to you to scrutinize their features and pick accordingly. Read on, or contact us and let us advise you.

What Business Loans Are Available For Start-ups?

Typically, start-ups have minimal internal funds at their disposal. As a result, these companies have to choose between two primary types of financing, namely equity or business loans. Equity financing refers to getting funds from investors, or a public float, in exchange for a share of the company. Meanwhile, debt financing implies borrowing the money from a lender or bank.

Loans from Traditional Lenders

If you want to apply for business loans at a typical bank, you should know that the application process is time-consuming. Normally, applying for a loan will require providing a comprehensive business plan. Additionally, another condition might be adding a security, as a back-up if you default on the loan.

Loans from Alternative or Online Lenders

Recently, the number of online and alternative lenders has been on the growth. This is a good thing for the obvious reason, namely because these lenders offer more flexible terms. Concurrently, in some instances, you can get hold of the money in 24 hours time, which can be rather convenient in the case of emergencies. Nevertheless, the drawback is that, considering the growing number of such lenders, there are plenty of scammers out there. That is why you should be careful about selecting your lender. For example, if you choose ALC Commercial, you can be 100 percent certain that you will be assisted by reliable professionals, and that our offer for business loans is diverse and convenient.

Credit Cards

If you need access to an ongoing line of credit, or you need a considerably small amount of money, a credit card could be a viable alternative. You can compare which credit cards will give you the best rates and fee’s online. Websites such as Compare the market and Finder can be fast and useful online tools.

Types of Loans

Unsecured Business Loans

If you’re applying for an unsecured business loan, the lender will assess the financial situation of your start-up, in order to determine your capability of making repayments. In general, the established minimum and maximum amounts vary by the lender. As for the repayment period, it is usually short, ranging from three months to three years. The quicker you manage to make repayments, the more money you’ll save on interest.

Invoice Factoring

Moving on, invoice factoring allows you to borrow against outstanding invoices. Hence, you’ll repay the loan when the clients will honour the invoices. This is an effortless, accessible way to cope with your start-up’s cash flow problems if the situation asks for it.

Purchase Order Financing

If you encounter difficulty in filing an order due to serious cash flow problems, you can get a purchase order financing loan that will pay your suppliers on your behalf. As opposed to requiring property as security, purchase order financing is supplied based on your company’s profile, experience in the industry, your clients’ and suppliers’ reputation. Must I provide security? This aspect depends on the lender you select. Generally speaking, you’ll also have a say in this, depending on whether you want to supply a guarantee or not. The advantage to providing security is diminishing the repayments. Nevertheless, the risk associated to this decision is that you place your asset at risk, considering that you default on the loan.

Are there any important Business Loan Regulations?

The start-up sector has been made more approachable with the implementation of a range of regulations, which make it easier for Aussies to access finance. For instance, starting the 1st of July 2016, if you support up-and-coming start-ups, you will get 20 percent non-refundable tax offset. This applies to investments of $200,000 per year, per investor. Concurrently, changes have been applied to crowd sourced equity funding schemes, allowing entrepreneurs to raise as much as $5 million per year, in funds.

Conclusion

Without a doubt, being a business owner is not an easy task. Although it is challenging to get a start-up on track, knowing that you can apply for business loans when the time asks for it is definitely reassuring. Nonetheless, make sure you don’t make any rushed decisions, and pick your lender carefully.

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