So, you’ve got a great idea and the enthusiasm to get your new business started. Something else you need which you might not have thought about is capital. Whatever type of business you’re planning, without any funds in your bank account, you’re not going to venture very far.
Entrepreneurs, both big and small, are not always aware of the best way to fund a startup business. Hence, we’ve decided to write this comprehensive guide. The aim is to focus on the various funding options open to you. We’ll also be looking in closer detail at one particular source of funding.
Upstart is a peer-to-peer online lending organization that has an exciting start. For that reason, and the value of its services, we’ll be looking at this online lender is greater detail. We’ll also look at a few other lending sites for comparison. But first, we’ll get the ball rolling with some general advice.
Why You Might Need Finances for Your New Business
Time and dedication are requirements if you want to start a business. However, you’re also going to need some money. Even the simplest of business ventures require a small injection of funds. A more significant business will require a large amount of money in the bank.
The actual amount depends on the type of business, but there are a few general expenses you need to cover. Don’t think you’re unusual in feeling worried and anxious about financial matters. Here’s a list of a few of the expenses you can expect.
The cost of equipment is one of the first things you need to consider. Startup equipment costs can range considerably. They might be just a few hundred dollars, or they could be as much as a couple of hundred thousand. It all depends on the type of business you’re planning and the industry in which you’ll be operating.
Of course, you have the option of running your business from home, but premises such as this don’t suit every kind of business. Renting space for your business can be a sizeable expense. If you decide to purchase the premises, the cost is even higher. You can reduce the price of a workspace if your budget is limited. Consider co-working spaces or working from home. Another option, if your business is service-based, is to visit your clients in their own homes.
Office Furniture and Supplies
You’re going to need to fill your office or workspace with various equipment, furniture, and supplies. In an office environment, consider purchasing:
- Filing cabinets
- Water cooler
- Printer ink
The actual amount you need to spend depends on your business and how many employees will work with you. A good rule of thumb is to spend around 10% of your budget on supplies and furniture.
Inventory expenses depend on the type of business you’re planning to run. A service business, for example, might not need any stock at all. Manufacturing, retail, or distribution businesses, on the other hand, are going to require a sizeable investment.
How much inventory can be challenging to decide, especially if you’re a new startup? You don’t want to have too much and risk it spoiling or not selling. Too little is also not the right place to find yourself as it means your customers are kept waiting. If you’re struggling with the decision, don’t worry because there’s plenty of help online.
If you want your business to be successful, you’ll need to invest in marketing. It might interest you to learn that you can adopt many marketing strategies at little cost. Some of the options you might want to consider include:
- Physical marketing materials such as business cards, banners, and signs
- Paid advertising
- Digital marketing such as inbound and outbound, content, affiliate, SEO, social media, and pay-per-click
Part of your marketing strategy should be the creation of a professional website. For the modern business owner, this is essential. You can create your own using the wealth of online website services or hire someone to do it for you. Don’t be worried about building one yourself, because very little technical knowledge is required. Use services such as Wix, WordPress, Weebly, and Squarespace. Some of these content management systems are free, while others charge a monthly premium to use their services.
The legal side of running a business requires the registration of your business name and company. To do that, you first have to decide on the type of business entity you’re going to run. Is it, for example, going to be a limited liability company, partnership, or sole proprietor? What you decide has a bearing on tax, financial, and legal issues.
If you decide you want to operate as a limited liability company, you’ll need to create a separate legal entity and file articles of incorporation with your state. This process costs money, depending on the state. Fees range from $50 up to $725. Generally, however, you can budget on spending around $300.
Rent is one of your fixed costs for which you need to allow. The cost of services also needs to be factored into your startup costs. The internet, telephone, electric, water, and gas are all expenses that are your responsibility.
Is your business going to be a one-man-band, or are you going to hire employees? If you’re going to have a team of people working with you, they’ll need pay. Don’t forget that you need to pay for yourself as well.
The size of your payroll depends on several different factors. For example, the experience and skill set of your workforce, the work they’ll be doing, and whether they’ll be receiving any additional benefits.
Suggested Reading: How to Find the Best Mortgage Lenders for Refinancing
Do you have health, home, life, and car insurance? Insurance is used to protect various aspects of your life, and it can also be used to protect your business. Business insurance comes in a range of shapes and sizes.
Professional Liability Insurance
This type of insurance covers your business against claims of negligence, either because of mistakes made or because something failed to perform. This insurance is also called errors and omissions insurance (E&O). Liability insurance comes with many options, depending on the type of business sector in which you operate. Every business is different, and policies tend to be custom written.
This type of insurance is essential, whether you lease or own your workspace. It covers many different things, including equipment, furniture, inventory, and signage. Damage or loss as a result of theft, fire, or a storm is inclusive in a typical policy. However, earthquakes, floods, and other similar mass-destruction events aren’t. If you’re going to be operating in a location that’s prone to such circumstances, you need to arrange with your provider for separate coverage.
Worker’s Compensation Insurance
Insurance such as this is necessary should an employee become injured or die as a result of their work. It’s added to your business insurance policy and covers medical treatment, disability, and death benefits. You might think your employees perform low-risk tasks, but sitting at a computer all the business days puts them at risk of carpal tunnel syndrome.
Product Liability Insurance
Those of you manufacturing products for sale need product liability insurance. It protects your business when named in a lawsuit because of the failure of a product. You’d like to think that your products are safe, but you never know what can happen. Generally, coverage is product specific.
If you find yourself using vehicles for your business, they need to be insured. Coverage like this protects your company against liability, should an accident occur. There are various levels of vehicle insurance. The most basic covers third-party injury, while comprehensive insurance covers the vehicle as well.
Business Interruption Insurance
Do you have a plan should your business operations be interrupted? It’s not something that might be obvious, but disastrous or catastrophic events can occur. Business interruption insurance provides compensation for your business should such events disrupt business operations. This compensation is for any lost income.
Are you going to start running your business from home? Check with your current insurance provider to ensure you’re covered. Home insurance policies don’t usually cover home-based businesses in the same way as commercial insurance would. You may need to request additional insurance coverage for your inventory and equipment.
Who was it that said, “Only two things are certain in this life, death, and taxes?” Benjamin Franklin was right when he uttered these now-famous words. Everyone who owns a business pays business taxes. The actual amount depends on revenue, type of business, and deductible expenses. A flat rate of corporate income tax is payable under federal law, but working out the final amount is more complicated.
Not paying the right amount of tax can get you into trouble, so it pays to use the services of a professional accountant.
Travel costs aren’t something all business owners have to pay. However, if you visit customers or travel a lot for business purposes, costs can quickly add up. As well as including gas money, train tickets, and airfares, you might also need to cover the cost of accommodation and food.
You should always aim to keep travel costs to a minimum. One way of recouping some of the costs is to sign up for a hotel or airline loyalty program.
Suggested Reading: Best 0% APR Cards to Take Advantage Of
Are you going to be shipping goods to your customers? You might need to factor shipping into your startup budget. Costs might include packaging as well as postage.
Several different professional people can help you when you first set up your business. You might think you can do everything yourself, but it’s not always the best way to do things. Accountants, bookkeepers, and legal professionals can help in many different ways. You might, for example, need help to choose benefit programs for your employees, compliance with federal and state regulations, and your end of year tax returns.
You won’t need to hire these professionals on a full-time basis. Instead, you’ll be consulting with them once a month, every quarter, or annually. How much you need to pay them depends on their experience—the difficulty of the tasks they’re required to perform matters as well.
Now you’ve got a good idea of the costs involved in starting a business; it’s time to look at some of the ways you can finance it.
Suggested Reading: Compare Chase Credit Cards: What You Need to Know
15 Ways to Finance Your Business
When you’re looking for finance for your new business venture, there are several avenues to explore. Not all of them are easy, and some are very challenging. You should already convince yourself of the need for startup funds, but where can you go to find them?
If you’re lucky enough to have some personal savings, you can use these to fund your new business. Even if you’re not flush with cash, there are things you can do to cover the cost yourself. There’s the option of selling your car and using public transport to get around. Is selling your house an option? If you’d rather not sell your home but have equity, why not take out a home equity loan? Do you have a 401(k) or IRA savings account from which you can borrow money?
If you use your savings, you’re not going to be paying interest. There is, however, a particular risk involved.
Friends and Family
Tapping up your friends and family is another possibility, but is it worth risking your close personal relationships? Asking your mom or grandma, for example, is not such nonsense as going to a bank or investor, and they’re not likely to charge you interest either. You will, however, be putting their money at risk. You might also be tempted to stick with your business longer, in spite of it failing. Neither scenario is a good one.
Choosing this route might work for some of you. If it is a valid solution, make sure you have professional paperwork prepared.
Suggested Reading: Best VA Lenders
If you’re a new business virgin, finding a lender willing to give you a startup business loan can be difficult. Because you’ve got no previous business experience and no existing business revenue, a personal loan may be the answer. Whether or not you secure a personal loan depends on your circumstances, whereas a business loan is dependent on the health and creditworthiness of your business.
If you apply for a personal loan, the lender is going to look at your credit history, so you’d better make sure it’s healthy-looking. They’ll also want to know about your income, debt-to-income ratio, and the reason for the loan.
It’s possible to get as much as $35,000 via a personal loan. If you’re lucky enough to find the right lender, this could max out at $50,000.
Also Read: Are Debt Consolidation Loans Right For You?
Do you already have a credit card you use for your personal life? It’s possible to get one to help with your startup business costs. Credit cards designed for small business owners can have limits of up to $50,000. You’re not going to have your business plans scrutinized either, which makes them one of the most convenient ways of funding your new business.
There is, however, a downside. Interest rates are often excruciatingly high, and if you don’t pay the balance off quickly enough, the interest piles up. Ideally, you should look to pay it off within the no-interest grace period.
Everyone likes receiving something for free, and it’s possible to fund your startup with free money. Grant programs exist all over the world, and in the U.S., there are federal, state, and local government grant programs. Some private organizations also issue grants.
Grant programs tend to tailor to a particular type of business or sector of the population: for example, veterans, single mothers, or women’s business. If you want to apply for a grant, be prepared to write a detailed proposal. Competition is fierce, and only the best proposals are successful.
Anyone not confident about writing a proposal might want to hire a professional grant writer to do it for you.
Bank loans are notoriously difficult to secure. There are thousands of banks offering this kind of service, but banks tend to want to see a successful business before handing over any money. For anyone starting a new business, this can be a considerable obstacle.
That doesn’t mean, however, that you should rule out a bank loan. If you’ve got substantial collateral and excellent credit, a bank loan can be a possibility. Choose a bank loan, and you’ll be paying fixed-rate loan interest, which sets quarterly or monthly payments. There will be a maturity date of any loan up to 25 years.
Invoice Discounting and Factoring
Both these options come under the heading of invoice financing. This financing option allows you to unlock the value of any unpaid invoices. You first have to find an invoice finance provider. Copies of any invoices you issue are sent to this provider, who then pays you an advance. This advance can be as much as 95% of the value of the invoice. You can also expect to receive this amount within 24 hours.
As an advantage, you don’t have to wait for customers to pay you the invoice due. Depending on your payment loan terms, the length of time can be 30 days or more. Another advantage worth mentioning is that the invoice financing provider controls the credit and collections process.
Suggested Reading: Why You Need Estate Planning
If you’ve heard of angel investors but aren’t sure what they are, let’s enlighten you. An angel investor is generally a wealthy business person who is willing to finance startups. They are eager to do this because it can potentially make them even richer. Finance takes the form of an equity investment rather than a loan. Fans of “The Apprentice,” a T.V. show that launched in the U.S. in 2004, will know Alan Sugar. He is a well-known angel investor.
Approaching an angel investor might be a very tempting proposition, but be aware that you’ll have to sign over a percentage of your business in exchange for the cash. As well as giving up as much as 50% of your business, you’ll also be under scrutiny.
An excellent place to start looking for an angel investor is the Angel Capital Association. It has a directory of angel groups and platforms.
Crowdfunding is a way of laying out your plans online in the hope that potential investors will come to you. Traditionally, business owners take their sales pitch to investors. Crowdfunding sites such as Kickstarter, GoFundMe, and Indiegogo turn this idea on its head.
Funding contests are a relatively new concept. Amazon Web Services Start-Up Challenge and the MIT $100K Entrepreneurship Competition are a couple of examples; thousands of dollars are given away in funding every year. As you might expect, there is a significant number of applicants all competing for the prize. Standing out from the crowd isn’t easy. Aim for a pitch that’s unique and compelling.
Also known as P2P lending, it’s a combination of crowdfunding and a traditional lending platform. A company offering P2P services, of which UpStart is the best example, matches lenders with borrowers. We’ll be looking at UpStart in much greater detail in the next section of this article.
There are a couple of advantages of approaching a peer-to-peer loan lender.
- The application process is simple – far more convenient than having to meet a lender in their office, dressed in your best suit. You can apply for a P2P loan in your pajamas at home.
- Approval is swift – the approval process is much quicker, as is the receiving of funds.
Suggested Reading: Compare Mortgage Rates: Get Smart Before You Buy
Microloans are small, short-term loans with a low-interest rate. They’re perfect for the startup business because collateral and cash flow requirements are much lower than traditional bank loans. Many private organizations and federal government entities offer microloans.
One federal government entity offering microloans is the U.S. Small Business Administration. SBA loans are available for small business owners; however, there are several criteria to meet. They include:
- You have been turned down by a bank or other financial institution
- Your business must meet the government’s definition of a small business
- Depending on the type of loan, you have to meet additional criteria
Once determined that you qualify, you need to apply to a financial firm that operates with SBA loans. The SBA itself does not give loans directly.
Trade credit refers to the practice of suppliers extending credit to you. If your supplier delivers you materials and equipment but doesn’t pay for the goods on-site, you are exercising a trade credit.
Trade credit is not always easy for startups because it’s trust-based. It’s still worth pitching the idea to your suppliers. Present them with a detailed business plan, offer some collateral, and you might be accepted.
Suggested Reading: Tricks for Finding the Best Home Insurance on the Market
Presales are another tricky avenue to explore for the new business owner. If you have experience selling yourself and your business idea, you might be successful, though.
Upstart is one way to finance your business out of 15 others, and we want to pay special attention to this:
A Comprehensive Guide to Upstart Business Loans
Upstart does things differently than the vast majority of lenders. It’s this quality that makes it stand out from all the rest, particularly when it comes to financing new business ventures. Financial institutions have been lending money for centuries, but little has changed until Upstart came along.
A team of innovative thinkers, ex-Googlers, thought up the idea of creating a faster and fairer system for granting personal loans. Traditionally, lenders use FICO-based models to decide whether a person’s credit application is approved. These models also determine what interest rate to offer. The methods are undeniably simple; however, how the risk is quantified is very limited.
The founding members of Upstart wanted to do things differently and came up with the idea of using artificial intelligence to improve consumer’s access to affordable credit. It also meant a reduction in the risks and costs of the company’s bank partners.
It was a very successful and popular idea because, according to the Upstart website, there have been $4.4B in originations, and 67% of the loans are fully automated.
Upstart offers many different services, including:
- Personal loans
- Credit card debt consolidation
- Debt consolidation
- Home improvement loans
- Medical loans
- Wedding loans
- Moving loans
Upstart does not offer payday loans. For new business owners, personal loans are going to be of most interest to you.
Upstart Personal Loans
Personal loans are available, and you can use them for any purpose you want. It’s possible to borrow anything between $1,000 and $50,000, and the interest rates are reasonable. If you visit the company website, you’ll notice there are a few variations. In MA, for example, the minimum loan amount is $7,000. In Ohio, it’s $6,000, and it’s $5,100 in N.M. One final difference is in G.A., where the minimum amount is $3,100.
The reason Upstart personal loans are beneficial for a startup business is you’re tied to the loan according to your ability to pay, rather than by your business. If you have every confidence in your business being able to cover repayments, start completing the online application form today.
What You Have to do to Qualify
The requirements for a loan are much more relaxed than for any other financial institution. All you need is a minimum credit score of 620. You don’t have to have been in business for a certain period, and no business revenue is required. However, you do need to be a U.S. citizen living in any state other than Iowa or West Virginia and be 18 years of age or older. In Nebraska and Alabama, the minimum age requirement is 19 years. Additional requirements include:
- A valid email address
- Regular income
- Bank account
You provide your name, social security number, and date of birth on your application.
What is the Upstart Personal Loan Interest Rates?
The interest rate offered by Upstart is a fixed one. The actual rate depends on a variety of factors. These include your education history, work experience, and credit history. Rates range between 5.59% and 35.99%. The APR is the total cost you pay and is what you should consider when comparing products. The APR relates to the annual cost of the loan, including all other fees, including the origination fee.
Fees and Penalties to be Paid?
- Origination fee – deducted from loan amounts before delivery, the origination fee is up to 8%
- Late payment fee – 5% of the unpaid amount or $15, whichever is the higher amount
- Insufficient funds fee – $15
- Paper copy fees – $10
Upstart charges no prepayment penalty if you pay off part or all of your loan at any time.
You Can Have More Than One Upstart Loan at a Time
Something else that makes Upstart unique from its competitors is that you can apply for an additional loan at any time. However, you will have to meet specific criteria. You must pay your monthly payments for the past six months on time. You can only apply for an additional loan if you have no more than one other. One final requirement is that at the time of the loan origination, you must have no more than $50,000 outstanding principal
How Quickly Can I Get My Money?
A quick turnaround must be the most critical question you want to ask. One of the advantages of choosing an Upstart personal loan is that payouts are swift. The website clearly states that 99% of applicants receive money just one business day after accepting their personal loans.
At the bottom of the Upstart personal loans website page, there is some small print that goes into a little more detail. Accept your loan by 5 pm EST (not including weekends or holidays), and you’ll receive your loan proceeds the next business day. If the loan is to cover education-related expenses, it’s subject to a three-business day waiting period between loan acceptance and funding, which is under federal law.
How to Apply for an Upstart Personal Loan
The Upstart application process is quick and easy. First, check your rate by clicking on the button. It’ll take you to a page where you answer a few basic questions. Complete the section for how much you want to borrow and the purpose of the loan. You will add your personal details, which include your name, date of birth, address, and telephone number. You authorize account notifications via text message by checking a box.
Further questions relate to your highest level of education, a primary source of income, and how much savings you have. You also have to state whether you’ve taken out any loans within the last three months. You must also share if you’re applying for the loan anywhere else.
The final part of the form is to provide a valid email address and create a password. This information allows you to access your rate at any time in the future.
All that’s left to do is to click agree, and your rate is visible. Altogether, the whole process shouldn’t take longer than five minutes.
You then get a preliminary approval and an estimated rate. The information given is your interest rate, origination fee, and any other essential details about your loan. You use this information to decide whether you want to accept the offer.
There’s another step to take before you can think about getting any money. Your application has to be checked by an underwriter. You will then be required to provide more substantial information, and you will need to upload several more documents. These documents are used to verify the information you’ve already given. Documents such as transcripts, pay stubs, tax forms, and test scores are given to the underwriter together with your application. When all the information is verified, you’ll receive an official loan offer.
Once the official offer is accepted, you can expect to receive your funds within one business day.
Does Checking the Rate Affect My Credit Score?
The answer to this is no. Upstart does check your credit score, but it’s only considered to be a soft inquiry. Should you decide to accept the rate and continue with the application process, Upstart will make a hard inquiry. It’s this second inquiry that impacts your credit score.
Setting up Payments
The application process is the simple part. When you are accepted and receive your funds, you then need to think about loan repayment. Monthly payments are easy to set up: arrange for them to come out of your checking account automatically. That way, you won’t forget about making the payments.
The Pros and Cons of an Upstart Personal Loan
To make things a little easier, let’s look at the benefits and disadvantages of taking out an Upstart personal loan to help finance your new business.
- Interest rates start as low as 5.59%
- Receive funds in just one business day after approval
- Final approval is based on several factors including credit history, academic history, and employment status
- Eligibility and the interest rate is determined with a soft pull
- Origination fees can be as high as 8.00%
- Only 36- or 60- month repayment terms are available
What do Customers Say About Upstart?
The Better Business Bureau is an excellent website to visit if you want to know more about any U.S. company. Upstart has been accredited with this organization since 2015 and has an excellent A+ rating. TrustPilot also gives it the thumbs up with a score of 9.9 out of 10.
That’s not to say there aren’t any complaints online, but you can expect that about most companies—even multimillion-dollar shining examples of how a business should operate encounter a few disgruntled customers.
Final Word on Upstart
If you don’t fit the traditional criteria for a loan, Upstart is a worthwhile avenue to explore. If you’ve just left college, or you haven’t established your credit history yet, Upstart considers additional non-traditional information.
Upstart has a better than average rating when it comes to customer reviews, and any complaints seem to be those that are common across the whole of the lending industry. Before applying for a loan, it’s a good idea to shop around and check what else is available. Don’t be afraid to ask lenders for an estimated rate because it shouldn’t affect your credit score.
If you’re not too sure about applying for an Upstart business loan, here are a few other options you might consider.
Apply for an SBA Loan through a lender who is part of a program run by the U.S. Small Business Administration. The SBA runs several programs, but the most relevant for a startup business are the SBA Microloan program and the SBA Community Advantage program. All others require your business to be operating for a longer length of time.
If you’re interested in an SBA loan, you must understand that the SBA doesn’t give out the loans. It acts more as a facilitator between a borrower and a lender. It does this by setting out a series of guidelines for the financial institutions to follow. The SBA effectively minimizes the risk a lender faces when lending to a new business owner.
The SBA Microloan Program
The Microloan program is excellent if you want to borrow less than $50,000. They come with a low-interest rate between 8% and 13%. The maximum term length is generally six years. Microloans can be used to cover a variety of startup costs, including working capital, inventory or supplies, machinery or equipment, fixtures, or furniture. The requirements for an SBA Microloan depend on the lender you approach.
The SBA Community Advantage Loan Program
This program provides federally guaranteed term loans of between $50,000 and $250,000. Community-based lenders, for example, Community Development Financial Institutions and Certified Development Companies, administer these loans. The loan amounts offered are very affordable, with interest rates of between 7% and 9%. Loan terms are generally between seven and ten years.
Very few criteria have to be met to qualify for this type of loan. If you prove you’re a responsible borrower, and your business idea is a good one, you’re in with a good chance of being accepted.
If you want to know more about SBA loans, visit the Small Business Administration website.
The Lending Club offers peer-to-peer lending between $1,000 and $40,000. This company is the pioneer of peer-to-peer lending and has been facilitating loans since 2007. As well as being an option if you’re looking for startup funding, it also offers debt consolidation.
One of the advantages of this lender is the co-signing option. Only a few lenders allow joint applications. If you want to apply for a joint loan, one of you must have a minimum credit score of 600 and above. The second applicant’s credit score can be much lower. Your combined debt-to-income ratio must be less than 35%.
The estimated APR for a loan from LendingClub is 6.95% to 35.89%, depending on your circumstances. For more information, check out the LendingClub website.
The options for anyone with a lower credit score are limited. There are, however, a handful of lenders who can help if you want debt consolidation or need money for a startup business. Loan amounts from Avant range from $2,000 up to $35,000 and can be taken out between two and five years. Qualifying for this type of business loan requires a minimum credit score of at least 580.
One option about which Avant likes to boast is its refinancing option. Customers might be eligible to refinance loans to raise more money, benefit from a reduced rate, or improve the details of their student loans. For student loan refinancing or any other type of refinancing, you’d need a minimum of six months of consecutive payments made on time.
The estimated APR for a loan from Avant is 9.95% to 35.99%, depending on your circumstances. Find out more details by visiting the company website.
Before you start contacting online lenders and completing applications, let’s share some useful tips to increase the chances of securing the right kind of financing.
5 Tips for Financing Your Business
The competition for startup funds is fierce. If you want to stand out from all the other entrepreneurs with great ideas, here are some tips to help you.
Draft a Business Plan
The foundation stone of any successful business is a detailed business plan. It’s a way of mapping out your journey for the next few years. It’s also something that comes in very useful when you’re looking for finance. Banks, in particular, often ask to see one. A well-written business plan helps to improve your credibility, and potential investors can appreciate the value of investing in your business.
Aim for your business plan to include:
An Executive Summary
At the beginning, add a synopsis that gives the key points of each section.
An Overview of Your Business
Includes information such as the legal structure, history, type of business, location, and how you plan to do business.
A description of how the business is going to function, for example, it’s physical setup and who’s responsible for various tasks.
Analysis of the Market
This section looks at the market as a whole and could include charts, graphs, and other types of data. It allows you to show how you’ve thought about how your business will hold in the market and how you plan to meet the needs of your audience.
Services and Products
Provide a brief description of all the services you are planning to offer or products you’re planning to manufacture or sell.
Marketing and Sales
Give brief details of prices and sales information. Explain the reasons why customers might be buying your products and how you plan to market your business.
Analysis of the Competition
Compare your business with your competitors and how you plan to gain an edge over them.
If there are any other key players involved in your startup business, you provide their background information.
This is possibly one of the most critical sections and the one which requires the most thought. Outline how much is necessary to start your business and keep it running. Include figures for the funds needed over the next few years. Explain how you’ll spend the funds, whether there are any anticipated funding needs in the future, and define your ongoing expenses.
Provide projected income statements and balance sheets.
A business plan is quite a complex document for an inexperienced business owner to create, but don’t worry. There’s plenty of online help available and any number of professionals who offer their services for a price.
Suggested Reading: Travel Medical Insurance: What We Wish Everyone Knew
Don’t Be Embarrassed About Seeking Advice
One of the good things about starting a new business is that there are always people willing and able to offer advice and share their experiences. Talk to other entrepreneurs in your area and ask about their experiences. Let them show you how they funded their own business and listen to their recommendations about who to approach. You might come across a businessperson willing to offer resources to help you get your business off the ground.
A Good Credit Score is Vital
Many benefits come with a good credit score. When it comes to funding, you’ll find financial institutions more likely to provide you with the money you need, better loan terms, and interest rates.
The basis of your credit score and credit report are:
- Payment history
- Level of debt
- Credit age
- Mix of credit
- Recent credit
You might not have thought about your credit score previously. But you’re starting a new business and require capital to get the ball rolling, so do it now! You’re entitled to request a free credit report and credit score once a year from all three credit bureaus. Make sure you do this before approaching any lenders. If you have a bad credit score, there are things you can do to make it look better.
The three-digits of your credit score is an essential factor in your financial life. The higher your score, the more likely you are to be eligible for loans and credit cards. It also means you get much better deals. Take the following steps if you want to improve your credit score over some time.
Pay Your Bills on Time
It’s crucial for you to show any lenders that you can pay your bills on time. Your past payment history is considered a good indicator of the future. Aim to pay all your bills on time, including rent, phone bills, utilities, and loans. If you fall behind on any of your bills, you should aim to catch up as quickly as possible.
Paying utility and phone bills on time can earn you credit. It’s possible to improve your credit score by making your utility and phone payments on time. There are unique products that give you credit for paying these bills promptly.
Pay off your debt and keep your credit card balances low. Credit utilization is the amount of available credit you’re using, and you should aim to keep this figure as low as possible. A credit utilization figure that is low in number shows lenders you haven’t maxed out your credit, and you’re a smart manager of your credit.
Suggested Reading: FHA Mortgage Rates: Our Top Lender Comparison
Applying for New Credit Accounts
Only do this if necessary, and it’s certainly not worth doing it to improve the variety of your credit. Applying for new credit usually involves a hard inquiry, and too many of these harms your credit score. Too much credit can also be a temptation, causing you to overspend and rack up your debt.
Keep Unused Credit Cards Open
This is a smart strategy because it improves your credit utilization ratio.
Regularly Check Your Credit Report
This is something you should aim to do every year. Mistakes do happen, and inaccurate information can damage your score. Any errors you find should be disputed immediately and put right.
Become a Wizard Networker
Networking might not be something you usually do, but it’s an essential skill to learn. Strong networking skills provide you with lots of opportunities to grow your business. It doesn’t matter what type of business you’re running. It’s a healthy practice to include in your business day routine and can help you find the funds you need to start your business.
There’s no better time to get started either. Start with face-to-face networking, talk to other business owners in your area, attend conferences, and seminars. Once you’ve honed your face-to-face networking skills, you can move online.
Work on Your Budget
Your budget is part of your business plan, but it’s so important that it requires a tip of its own. Your budget is something that’s going to guide the financial side of your business. Even if you haven’t written a business plan yet, it’s something you can present to lenders.
If you follow these tips before you approach any lender, you’ll be more successful, and acquiring funds for your business venture will be easier.
What to Look for in a Business Lender
With so many business loans available, it can be challenging to know which one is right for you. When you’re comparing business lenders, here’s a list of some of the things you need to pursue.
Ideally, you need to find a lender that provides upfront, transparent, and easy to understand pricing. It’s also vital that you don’t borrow more money than you can afford. It’s not the best way to start your new business, with debt hanging over your head and no chance of repaying in full. When comparing the cost of different loans, look at how a lender calculates the value of the loan, the length of the loan, origination fees, and any additional fees you might have to pay.
Being able to apply for finance online is very convenient, but you should also look for companies with real people with which you can discuss your loan. There are bound to be questions you want to ask, and you can’t always find the answers you need in the FAQ section of the website.
Applying for a loan online streamlines the process. You might need to provide some documentation, but usually, this requirement is less than a traditional brick-and-mortar bank. If the loan application process is more straightforward, you can expect a quick answer, and there will also be fewer hoops through which to jump.
If a lender’s customers are happy, it means they provided an excellent service. Check online for positive customer reviews, a high rating from the Better Business Bureau, industry awards, and recognition. Also, look at any negative reviews you might find. They’re not necessarily a bad thing, because even the best companies around the world have a fair share of disgruntled customers. What you need to view is the way the company handles issues and how quickly they resolve any problems.
Understand your payment schedule before you decide whether to accept any funding. You’d like to have the option of making payments every business day, weekly, monthly, or quarterly; the schedule must suit your needs. The best lender is one that makes repaying your loan simple, ideally with automatic payments made from your account.
With all the information you need, you can now decide which route to take for funding. Upstart is worth considering, for all the reasons mentioned in our Upstart personal loans review, but there are other options should you need them.
We’d love to hear about your experiences, as there may be some information we can use to improve our service. Real-life experiences also help others like you, so please leave some comments below.
Suggested Reading: Dental Insurance Companies – A Quick Guide