Steve L. Hatch
One of the biggest challenges, if not the largest, for a start-up firm is trying to find a lender that is willing to finance a new venture. The borrower must demonstrate to the lender that their business will be a success and that they will be able to make all of their loan payments. This is an aggressive challenge. The two main attributes that lenders look for in a business is longevity and collateral. Obviously a start up company is not likely to have either of these qualities, but that there are still places and institutions that a borrower can seek for funding.
Many business owners are unaware that there is a government agency that helps assist small business owners, but in fact an agency by the name of the SBA does just that. While some people like to believe all the government does is collect taxes and pass regulations that prohibit growth, they actually do programs in place to help small businesses succeed. As a start-up company a person can go to them, as long as there is a sound business plan in place, and they may be willing to guarantee up to 50% of a bank loan. They also have programs that can help veterans get there companies off the ground.
If after being unsuccessful in trying to get the SBA to back a loan a borrower could apply for a business credit card. For people with good credit they should put the card in the business' name to help build the credit rating so down the road they may qualify for a loan with more favorable terms. When a person does this they should use the card as little as possible and make sure that the balance is paid off every month. This will help them avoid interest charges and build their credit rating at the same time, but remember that in essence, business credit cards are just high interest business loans and their terms will always be less favorable.
For new companies trying to get funding from a bank or credit union they almost unduputedly will have to possess some sort of collateral to put up against the loan. Make sure to be careful if this is what you decide to do. If the bank makes an offer the best thing to do is take it to another bank to see if they can make a better offer. There are also sites online where banks will actually compete against each other in order to loan you money. And, as always, make sure to read all the fine print of any deal that you enter into order to avoid opponents like the one many people faced when the interest rate reset on their sub-prime mortgages and they could no longer afford their homes . As long as you do your homework you will be able to find a loan that fits your needs and you will be able to avoid the many pitfalls that others are confused with.