How Much Will a Bank Loan Me? 8 Business Loan Options If You Need Lots of Money
Have entrepreneurial visions? You're not alone. In fact, a recent study found that 63% of twenty-somethings want to start their own business.
You may be asking yourself, how much will a bank loan me? It's a valid question, and you need to understand your options.
Let's get into the different loan options available on today's market!
Today, numerous online lending platforms specialize in providing loans to small businesses in 24 hours or less. Some of them offer interest rates as low as 5-6% depending on your financial situation.
Online loans are available for a variety of purposes including real estate financing, small business startups, and equipment leasing.
While some of them require credit checks, not all of them do. Some of them require a solid business plan to get started.
Potential or current business owners with high personal credit scores can apply for a personal loan through a credit union or bank. The institution will consider both the applicant's income and credit history.
Personal loans can be a great choice for a startup business since you haven't established a business history yet. You simply need to prove your own personal credibility and financial stability.
While most personal loans can be used for business purposes, there may be some restrictions depending on the bank. Furthermore, personal loan amounts tend to be lower than business loan amounts. You are also not able to write off a personal loan on your taxes.
Some companies offer small businesses microloans for the initial funding of their companies. These businesses typically require collateral and equity to be eligible for the loan. You'll also need to demonstrate income and revenue to show that you can repay your debt.
Microloans are smaller loans providing up to $50,000 for small businesses. This makes it an attractive option for businesses with small capital needs. It won't be helpful for those who require very high upfront costs.
Each lender may have its own requirements or restrictions for loan use. The quantity of loans available also tends to be limited, as many organizations receive money through government grant programs. However, interest rates tend to be lower than most startup loans.
Friends & Family
Many people successfully launch their businesses with the help from the people they know best. If you go the route of using your friends and family for a loan, you need to create a reasonable plan-of-attack.
It's a good rule of thumb to create a manageable payment schedule and put it in writing. Collaborate on an arrangement that's optimal for all of you. Because things can get messy when you mix family with business, you want to treat the arrangement as formally as possible.
After all, you don't want to kill your business before you even get started!
Interested in real estate investments or businesses? Bridge loans represent short-term loans that fund real estate transactions.
Here's how it works. Typically, the commercial developer uses the money to purchase distressed property with the intention to improve it. Then, they flip the property to another owner or use it for rental income.
Bridge loans are asset-based, and they tend to have shorter terms than typical construction loans.
Read more here to learn about how bridge loans work.
- Business Credit Cards
When you apply for a business credit card, you receive a set credit limit, and you can use your card up to that limit for relative business expenses.
In general, it's fairly easy to apply and receive a business credit card. Most companies only require you to indicate your total profits and your own personal income.
Furthermore, business credit cards typically come with lucrative cash or travel rewards program. When used for qualified purchases, you can redeem points for air miles, hotel stays, or gift cards. You may also receive extra perks like free luggage, lounge access, or additional points for certain kinds of purchases.
The risk of business credit cards comes with the extraordinarily high interest rates. If you rack up a high balance, you'll spend far more paying off your bill than you would if you received another loan.
If you need to finance long-term equipment, this type of financing allows you to do exactly that. Rather than coughing up the entire upfront cost, you'll be responsible for manageable, monthly payments.
Most businesses, including startups, can qualify, and the time in business and credit requirements are not overly strict. In fact, most lenders only require a credit score within the 600s to apply.
Equipment loans only work for the purchases of equipment. The risk, of course, is that you won't need the equipment anymore, but you will still be responsible for paying the loan.
Crowdfunding has become a popular loan platform for startups, and for a good reason. With crowdfunding, you have instant access to thousands of investors. A successful campaign can generate the needed capital in a concise time frame.
Furthermore, anyone can do it, though not everyone will be successful. You'll need to be dedicated and persistent, as the competition on these platforms can be fierce.
This means you'll need to be proactive in offering lucrative incentives to investors, marketing and sharing your campaign online and helping generate a buzz.
How Much Will a Bank Loan Me?
If you're asking, how much will a bank loan me, you need to deepen your realm of thinking! Bank loans only represent one option in providing the capital you need for your business. Don't overlook what else is out there!
Ready to get started with your entrepreneurial visions? Learn how to start your business the right way!