* Partner Post
Big problem startups face while trying to get a business loan is lack of credible credit history. If you are a new entrepreneur, then you would understand this pain very well. Although you have all the business plans ready, the files aligned, the documents updated, the strategies formed and can give a brilliant presentation on your business forecasting, yet you may be denied a loan from a bank for this reason that you are new to this, and the business is also new. 'New' means no previous record found, which means a lack of credit history. And that is enough for the traditional system to deny you a business loan.
But this is not the end of your dreams. Your startup would still run and sustain, as there are many more doors left to be knocked and tried, and you certainly deserve a chance to get a loan and try the venture. Here is how you would take this entrepreneurial challenge and win.
How to face this challenge
New entrepreneurs face the challenge of not getting a business loan from traditional banks by trying other funding options and private lenders who also are trying to get established in the money lending business in the market. This way both parties are benefitted and a big role is played by services like https://www.libertylending.com/ in helping the entrepreneurs and business loans seekers meet the several money lending organizations and agencies. There are several alternate options and loan options for startups though, which are discussed below.
This is a very nice concept for the beginners in business. If you need some funds for buying equipment, then you may apply for an equipment financing loan. And the collateral for this loan would be the equipment you have bought with the loan. This simply means, you get a loan, you buy equipment and you are sorted, and till the time you pay back the loan, the equipment is hypothecated to the lender. In case you cannot repay back the loan, the mortgaged equipment would be auctioned to pay off for the rest of the loan.
In an equipment financing plan, you can enjoy huge tax saving benefits by deducting the financial costs and interest fees. Also, the depreciation of the equipment is noted each year and adds to tax savings. This kind of loan needs less documentation, and also you get more interested lenders to invest in your business as you have bought new equipment.
With a decent credit score of above 600, and being in the business for almost a year, or earning revenue of $100000 a year qualifies a business for the loan, and the entrepreneur can apply. With this funding system, you get the whole fund needed for a purchase altogether, and hence you need not go for part purchases over a period of time slowly. Rather you can get all that you need at once and of the latest model or technology.
Credit cards for business
You may apply for a business credit card, and use it to buy the required inventories or make expenses. This has one big advantage. Business credit cards can be consistently used within the credit limit as long as you keep on paying back some amount to stay within the limit. You can always get some funds through this system. Business credit cards help you keep your business expenses from the company funds and other expenses on loan amounts stay separated. This makes things sorted.
The usage of credit cards helps you set up a strong credit score with each successful, timely repayment. And you also are benefitted with card usage reward points. Every company has their own point and reward system. And you can get help from it.
Another benefit is the offer of 0 percent APRs for the first year of use, which comes as an introductory offer with many business credit cards. If you are getting a card with such features, then you can reap its benefits by using the card extensively in the first year for all expenses and pay back every expense made on time.
If you can get a business credit card, then it's great. Over time with continued use and paying back the credit limit will keep on increasing. Else you may also get a secured credit card for which you will have to put a security deposit for the line of credit.
Credit line builder method
If you have a healthy credit rating of 700 or above, then you qualify for applying for a credit line builder. This is a system where you sign up for getting multiple credit cards through a business funding agency. And every card comes with a high credit limit, thereby giving you the opportunity to use the fund in flexible ways. With this, as you use and pay the cards for, you gradually build a healthy credit history over a reasonable period of time since startup.
Other loan options for entrepreneurs
You can avail more startup loan options by going through funding financial agencies, who acts as the platform for meeting loan seekers with lenders. They help in a lot of ways. As they earn their revenue from commissions of each successful loan approval, thus they take a special interest in the fact that every applicant gets a loan. And in the process, they reduce the strictness in verifications, policies, processing time, documentation and all. Only a few basic things are seen and needs to be met to get a loan approved through such financial agencies. Therefore, as the new entrepreneur, you must try your hands on such a platform which are available online, and where the application process is very simple with filling up of simple online forms.
Entrepreneurs have to face various challenges, and they meet several problems while they struggle and try to establish their startups. The key to success is to tread steps carefully after gala research so that you do not lament on your mistakes and their impacts which are sometimes too deep.