Should a Business Get a Start-up Loan?

If you are thinking of starting up a business, then you will need to consider the financing. There are different ways to finance a start-up and these will partly be determined by how much the business costs to start. Some businesses have a lot of costs and others will have very little, it all very much depends on what you are going to do. If you need premises, equipment and staff, then your costs will be relatively high as you will have to also pay insurance, utilities and things like this. If you are a sole trader working from home providing a service, you may not need to buy anything at all to start your business or just a domain name and business email. Therefore your first decision as to whether to get a loan is very easy as it will be determined by how much money you need to start. You may need nothing or very little, which you can afford or you may need more.

It is always wise to put together a business plan. If you do ask for a loan, then your lender will want to find out that you have a good business plan and therefore can show that you will make enough income to be able to afford the loan repayments. You will also need to look at this for yourself too. Although it is great to be positive and imagine the best, it is also wise to think about what may happen if things do not go so well. How will you afford the loan repayments if the business is not making enough money. You may have some savings you can fall back on, there may be other people in the household who may be able to help you out and you may be able to earn money elsewhere or maybe already have income coming from other sources which will help.

If you do have savings, then you will need to decide whether it is better to use these than to borrow money elsewhere. You can use it as a loan to the business and pay yourself back as you start to make a profit. This is good because you can lend to the business at a low or free rate which will be less costly to the business. However, it will mean that you will not have any money to fall back on if things do go wrong and you cannot pay yourself a salary from the business. It can even be a way that you can personally make more money form the business, if you lend it, then charge interest. Those interest payments will come out of the business costs and therefore reduce the tax the business will have to pay, but they will make up part of your personal income so you may have to pay tax on it that way, if you earn enough to pay tax. It can be worth discussing it with an accountant as they will know the legalities and tax benefits of doing this.

There are alternative ways to fund a business rather than a loan. It could be worth taking a look at these so that you are aware of all of the options. These could be cheaper than a loan, which could help you as a loan is a big commitment.

It can be worth thinking hard about whether to borrow and how much as well. Taking on a new business is a big responsibility and will take up a lot of time and effort. This will be stressful and you will not want any money stresses creating even more stress for you. If you need to be finding loan repayments every month as well as working hard to make a profit and get a business building up, it can be just too much. It can be tempting to borrow a nice large sum of money so that you have lots to buy things with when you are starting out. It can be fun buying new things and setting up and feel like you are really building the business resources quickly.
However, it will take time to start making money back form the business and you will need to make those loan repayments. If you overspend, you may find that you are not able to make the repayments and that you really start to struggle. This can happen quite quickly as it takes time to find customers and get money coming back in. There are also often lots of things to pay for in the beginning so money coming in can be easily spent.

So a business loan can be an even bigger commitment than a personal loan as you will be taking on so much at the same time as the loan. It is worth calculating how you will make the repayments, should the business not make enough to cover this cost. It is also worth working out exactly how much you need to borrow and borrowing the minimum amount that you can. Also think whether you have the money to lend the business and if this is something that you want to do.

Is it Worth Trying Peer to Peer Lending?

There are quite a few companies out there now which offer peer to peer lending. What the company does is matches a borrower with a saver or several savers. The borrowers usually get a lower rate, than they would from a traditional lender because it cuts out the banking middle man. The money you borrow comes from individuals who are hoping to get a better return on their savings and so are prepared to take some more risk, by lending through this sort of scheme.

Borrowers are picked carefully though. There are credit checks done and every borrower is given a risk rating. This means that savers will be able to take a look and see which they will be most happy lending to. There is a chance that as a borrower you may be turned down, but as there are a few firms that offer this service you could try more than one, but being turned down for borrowing does not look good on your credit record. Someone with a low credit rating may also be giving a high interest rate to offset the risk. This could mean that it is more expensive to use peer to peer lending than going to another lender. Therefore it is worth getting some quotes first so that you can decide which will be the best for you.

Therefore it can be a good thing. If you have a good credit rating then you can get a better rate than using a bank for borrowing money which could really suit you. However, it is worth bearing in mind that if your credit score is not so good, then you could end up paying more than a bank. Therefore it is wise to examine these rates carefully before you apply and find out what your credit rating is like before you apply. There is no point in applying if you will definitely be turned down and by applying you could be making your credit record look even worse.

Many peer to peer lending companies will allow you to repay the loan early without a penalty. This is great as it means that you will be able to save money in interest if you happen to have enough money to be able to pay it off. Other lenders will often charge for this and sometimes it can be a significant amount depending on the lender and the type of loan. It is worth looking at this when you are comparing different types of lending as it could have quite an influence on the overall costs if you plan on paying back early.

They can be a great alternative if you are finding it difficult to get money elsewhere. There are something that people do not often consider but they could work out really well for you and so could be well worth thinking about.

It is important thought to look out for the fees. The company may charge you a fee for arranging the loan. The way the loans work is that you may have several people all offer to give you a small part of the money. They may not add up to the full amount and so if you have to apply again for the rest you could end up paying an additional fee as you will have to apply again.

There is also no guarantee so if you have a poor credit rating or lenders do not feel that they are willing to take a risk with you, you could end up with no loan. It is worth talking to them though and finding out whether they think it is worth you applying. You may find that even if your credit rating is not excellent you may still find someone willing to lend to you, so you could check with their customer services and see what sorts of people they tend to source lending for.

It is wise to do your research first. Peer to peer lending is relatively new and not many people have experience of it. It is something you are less likely to be able to talk to friends and family about as they are unlikely to have experienced it and so knowing what real life experiences are like is hard. You should be able to find some reviews online but also take time to compare the lenders, find out what they are like, what their terms and conditions are and how they work before you sign up to anything. Look at their websites in depth and also chat to their customer services departments so that you can find out as much as possible about how they work and what they are like. It is good to talk to them as you also get a feel for how friendly and helpful they will be should you have any problems in the future.

Business Loans (Borrowing to Start up a Small Business)

Starting a new business in this economy is a rather tedious task. There are multiple factors why: the economy itself is unstable, the political situation is totally crazy, and the world is in an upheaval. The internet further complicates matters. While it is true that it makes advertising much more approachable, the issue lies in the fact that it makes it possible for everyone – this time, your advert must really stand out in order to ever hope getting any sort of attention.
Fortunately, things aren’t so bleak. There are things that can help you with starting out. Today, we will pay attention especially to the primary mode of starting out a business in today’s world, and those are business loans. We will check out their various aspects, benefits and disadvantages.

A business loan is a special kind of debt – the money received is intended primarily for business purposes. As such, it is taken by people who don’t have enough capital to start without one, or who cannot pool enough money with other investors. As with most other loans, a business loan can be secured (meaning that the debtor will pledge an asset, usually a piece of equipment or a block of materials) or unsecured (meaning that there isn’t a specific material object that secures the debt, but the debtor is still responsible with his or her entire estate for the loan). Secured loans are a bit easier to obtain, but they may be unavailable to those with smaller assets. Unsecured loans are more difficult, and are riskier, but often, they’re the only option that the future businessman has.

Remember also that a lot of banks offer a specialized kind of business loan, called ‘equipment loan.’ These specialized kinds of loans repeat themselves on a monthly basis, allowing the businesspeople to replenish the stocks of equipment and materials to keep their operations going. They should be considered if you’re having a difficult time making ends meet regarding the material themselves, but take care – your ultimate goal should be to be completely loan free, funding all the materials and equipment from your business transactions.

Regarding your eligibility to get a loan, there are a couple of hints and tips to help you going. The first thing you should do it to do it as soon as possible. Getting the loan approved may be time consuming, and in business, time is everything. Furthermore, you need to have a good credit record. Usually, the banks will pay close attention to your previous loans and decide whether to give you one depending on how regular were with your loan returns in the previous three years. It literally pays to be regular.

The next important thing to have in mind when applying for a loan is that you need to make it probable that you will return it when the time comes. Prepare a story. Tell the bank why are you successful and why do you think you will keep on being successful in the future. Remember – the bank that’s issuing a loan is a client just like any other. The sole difference is that you don’t need to convince them to buy your product or service; you need to convince them why would other people buy your product or service. Practice your bank pitch! Remember – you will need to put it all in writing, so this wouldn’t be too much different from an advertisement.

Selecting the bank that will give you a loan is also very important. A local or community bank is much more likely to give out loans to local and national businesses than a national one; after all, they are more affected by the positive changes in the community. Also, remember that, in some cases, government itself guarantees for the local businesses in order to make them more profitable and likely to succeed; don’t forget to tap into this wellspring of possibility.

Also, as a general piece of advice – know what you are getting yourself into. Loans are always a serious business. Get informed as much as possible, consult a lawyer if you have to, read the contract down to the smallest possible print. Know your rights, and remember – if the contract says that you are waivering your right to get help in the case of a fraud, that is not binding. In fact, it is more than non-binding; such a clause in a contract is completely illegal and should be treated as an attempt to scam you. You should definitely distance yourself from such financial institutions as soon as possible. The same goes, without saying, to you waivering your right to a jury.

We hope this article was of some use to you, and that it will facilitate and improve your attempts at getting a business loan.