How to Get a Loan to Start a Business
Starting a business or building on one you already have can cost a lot of money. Sometimes, this prevents people from following their dreams. When they look at the money that they need for merchandise, real estate, equipment, and employees, they often wonder who would possibly lend them such a large amount of money. Looking for a business loan during a recession causes even more worry.
Before you throw away your dream, though, you should learn how to get a loan that will help you start or build a business. You might find that you have better options than you think.
How to Get a Loan to Start or Build a Business during a Recession
The current economic downturn will make it harder for you to get a loan to start or build a business. There’s no reason to pretend that it won’t. Many of the banks that handed out business loans to everyone who walked through the door two years ago now go over every application with a fine-tooth comb, looking for reasons to deny the application.
Just because it has become harder to get a loan for your business, it does not mean that it has become impossible. There are still options open to those with various levels of credit.
How to Get a Loan from a Bank or Credit Union
One of the first things that you should do is contact the banks and credit unions in your area to get information about applying for a business loan.
Pay particular attention to banks that you have a history with. Most lenders are more aware of the dangers associated with lending money to new businesses, but you often have a better chance of securing a loan from a bank that has first-hand experience with your financial history. Plus, some banks are willing to offer slightly discounted interest rates to those who have checking accounts at their branches, so you could save money.
Banks and credit unions will ask you to fill out applications to determine whether or not your idea is a safe bet and whether you can repay the loan. It’s important to complete the application as honestly as possible to prevent any unforeseen problems from developing just before you think you have approval. The institution might also want to talk to you about your business plan, so be prepared to give them a short presentation that explains why your business will make money.
How to Get a Loan with Bad Credit or No Credit
If you have bad credit or no credit, then it’s going to be tougher for you to find a lender. Don’t give up hope, though. Try contacting the U.S. Small Business Administration to see what options are available in your area. They can often provide information about lenders and other services that are located in your region.
Expect to pay a higher interest rate if you have bad credit or no credit. Lenders use higher interest rates when giving loans to these clients to make up for the larger risks that they assume. Be sure to contact several lenders and explore potential government funding options, though, to make sure that you get the lowest possible rate.