Small Business Loans to Start a Business- A Quick Guide

Small Business Loans to Start a Business- A Quick Guide

Published on 2022-07-19

Category: Business Loans, Small Business Finance

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Finding the right business loan to start a business isn’t easy, especially if you’re a first time entrepreneur. Even if this isn’t your first entrepreneurial stint, it can be hard to predict what cash flow might look like a few months from now.  With a non-existent business credit score, it comes down to whether or not you can put up some collateral. So, how does one choose the right small business loan to start a business? Let’s find out.

Why a small business loan is a strategic investment:

Research shows that Australian business owners end up needing additional funds within 3-6 months of starting up.This is a crucial time that can make or break virtually any business. It’s all too easy to underestimate the many startup costs–from obtaining licenses to working with a business consultant.A small business loan can be an excellent backup in such situations.

What can you do with a small business loan?

A small business loan comes in handy to cover virtually any business expense under the sun. This includes:

  • Purchase of inventory or equipment
  • Managing cash flow when customers delay payments
  • Paying employee wagesand supplier bills
  • Running marketing campaigns

How easy is it to get a small business loan to start a business?

Lenders will use different criteria to evaluateapplications for small business loan. However, most will expect you to have::

Minimum Timeframe:

You should have been in business for at least 6 months to be eligible for a small business loan.

Minimum annual income:

Some lenders will also have a minimum annual income requirement to assess your repayment ability. For loan amounts greater than $150,000, you may be asked to provide P&L, balance sheet or other documents related to your business.

Credit score:

A good credit score and a clear tax record can go a long way in getting you approved. However, business transactions areoften unpredictable which can adversely impact your credit score. To tip the scales in your favour, you would normally have to offer collateral to get a small business loan. Over the years, however, a number of non-bank lenders have been offering competitive small business loans of up to $150,000 without collateral.

Finding the right business loan:

There are dozens of small business loans available to the average entrepreneur today. To make the right choice, ask yourself the following questions:

  • Do you know exactly how much money you need?
  • Are you looking to make a one-time purchase or do you want to pay for recurring business expenses?
  • Is your cash flow fairly consistent?

Depending on how you answered the above questions, you can choose either a business loan (short-term expenses) or a line of credit (ongoing expenses).


Tags: Small Business Loans, Small Business Loans to Start a Business, Short term loans, Business loans for startups, Start up loans, Business loans for new businesses, Start up business loans, Business startup loans, Startup loan tips

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