Building your own business isn’t easy. There is a lot that you must consider before engaging entrepreneurship. Considerations include coming up with a business idea, deciding on your target customers, doing market research, and determining your financial sources.
A starting capital is one of the foundations of a business. This type of capital is where you get money for starting expenses such as purchasing of initial business equipment, hiring of capable workers, and buying of raw materials. That said, it is important to have a significant amount of money that should be utilized for your starting capital.
However, there are times where you are not financially capable of providing for your starting capital. But, this should not hinder you from growing your business. To bridge the gap of not having such capital, consider taking a loan. Below are the types of business loans that jump-start your business.
SBA Loans
Small Business Administration or SBA loans help small business owners by partially paying their loans. The amount of money that SBA pays ranges from $5,000 to $5 million. Provided by commercial banks and online lenders, these loans have lower Annual Percentage Rate or APR since they the government are going to pay for them.
Other than having a low APR, SBA loans can be utilized for almost any business purposes. Such loans also have longer repayment terms, making it suitable for financing your starting capital. However, the process of such a loan is long and time-consuming, as it takes three weeks to several months before your application process can be approved.
This type of loan also requires a strong credit history before offering the loan. This means that if you have a poor credit score, it might be hard for you to get such a loan. It would be wise for you to improve your credit score first to get the loan that perfectly fits your business.
Government Grants
Some governments offer grants for promising entrepreneurs who want to start building their small businesses. Such grants often have zero interest rates and long repayment period. This means that it is appropriate for your business when you want to have a starting capital.
When applying for a grant, you might want to be fully prepared when you present. Prepare a detailed plan of your business that is relevant to the community. When the government sees that your business brings economic growth, your chance of taking the grant goes high.
In California, small business owners and potential owners are offered numerous loan options that help them in building their businesses to grow economically. Small business loans in California guide offers various programs such as California Capital Access Program or CCAP, California Jump Start Loan Program, and Small Business Loan Guarantee Program. Such programs are geared towards providing starting capital for entrepreneurs who are financially incapable.
Cash Advance
Especially when you are engaged in business involving services, it might be wise to turn to cash advances. This type of business loan works by borrowing money from your client for your starting capital. You will then give the service to your client plus the amount of the agreed interest. In this way, you can buy the necessary equipment and workers to deliver a service that will satisfy your clients.
Equipment Loans
If you are in a manufacturing business, this type of loan is the best option to take. This is because this loan helps you buy the equipment you need in manufacturing. The collateral for the loan is the equipment. The expected life span of the equipment is the basis of the loan term. The rate for such a loan is based on the value of the equipment and the growth of your business.
Business Line of Credit
Line of credit for businesses works like a credit card. This is because of its flexibility when it comes to funding. The lender offers you a maximum amount of credit where you can draw money from any time, whenever you need it. Sometimes, lenders go above the amount of money that you need. This becomes an opportunity where the rest of your money can go to emergency expenses or your working capital.
The advantages of having a business line of credit as your source of funding are that it offers quick approval times and competitively low APR. It is also open for businesses that have bad credit scores. However, be careful when taking this type of credit. Missing regular payments may impose high penalties. If you think that you can make regular payments with the profits of your business, taking a business line of credit is a way to go.
Takeaway
Borrowing money for your business isn’t always a bad decision. You just have to plan out how you can repay your debt without complications. As long as the cause for loaning is just and for the welfare of your business, you can turn that loan into an opportunity for your business to grow.
