The complete guide to securing a business loan for your startup. - EduKaroo

The complete guide to securing a business loan for your startup.

The complete guide to securing a business loan for your startup.

When you want to start a business just having a passionate team and a great idea. It often requires money to get things done. Without having funds it’s hard to manage day-to-day expenses. The reason behind the unsuccessful startup is a lack of money or funds, especially due to limited credit or a history of business many banks may not want to lend to the new businesses.

But don’t take much tension. There are many ways to get funding for your startup. These startup loans can help young businesses to kickstart their projects and look to expand their businesses. These loans can provide the cash you need to kickstart your business.

Business Loan

It is an arrangement between a private lender or any bank and a business owner, lenders are those who offer funds. In exchange for these funds, they receive eventual payment they have done with principal interest. These loans are only meant for business needs.

Important factors on which business depends:

Here are some important factors to consider and evaluate before giving any loan.

  • Business Plan: Companies are seeking financing, they must submit a written and proper plan for business. This plan serves as a roadmap for how a company can work to generate revenue and achieve success. The goals of the company must be clearly stated in which these goals can be achieved and the deadlines must be met.


  • Cash Flow: The net amount that is coming and going out of your organisation of cash and equivalent to it. There are three types of cash flow available that are Operating, financing cash flow and investing.

Operating cash flow is all the money made such as selling goods and services. Financing cash flow is the payment of the company and it also includes issuance of stocks and debt. Investing cash flow is all acquisitions of assets and in other endeavours business investment.


Qualification required


It often depends on how long you have been in the business to get a loan for your startup. If you apply for a small business, your business must be running for six months. You can even qualify for a more traditional loan for your business.


Lenders rely mainly on the personal credit score. It means the higher your credit score is the higher your chances of getting an approved loan for the startup. They also want to know whether you know this field or not. In some cases, you need to showcase your collateral like a house or car to secure the loan.


Many criteria for small business financing can vary from lender to lender. Here are some requirements for a startup loan:


  • Personal credit score: A score of 680 or higher should be the credit score for an ideal approval.


  • Business history: For at least 6 months being in business can improve the chances.


  • Plan of Business: It is a well-prepared plan for most loan applications.


  • Collateral: To secure the loan with personal assets loans are required.

How to apply for a startup small business loan?

It depends on the application process for the financing option for which you are applying. It is a great idea to research startup different loan options before finalising.

There are types of small business loans.

Microloans SBA

These are considered tricky to apply through traditional banks, this can simplify the process but reliable lending marketplaces. A small amount of funding up to $50,000 needed for startups. These loans can help you buy inventory, and cover working capital needs, and equipment. It can’t be used to pay off existing debts or to purchase any property. The loan term interest rates are between 8% and 13%.

Business credit cards

It is easy to apply and requires a federal tax ID or Social Security number. This card provides easy access to funds and helps to manage cash flow. It depends on your credit card, credit limits vary; they can go up to $50,000. There are many offers offered by these cards rewards like cash back and other perks.


Crowdfunding and Friends & Family

Your ideas and creativity play a crucial role. Crowdfunding and Friends & Family to fund startups online payment or using a personal network. While crowdfunding is used to connect with potential supporters, family and friends loans rely on the relationship.


Financing of Equipment

The equipment serves as collateral and this option can be quick and easy. To buy the equipment your business needs you to borrow money. For the loan equipment serves as collateral which lowers the risk. For businesses, this option is especially helpful in fields like construction or manufacturing.


How Does a Typical Business Loan Process Work?

For processing loan applications while every bank has its procedures there are six basic steps:


  • Business Reaches out to a Lender: When you are selecting a lender countless banks offer business loans. With competitive rates and terms shop around for a bank that suits the offer. It is okay to speak to ensure you get the best rate.
  • Lenders provide information that suits the needs of your business: When you speak to the lender you can understand the type of loan that suits your requirements.
  • Documentation requested by Lenders: Supporting documents are asked by the lenders. These documents may be submitted physically or electronically.
  • It went into underwriting and then got closed: The underwriting time varies from one lender to another. Underwriting is processed by the loan provider, an online lender reviews the application to determine the benefits and risks of loaning money.
  • Business owner Receives Funds: The loan has closed, and the funds are received by the borrower and the account is transferred into their account.

Advantages of Business Loans

These are commonly used tools that help to grow a business and offer a range of benefits and this depends on the circumstances.

  • For a variety of uses, they provide access.
  • It establishes a relationship between a bank and a banker.
  • It accelerates your growth.

The world of business loans can be intimidating. With so many different types of loan requirements, options and it can be challenging to find an accurate loan that fits the needs and requirements of an individual.

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