Loans to Start a Business
Loans to start a business are readily available for small business owners. Use these loans to start a business, purchase inventory or real estate, or to consolidate existing debt. Like all loans, business owners should compare loan options to locate the most affordable option for their business. Focus on the availability of the loan, interest rates, qualifications and terms. Look to several sources, including business-to-business loans and government-backed loans.
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Commercial Lenders
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Standard commercial lenders such as banks, credit unions and other financial institutions offer numerous loans. To obtain a loan, provide the lender with a full credit application and a business plan. The business plan should outline the need for the funds, but also the business's profit potential, management organization and sales goals. These direct commercial loans rely on the business, or the business owner's credit rating in part, for approval.
Basic 7(a) Loan
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The Basic 7(a) loan program offers business owners who are planning to start, expand or acquire a business to have the funds necessary to do so. This is the most basic loan offered through the United States Small Business Administration. To apply for this loan, contact a lender directly and request this loan. Lenders apply for a guaranty from the SBA for the loan. This means that if you default on the loan, the lender may request the SBA to pay a portion of the lost funds.
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504 Loan Program
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The 504 Loan Program, or Certified Development Company loan, provides long-term financing to business owners. These loans offer long-term, fixed-rate financing for borrowers. Business owners may use these loans to purchase fixed assets, such as buildings, equipment or land. These SBA-backed loans do require investment into the project by the borrower, as well as private lenders. Up to $1.5 million is available per project for qualified projects.
Microloan Program
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The SBA offers a microloan program, designed to provide borrowers with up to $35,000. Borrowers may use these loans for start-up or growing needs. The SBA provides the loans through nonprofit community-based lenders. Applications are available through local lenders.
Other Business Loans
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You can also find specialized business loans to utilize. For example, a pollution-control loan, offered through the SBA, helps small businesses to plan and install a pollution-control facility, even from the business start-up. A new business struggling with an economic downturn may benefit from the economic injury loans available through the SBA. These loans help small businesses recover from physical disaster or agricultural production disaster.
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