How to Get a Start up Business Loan
Not including loans from friends and family, 98% of funding to start a small business, any type of business or project will come in the form of loans (debt) as opposed to equity in which someone takes a % of your business.
Getting a start up business loan is not hard. You can get them without collateral, without verified income, without a business plan and without selling anyone on why your idea is a good idea. What you will need, is good credit, or at least a plan to get to that point. I have seen lending really start around a 620 score, but if you are looking for loans from 25k-300k, you need to be 680+.
This funding is all unsecured, you don’t have to put a lien on your paid off house, (if you do see collateral based loans HERE) – link to other page. These loans can only come in one of three forms.
- 1. Lines of credit – These are lines given by banks usually that do not have a fixed rate and term. Only pay interest if you are using the money. Rates vary from 7-12% and they are usually issued in amounts less than 50k each with the average being under 20k. These are the hardest of the three loans to get because the bank sets the money aside and if you don’t use it, they are losing money. You will need a 700+ score to get these and verifiable income in the form of paystubs. IF you have a 770+ score and no income, you have a decent shot at getting approved based on a stated amount at the right banks.
- 2. Installment loans. – These are mainly coming from the Peer 2 Peer lending sites these days. They have a fixed rate and term just like a car loan. The terms are usually 2-7 years and the rates range from 7-30%. You must verify income with these loans 95% of the time. Rates and scores are not as closely aligned as you may thing. Solid w-2 income and good work history with good scores usually yield the highest amounts with lowest rates. They want to know you will have a job and can repay the loan. With these loans you can almost always get lower rates if you accept less years for repayment (and higher monthly payments). They can be a good option if you know you will put money to use right away.
- 3. Credit cards – This is where the majority of funding comes for the simple fact that these companies make lots of money and can therefore lend money with less scrutiny. Most will not require verification with paper documentation so you can state your income. NEED CASH? Getting cash of cards can be costly… OR FREE. Many people are using the right credit cards to borrow money at less than 5% including all fees. Flipping houses on credit cards has become popular by acquiring cards that allow you to take a cash advance without a fee, then using balance transfers at 0% to pay off the cash advance. This effectively puts cash in your account at 0% for 8,12, 20 months sometimes. Learn more on this process at fundinghelp.com/cash.
If you have good credit, you have access to cheap money, just not infinite money. The most people can really obtain in unsecured in this way is 300k and that’s the top top amount. You can do it WITHOUT hurting your credit but you should have an idea that makes all these efforts worthwhile. You must have a game plan for acquiring the highest amounts possible by researching what banks and lenders are lending at the moment, what credit bureaus they pull, and what each specific lenders appetites are.