Business Loans For New Companies
Most business loans are acquired through banks, who are notorious for rejecting applications from new companies, but organizations like Fundwise Capital have creative methods of acquiring business loans for new businesses.
Banks
Banks are the top answer that comes to mind when a business owner wonders, “where can I go to get a loan?” Banks are trusted establishments. A business owner knows money loaned here is actually available capital and that interest and repayments are collected fairly. Bank policies regarding what they can lend and how they receive repayment are heavily regulated. Because banks have their hands somewhat tied as to how their loans are repaid, or whether these loans are repaid at all, they can be quite picky over who they qualify for a business loan.
Many factors affect whether a bank will even consider lending to a business owner at all. In the first place, a good credit score is essential. Credit score is a reflection of how good a risk a person is. Personal credit scores are built based on how well an individual has repaid loans of any kind in the past. These can include student loan repayments, mortgage payments, and even credit card payments. The more reliably a person has met these repayments, the better the credit score.
Banks Require Good Credit Score
Without a good credit score, it will be difficult to receive any kind of loan at all from anyone. Personal credit scores range from 300 to 850, where the larger the score, the better the credit. A good personal credit score is considered anything at 700 or above. A business entity itself can also have a credit score. These range from 0 to 100 and again, the larger the better. Business owners often make purchases from other vendors, and these payments can help a business’s credit score. This can be a saving grace for a business owner, as a loan can be approved on the business’s credit score if personal credit is an issue.
Banks Loans are Often Secured
Besides credit score, security for the loan must also be considered. Banks want to know that if the worst should happen, there is a plan a business owner can implement in order to pay back the bank’s loan. Often, they ask for collateral, which offers this security for the bank loan. In the event that a business owner cannot repay the loan, they will offer their collateral in place of the money.
Collateral can be anything of value, such as expensive equipment, cars, even jewelry, but most often is in the form of real estate. Banks can set collateral at a percentage instead of the whole value of an asset. So for example, the collateral can be set as 60% of the value of a piece of real estate an entrepreneur owns. In this case, it is important to define the set value before a loan is obtained. Even owners of long standing businesses will often need to set collateral for any sort of business loans.
Additional Concerns for New Businesses
Past these key factors, new companies have additional hoops to jump through. Where established businesses have financial reports of profits, new companies do not have enough proof for the success of their venture. Banks are more favorable to established businesses, whose tax returns can prove their profits and gains. They are seen as a good risk.
Usually banks need to see reports going back two years regarding a company’s tax returns before they feel confident in loaning money. For new business owners just starting out, this lack of paperwork can set them back. In place of solid reports and numbers, entrepreneurs can lay out a very detailed business plan to help show banks they are a good risk. Such details should include the cost of materials and production, cost of labor, profit margins for providing goods and services, and more. Basically, as many details as possible regarding the costs for the company to operate, provide their goods and services, and the profits expected, as well as market research, need to be taken into account.
Bank Loans Have High Interest Rates
Even with jumping through all these hoops, new entrepreneurs can find it very difficult to get approval for a bank loan. Even those who know members of the board can find they are still at a disadvantage without being able to prove, with a couple years’ worth of tax returns, their business is a good one. In the event a business loan is acquired, often interest rates are high, usually around 10%. While this can beat using credit cards, whose interest rates are around 15% at the lowest, these interest rates can certainly create set-backs for repayment.
Fundwise Capital Can Get New Businesses Loans
Without all those planned ducks in a row, a great place to get a business loan for a new company is through Fundwise Capital. This organization was made by entrepreneurs who found it difficult to get a bank loan when they were just starting out. Determined to provide a better way for those who find themselves in a similar situation, they have collected a knowledgebase for entrepreneurs to get the business loans they need.
Fundwise Capital uses creative solutions to get approval for those who have a good credit score. They have knowledge of many no interest credit cards as well as the best order to submit applications so a business owner can qualify for amounts easily double what they wanted in the first place. Best of all, these loans are interest free for several months – from 6 months up to 18 months in some cases. These loans are also unsecured, so business owners don’t have to worry about what they will use for collateral.
Fundwise Capital has access to a large network of lenders so they can find the best deal for business owners. An unsecured, no interest business loan is especially beneficial for the business owner who can repay it relatively quickly. Repayment before any interest accrues is the best way an individual can be sure not to lose any money for getting the loan, and also helps boost personal credit score.
For those with a credit score of 650 or more, Fundwise Capital offers a great opportunity for a no interest, high amount, and unsecured business loan. Whether a company is just starting out or has been doing business for many years, Fundwise Capital can help get them a business loan.
Other Options for Loans for New Businesses
Other options where business owners can get loans include other lenders and brokers, credit unions, and merchant cash advance companies. Just like with banks, these others will require a good personal or business credit score as well as collateral. Often interest rates offered are high, though credit unions may have fair rates and lenders can be persuaded in a competitive market to offer the best rates. Caution should be taken when applying through merchant cash advance companies. These so-called shark loans often approve those with great credit score for large amounts at high interest rates that come due fairly soon. For successful owners who know they will turn a profit rapidly with this loan for capital, this can be a great decision. For those who know they will need more time for repayment, other options such as Fundwise Capital should be considered.
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