While taking out a loan of any kind can be intimidating and extremely daunting, it is often a necessary step in starting your own business. Unless you have virtually unlimited cash flow on hand or are fortunate enough to have an investor who will back you privately, it is likely you will need a loan to help finance your business and cover all the costs associated with start ups. Much more than simply having the desire and drive to work for yourself is required to open and operate a successful business.
You will need enough money to cover acquiring or renting an actual physical location, equipment, advertising budget, payroll and taxes, business licensing, inventory and other necessary expenditures. As you can see, the list is long and the costs will definitely add up quickly. To finance all of this, a small business loan is necessary and Certified Business Loans would be a smart option to consider.
Different than regular bank loans, small business loans are designed to help people secure the financing they need while offering a much lower interest rate than traditional loans. These loans are also structured with terms of repayment that differ than traditional loans allowing small business owners to pay off their loans at a more comfortable monthly payment and these types of loans usually allow borrowers to stretch the monthly payments over a longer period of time. There are several different types of small business loans available and not every business is eligible for every type of loan, so it can be very helpful to visit your Small Business Administration and learn about what types of loans are available and if you qualify.
For most small business loans, you will need some type of collateral to secure the loan. For almost all loans, collateral is required from anyone owning at least twenty percent of the business. Collateral is considered any available asset, whether it be business or personal, of value that could be used to repay the loan if payments are not made. This collateral is used to secure the loan and help the lender recoup their investment should your business fail by selling your collateral and keeping the income to pay off all or part of your loan debt.
As you can tell, it is extremely important you weigh your risks before putting up collateral for your small business loan. Make sure you do not risk anything you cannot afford to lose without suffering dire consequences. To that end, the Small Business Administration will not automatically deny a loan request with insufficient collateral to back it so long as all realistically available collateral is offered. It is important to keep that in mind as you and any partners you may have decide what you can and will offer as collateral.
In addition to low interest rate loans to help you start your business, the Small Business Administration offers another type of loan called a microloan. These loans cap out at $50,000 with the average loan being $13,000, have a maximum repayment life of six years and can be used to purchase equipment, inventory, working capital and fixtures like furniture. This is important to know particularly if you are planning to open a business that will not incur tremendous expenses to open. Borrowing as little as possible is a smart way to make sure you business can turn a profit as quickly as possible and if your needs can be met for $50,000 or less, a microloan is a great way to go. Microloans are available only through Small Business Administration intermediaries so be sure to visit your local branch to get all the help, guidance and information you need to determine which loan is right for you.
While it can be frightening to take out a loan to secure your future business, you can take a lot of the risk and fear out of the equation by making sure you get the best loan terms and repayment plan possible. The terms under which you secure the initial financing of your business are one of the largest factors in determining the success of your business, so it pays to take your time, seek help from experienced professionals and get a loan that sets you and your business up for success and financial security.