Start Up Loans for Small Businesses

Start up loans often present the greatest risks to lenders. There are many unknowns to how the business will perform. A franchise is much easier to start up than a small business from scratch. This is because a franchise presents a viable business model. The existing franchises can be analyzed and assumptions are easier to support. In order to have a chance at getting the money you need to start a small business you must have the following strengths.

Direct Industry Experience: This means that you have worked for a company similar to the business you want to start up for 3 or more years (more years is better). You need to be able to prove that you know what it takes to manage and run the new business.

Cash: Not only will you need to come up with a down payment which could range from 15%-30%, you will also need to have at least 3 months worth of working capital on hand. Make sure you look at your projections and include the debt payments when determining how much cash you will need.

Business Viability: Your business must not be a distressed industry. You need to have a competitive advantage over the local competition. Your business plan is one opportunity you have to demonstrate your market niche and opportunity for business. A feasibility study can also be ordered by a third party company to help determine how viable your start up business will be.

Collateral: Make sure you have enough collateral to support your loan request. Collateral can come from business assets, retirement money, investments and equity in real estate. SBA will typically put a lien on your primary residence to support the collateral of a start up business loan.

If you need help determining whether start up financing could be available for your unique situation please contact us. Our group can provide you a quick analysis and get you started with the right foot forward.

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