To qualify for credit, many small-enterprise lenders require entrepreneurs to have been in business for at least a year. However, if you’re looking for a startup business loan, alternate funding options may be available to help you get started. Here are a few financing options to explore.
SBA Loans
SBA microloans are often easier to qualify for than larger-dollar loans because they are managed by nonprofit community lenders. The disadvantage is that the amount of funding may not be sufficient for all debtors. The SBA’s flagship 7(a) loan program also provides funding for applicants to start enterprises. However, SBA 7(a) loans are more difficult to obtain. The loans are often made to established enterprises that can provide collateral, which is a physical asset that a lender can sell if you default. The requirements are stringent, and even if you meet them, applying for an SBA loan might take several months.
Microloans
Those who don’t qualify for a microloan from the SBA can apply for one from a microlender or other nonprofit lenders. This is often a less challenging route to access financing if you have shaky finances. A number of these lenders focus on underserved and minority small-business owners, as well as startups in communities that are economically weak. Because many of these loans are offered by mission-based organizations, their terms are likely to be better than what you would receive from a private lender. This makes it possible for you to establish better credit and grow your business.
Online Business Loans
Some internet lenders provide business loans to companies that have been in operation for less than a year. To qualify, you need to have been in business for at least six months. You may be able to access several sorts of finance, depending on the lender, such as short-term loans, invoice factoring, startup business lines of credit, or equipment financing. However, when compared to more established enterprises, you will typically receive lesser loan amounts, shorter durations, and higher interest rates.
As in the case of other types of financing, make sure to compare your options and do your research before you zero in on a loan.
