Getting Approval For A Business Start Up Loan
Setting up a business requires financing and in reality
, many new entrepreneurs had to acquire some help from other sources (family, friends, lenders, etc) to start their own businesses. Fortunately, business start up loansare available and these are loans that are especially designed for businesses that are in the beginning stage, and thus, with no business credit history yet.
Are you Qualified?
Indeed, getting approved for a start up loan can be a big challenge because of the lack of corporate credit history. Since lenders must rely on the business owner's personal credit history and the business plan submitted, the amount of loan available for start up businesses is often much lower than those provided for established companies.
Generally, higher financing can be obtained if you apply for a secured business loan. This means, the borrower is expected to submit a property of considerable value as a guarantee for the loan. This gives a lender the confidence that in case the business doesn't flourish or the borrower defaults payment, the borrower's assets can be used to pay the remaining debts.
However, not all business owners are qualified to apply for a secured business loan. If you don't have a property to submit as collateral, then an unsecured business loan is your next best option. Again, there is a greater risk on the part of the lender because in case of default, no assets have been submitted to pay for the debts. For this reason, unsecured start-up loans are limited to smaller amounts and may come with higher interest rates and fees.
Getting Approved for a Start-up Business Loan
Despite not having corporate credit to back up your loan application, business owners can do some steps to improve their chances of approval. First of all, you need to improve your personal credit rating to make up for not having corporate credit. If a prospective lending company discovers that you have a problematic credit history, then how do you expect this lender to entrust you with a new credit? Of course, having an excellent personal credit score will instantly send a positive impression to a potential business loan provider.
You will also need to come up with a comprehensive business plan. Through your business plan, you need to convince your lender that you do deserve the financing assistance you seek. See to it that your goals for your company, as well as the steps you intend to do to achieve those goals are clearly presented in your business plan.
Last but not least, you need to prove to your lending company that you are operating a legal business. Business permits and licenses are major pre-requisites when applying for business loans. One of the requirements you will be asked to submit is a proof that your company is a legal entity. If a certain lending company offers to give you a business loan without requiring you to submit these prerequisites, check the credibility of this lender as you could be dealing with a scammer or unauthorized lender.
Copyright (c) 2010 Irish Taylor
by: Irish Taylor
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