Not only to start a business but also to meet the day-to-day expenses of the business you need capital. You need funds to rent commercial space, buy office furniture, stationery, and other equipment depending on the size and type of the business. If your family and friends are confident of your business idea and plan, ask them for a certain amount of money as a loan. Else you can approach your local bank or Credit Union for a business loan at a favorable rate of interest.
Government has designed various loan schemes to attract and encourage small businesses. Before approaching a financial institution for a loan, check your credit history. If your credit rating is poor, take measures to repair your credit. You can apply for a bad credit loan if you have inadequate credit ratings.
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Small Business Loans – Requirements
Many people approach public and private banks for a small business loan in the first place. If the bank has to approve your loan application, you have to fulfill a few criteria. Here are a few things a bank would consider before issuing you a small business loan.
A bank would consider you a trustworthy customer only after checking your credit history, business experience, and educational qualification.
Your business plan should be strong and have all the necessary details of the nature of the business. In short, your business plan should speak for you. The reason is a bank or financial institution would approve a loan only after reviewing the business plan you have submitted. A bank will also take into account the loan repayment method proposed by you.
If you have the required collateral, a small business loan would be issued without any hassles. This type of loan is called a secured loan. The bank would not only issue a secured loan but also advises you on various loan repayment solutions.
You have to establish and maintain good business relation with the bank you apply for a small business loan. Apply for a short-term loan and ensure to repay it within a short duration. This will increase your business credit history.
Manage the savings account with your bank effectively by keeping ample funds and avoiding the bouncing of checks. The banks also would feel confident to do business with you.
Small Business Grants
Government grants small business loans at a very low rate of annual interest to encourage new entrepreneurs and also to finance any small business. Once you have decided on the type and the size of the business, you can check online for the various government small business grants. Choose the best suitable business grant available for your business in this option.
Getting a small business loan at a favorable rate is easy if you have a good business/personal credit rating.
You can apply for a business grant if you are a tax payee and have citizenship of the US. Applying for a government small business grant includes a lot of paperwork. If you are not confident about filing a loan application form, get the help of a reputed accountant.
Many private non-profit financial organizations are also providing small business grants. The best part of a grant is that you need not repay the grant amount. Remember, a bank would grant you an unsecured loan while many of the private financial institutions prefer to grant secured loans.