How Can You Apply For A Start-Up Loan?

How Can You Apply For A Start-Up Loan?

It is quite understandable that in order to start any new scale small business, capital plays a major role. This can be solved by taking loans from any financial institutions such as credit unions. So find out how you can apply for a start-up loan for your new business.

Be Aware Of The Reason And Amount Of The Loan

It is quite obvious that any small business owner will be aware of the reason for which he needs the loan along with the loan amount that is required. If it is a start-up business then it is not true.

Start-up owners might be in the procedure to determine the number of funds needed and why it is needed.

Whenever there is a loan taken from any bank by any business owner, it has become a debt to the business and to the owner as well.

So in order to reduce the risk factor, there should be proper research about the reason for taking a loan by preparing financial statements which actually helps to understand the requisite.

Pay A Visit To The Local SCORE As Well As The SBDC Offices

A start-up business owner always wishes to gain some advice as well as assistance from expert executives.

In order to open a start-up, the visibility of the idea and executing the same is the biggest challenge and that part is one of the crucial among all, with a help of an experienced person it can be reduced as they understand the requirements better than a newbie.

There are several organizations such as SCORE, a non-profit entity that has a volunteer group of retired business executives apart from that there are Small Business Development Centre which is an integral part of Small Business Administration that can help small business owners with the process of Small business loan application.

 Check Your Credit History And Score

When you are trying to take a big step before that you need to learn how to walk and that’s where your credit score comes into the picture. Whenever there’s a startup your credit history turned into your business history. So before you take a step forward it is always advisable to look into credit reports. Something around 700 or more than that would be great and it will definitely increase the chance of getting a loan with a very hazard.


Review Your Options For Borrowing

Large banks are mostly deal with bigger clients who got a brand name, a proper set up and Goodwill but for a startup above mentioned things are yet to be achieved hence it is always preferable to approach the commercial banks or a credit union and even if you are member of the local credit union, you can directly connect the loan officer and convince him with the business idea you have.

Even they turn you down there are several microfinance loans that can create a loan to the startup. You should opt for every possible option.

Create Your Business Plan

Whenever you are asking for lending money from any financial institutions, the reason should be as strong as they can’t put it down and it has to be crystal clear.

A good business plan is necessary because the competition in the market is very high so your idea has to be unique.

Before you get into this you must secure that your business plan has components such as financial statement, the value of the assets which are going to be used to secure the loan along with that a thorough market analysis of the market your business will serve.

Make A Presentation and Book the Appointment

No matter how good you are at what you are going to do, if you can’t persuade the loan officer then all the efforts will go into the vein.

So in order to avoid such incidents, you need to prepare a proper business plan and a presentation that will force the person to look at it again and will also help him in understanding your basic need for this start-up loan.

There are several things such as financial statements, charts, graphs, etc. but the part which actually plays a pivotal role in this is the executive summary.

Loan officers hold a notion about this summary, if it’s distinctive then will definitely put some interest in it. Make an appointment with the loan officer and ask them to provide you some time so that you can explain the idea to them properly.

The presentation needs to be compendious and methodical.

So if you are planning to start a new business, then you must be aware of start-up loans. If you are going to consider a start-up loan for financing your new business, then collect some knowledge of how you can apply for it. Follow the above-mentioned ways to get one.

Why Do Banks Deny Start-up Loans?

It is challenging for a new venture to get approved of a start-up loan from a bank or private loan provider for a business start-up.

New business loans are very risky loans that any bank or lender might face. So anyone will be not much sure of start-up loans.

Why Is Business Start-Up Risky?

If you wish to know why new business ventures or start-ups are risky for lenders, then have a look here. Lenders always expect borrowers to have:

  • Capital: Business assets that are utilized for creating products and services and that which can be changed into cash for making payments on the loans for business. Any new business usually will be having a few business assets.
  • Collateral: Cash for contributing to the new business. Any new business owner will be having very little collateral until he can make use of personal assets or there is a co-signer with some assets for pledging.
  • Capacity: A proper track record for showing that the business has the potential of generating sufficient money for repaying the loan.
  • Character: It is a good credit rating. A business owner with a good credit rating such as a business credit or a personal credit does not mean that he will be able to get the approval of a business loan. But if he has a poor rating it will be quickly turned away.

Reasons Why Banks Refuse Start-Up Loans

  • Absence Of Experience: Banks are seen to deny start-up loans to a person who has not a minimum working experience of 1 year in the profession.
  • Absence Of Management: Lenders do not feel comfortable with a new business start-up that has no powerful and expert management team for adding their assistance to let the business grow.
  • Absence Of Customer-Base: It is one of those circumstances, you will not get a loan approval until you have any customer, but you can also not start the business and get the customers without getting a loan. If you can make them believe that you are having some potential customer backup it can create a good impression on any lender.


For instance, mentioned are some typical replies from banks to a young man who was looking out for a start-loan to begin his professional practice.

Banks will simply say that they do not offer any loans to any start-ups. You can move to other banks. But it will take time for finding the perfect one.

A bank will be giving you a certain amount ($60,000) that is the limit for SBA express start-up loans.

So before talking to a bank, contact the SBA. Learn about their criteria. Few banks are ready to trade in with the additional paperwork as well as the hassle of the SBA loans. You can contact SBA and get the tentative approval for reducing the objections that the bank put.


Does Personal Credit Have Any Impact On Start-Up Loan’s Approval?

A new business will never have a business credit of its own. So the bank needs to have a look at the credit of that person who owns the start-up. Banks are seen to frequently say no to start-up loan appeal as the borrower’s personal credit includes problems. For instance:

  • The problem can be as small as a negative rating on a borrower’s credit report. But it will be all that the bank will be considering and denying your start-up loan.
  • A low credit rating will affect your ability of obtaining a start-up loan. Nowadays, any credit score below 800 will be questioned. So you must know your credit score and work for raising it.

Can You Get Your Start-Up Loan Sanctioned?

A great way of getting a start-up loan sanctioned is by crafting the plan of your business carefully for answering each and every question that a loan provider may ask along with those objections that can get raised.

  • Show may you plan for contributing capital to your business. What will you be contributing to your business on your own? What are you already having?
  • Show from where you will be bringing your collateral as well as credit report of you along with the co-signer if present.
  • Show the management that guides you, the advisors as well as executives you need to guide your business fast to profitability.
  • Add a spreadsheet to show when the business will be having a great cash flow and be sure that you will spending less than you will be bringing in.
  • Show the experience you have with any similar business or that you have expert management team beside you.


So if you are thinking of starting up a new business, look out for a loan for funding. Start-ups loans are of great help if its application is approved. Apply for funds from a private loan provider and get the loan approved for your start-up.

Personal Finance Tips For Young Adults

Stop living paycheck to paycheck and take control of your finances. Young people need all the financial help they can get to succeed in the modern world. It is incredibly important that you get all the good advice.

Spending less than you earn every month, keep the money in your wallet to a minimum. Even as you start saving, another first is to start educating yourself about every aspect of personal finance.

Carolyn Rhea

Hi,I am Carolyn Rhea, author of NIME 2016. Money management tips can help you and your family feel more financially secure.