5 Tips to Get a Business Loan as a Nascent Entrepreneur

Like millions of people sweating blood to land their dream job – aiming to be an entrepreneur – can be an equally difficult hurdle to cross when your business is in its nascent stage.

Some of us manage our jobs well and are perfectly content with our jobs. There are a few people, however, who just don’t find it in their best interest to work under a boss — especially someone with a Type-A personality.

They know they can’t work under someone for the rest of their lives. So what do these people end up doing?

They start coming up with ways that can make them the boss of their own company — and one of the ways to do that is to start up your own line of business and become an entrepreneur.

However, as tempting as that idea may sound, it’s never that easy to achieve. Building a company from scratch is a thousand times harder than what it may sound like. Right from the time you take your very first step as an entrepreneur, the process keeps on getting harder as you strive to make your business prosper.

But if you are determined to make your business stand proudly on its own two feet then no obstacle is insurmountable in the path to success.

If you are one of these nascent entrepreneurs who need some guidance on how to start towering the building blocks of their own business, then the first advice we can give you is to plan ahead way before you actually start putting things into action.

The first step that you need to plan out is to find how to get the necessary amount of capital that will be required to get your business up and running. If you are wondering how to obtain the finances — simply continue reading.

Here we give you some

important tips that can help you get a business loan as a nascent entrepreneur:

1. SBA Loans

A Small Business Administration (SBA) is still known to be one of the most common first options to choose if you are in need of finances to kick start your business. They have special programs that grant microloans to small businesses. It has been reported that a bank provided a SBA loan of $29.6 billion to a small company in 2013, which definitely proves that they generously help out small businesses in their field of work.

According to a recent survey conducted by Guidant Financial in 2019, here are some interesting small business statistics:

Small Business Trends and Statistics - Guidant Financial
Small Business Trends and Statistics – Guidant Financial

Banks however don’t give out loans easily or directly — they partner with traditional lending companies that are aware of and accept the guidelines set up by the SBA. They also need a guarantee of return on loans otherwise your approval rates can plummet.

If you want to get a higher chance at approval, ask for an SBA loan from the bank you have had good relations with for years. Another great thing about SBA is: not only do they provide small business with microloans, they also offer information and guidance that can help your business succeed.

2. Personal Investment

Initially, you can use the money from your savings to help invest in your business. You can start saving up money while you are still at your old job and once you have collected enough, you can quit the job and use your own money to handle your own company’s finances.

Although this may seem like a good idea as you don’t need to worry about paying back any loans to the bank, it is still a painfully long process. It can take up to many months or even years to save money for your personal business investment and this is why a lot of people lose their determination midway while trying to save money. This is where a credit card loan also appears as a viable option.

If you have more than a 580 credit score you can apply for a credit card loan. You can then receive these funds overnight. The only downside, however, is that the limit of these loans does not exceed $40,000.

But even with this much amount, you can easily purchase materials for your business, such as if you were starting up your own medical clinic, you would find many medical equipment financing companies that can provide you with machineries used specifically for medical purposes at reasonable prices.

3. Angel Investors

Being able to get any angel investors can be serious stroke of luck for your businesses start up. These angels are wealthy and rich businesses or individuals who are interested in helping out a small company grow. Notwithstanding, they cannot provide massive loans such as over 1 million dollars that a venture capitalist investor can provide. But if your business startup requires 5 hundred dollars or less then having angels invest in your company is in your best interests.

Of course the money they offer you does not come with free conditions. In exchange for the money they invest in your small business; they often seek the right to have a control over your company’s management. They also have an influence on the decision-making processes of the company and reserve a seat as one of the board directors of your company.

If you can compromise on their terms and are seeking their assistance you can contact the organization, such as the National Angel Capital Organization.

4. Family & Friends

Another great source for getting the capital needed for your business is to ask your friends or family to help invest in your business, but this method has greater risk than the above methods.

Businesses can end up having a phase where they do not earn a lot of profit — and if you can’t pay back the money you owe to the people you borrowed from, it can be emotionally damaging as well. You can lose old friends and family and destroy relationships in a matter of seconds. That is why you must make yourself and the other party aware of the risks involved when signing a legal document.

In fact, you can even sell them an equity such that the one providing you with the loan gets an ownership interest in your business. Either way, you must deal with this business professionally just like you would with any other investor.

5. Crowd Funding

Instead of seeking out venture capitalist investors or angel investors, make your need for funds known public, and grab attention of any other potential investors that would be willing to invest in your business plans. They can even give you more than you could’ve hoped for.

Crowd funding is an effective tactic to raise money for your funds from potential investors who give small amounts of money that increases according to the number of people willing to invest via the Internet.

These web based projects allow you to reach out to these investors and share your ideas. If they find your ideas interesting, they will be willing to pay a large amount of money for the business startup. These investments can be in debt but the equity crowd funding requires you to share a part of your company to the investors in exchange for the finances that they provide you with.

Featured image source: Freepik

Published by Nishitha

I am done with my Physiotherapy Graduation. And I always try to share Health and technology tips with people. Apart from Physiotherapy and being a tech savvy, I do explore more on Technology side and I keep sharing my findings with wider audience.

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