Funding for you new and or already existing Business: Business Loans
- Jan 20, 2020
- 2 min read
Updated: May 2, 2021
Maintaining and starting a business can be expensive; from Startup cost, to Inventory expenses, marketing, and more. If you are like most entrepreneurs or new business owners going out of pocket for typical start up cost can seem daunting. There are several ways to fund your business, See Below:
Crowd Funding - The act of receiving funds from your friends, family, or community. The most recognizable crowd funding platform today is GOFundMe.
Out of Pocket - Funding your business using your personal funds comes with a high risk if you are low on disposable income. Sometime's funding your business with personal funds creates habits of dipping into your personal bank account for business funding and replacing those funds at the rate you remove them would typically not work in your favor.
Grants - A business grant can be very helpful, it is a lump sum of money provided by either the SBA (Small Business Association) or other third party entities. The only issue you might run into is qualifying for that grant, grants typically have certain requirements that not every business is capable or meeting. Needless to say grants often times are used for non-profit organizations.
Business Loans - A business loan provided by a bank can provide you with a substantial amount of funds for your business to operate with, the main stipulation behind a business loan is that you have to pay it back in Installments.
*There are other forms of funding in which you can seek for your business, i only wanted to cover the 4 above. Below i will go into further detail about Business loans and the process of obtaining one
If you are looking to obtain a business loan for start up cost, major expenses or anything along those lines it is important to know that you can only apply for a business loan as a business and not for personal use. So you will need to do a few things to qualify for a business loan:
- Obtain a business credit score which typically ranges from 0-100
- Apply for business credit cards to obtain a better score (use responsibly).
- Open a business credit file with all 3 business credit Bureaus; Experian, Transunion, and Equifax.
- Obtain a tax ID/EIN for your business.
- Set up a business bank account.
- Incorporate/Register your business as a legal entity.
- Get a business phone number so that your business can be identified by the bank and not identified as your personal self.
Disclaimer - business loans can come in handy when you have a business and or a few cost you cannot cover. Rates are typically lower than most personal loans and the amount you can get on a business loan sometimes is much higher than you could get from a personal loan. But be cautious, if you were to get a business loan that you could not afford then you would be using all of your business profits to pay that loan back in some cases as the bank is going to have a set repayment schedule for your business installment loan. Consult a specialist like myself or an accountant before considering a business loan.
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