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.