Connect with us


How Much Loan Can a Startup Business Get?



Can You Refinance a Business Loan

The 21st Century has seen the rise of many startup businesses. Many individuals wish to go the business way and start their network. Naturally, a business startup would first and foremost require money to take off. Starting a business means trying to acquire a lot of funds even to set up a workplace. Businesses need office space, equipment, personnel, sales efforts, etc. There are many ways for a startup to acquire the required funds. One of them is to get a Startup Business loan.

Startup businesses are usually encouraged because young and budding entrepreneurs are the backbone of the consumer world. At the same time, investors and lenders will also be wary of providing funds as a Startup business does not always guarantee profits.

However, many lenders specifically provide startup business loans so that everybody has an opportunity to set up a business.

Many businesses are failing because they fail to determine how much loan can a startup business get from the banks or their local lenders. Well, this is an essential question, and if the company’s loan amount is not taken care of, then there is a risk that the business may not be able to pay the loan back. Therefore, the loan companies need to consider several things before actually getting any loan. Certain factors are considered to find out how much loan can a startup business get from their local lenders.

Choose the right lender

There are many lenders in the market, offering startup business loans. The amount of credit you want to avail can depend on the type of lender you choose. Microlenders are lenders that offer small but quick and unsecured loans. You won’t have to spend time on additional documentation with microlenders and can avail the amount quickly. With banks and other lending bodies like, you can get a higher amount of loan. However, you will have to match their more top eligibility criteria as well. The banks will also ask for your business protection, your profits so far, and a lot more documents to approve the loan.

Amount of loan to be provided

To apply for a business loan, you will first have to be aware of how much loan you can avail of. The amount of startup business loans can range anywhere between $5000 to $1,50,000. While this seems like a big range, the amount that you can get is entirely dependent on your startup business. As a business owner, you will need to decide how much funds you would require to set up your business. The amount of loan depends on a lot of factors in your business.

Business costs

The first and foremost step is to determine the value of your business. Now, a company can have a variety of expenses such as rent, supplies, assets, marketing expenses, promotional expenses, employee expenses, etc. It is very important to track down everything that will cost your business money.

Bifurcate your costs

Once you know every source of expense for your business, bifurcate the costs to understand that on a minimum term basis, how much amount would you need to cover them. This means understanding the difference between something that is a one-time expense and a repetitive one. A one-time expense can be the cost of your equipment or machinery required for your startup. Repetitive payments would be the cost of supplies for building your end-product, employee salaries, etc. Make sure that you’re accounting for the fact that these will be regular monthly expenses.

Consider Variable costs

Some expenses are subject to change over time, which includes the value of your supplies, materials, shipping costs, etc. It is essential to consider that these would cost more over time when you create a financial plan for your business. Combine all these costs and make sure to include office bills, electricity bills, and any other cost to the company when you are determining the amount of money you would need to start your business.

Make small steps

Small steps mean to aim for small growths instead of going all in and aiming for massive profits. Small steps can mean releasing your products in little increments with smaller and faster processing, more minor expenses, etc. You can increase your productivity with time while also earning small profits. Small profits will allow you to prove to the lenders about the profitability of your business. This will be helpful if you’re trying to procure large amounts.

Security for a startup loan

Startup business loans might require you to provide a form of protection to approve a loan of a higher amount. Fortunately, the equipment and machinery for the business can be considered as a form of collateral. The amount of loan provided will be equal to the cost of the security provided. Unsecured loans will typically be provided only in case of smaller amounts.

Have a fixed 6-month plan

Typically, the startup business loan amount you wish to apply for should be able to cover your expenses for at least six months. That’s why you should make a business plan for six months before you pitch the same to the lender. You also need to protect the profits you will be expecting from this pitch at the end of 6 months. Make sure to include all factors relating to sales, marketing, shipping, and other costs while calculating your profits.

Consider other forms of investment too to reduce the business loan amount

A startup business can have many ways of funding apart from a startup business loan. Consider getting part of the money required for the industry through other sources. You can get some of the funds from family, friends, relatives, or other people close to you. You can also opt for investors who would be willing to invest some of their money into your startup business. Many people on retirement benefits wish to invest in startups to gain profits. Getting part of the money would mean that you can choose to go for a lower loan amount. This will increase the chances of getting your startup loan approved as well. Research well on ways that you can use to achieve funds for the business.

Barjunaid Cadir is a Content Writer in The Weekly Trends, Web Developer, SEO Content Manager, LinkedIn Specialist, Social Media Manager, and a University Researcher at Anadolu University in Eskisehir, Turkey.