MightyRecruiterIf you’re not one of the lucky entrepreneurs with generous family members and friends, you’ll probably need the help of a bank or investor. Fortunately, you have several options, including loans, credit cards and Small Business Association funds. You may even be able to qualify for a special introductory offer. Just be sure to fully weigh the risks, as interest rates are all over the board.
Before you even think about financing a new business, you should first select an entity, choose a location, launch a website and develop a solid business plan. Unfortunately, startup capital is the main crux for most new business owners, and you’ve got to have the right pitch. Before you apply for a loan or start scoping out investors, be prepared with the right information.
Personal Information
Many entrepreneurs are sole proprietors. In this case, your company’s liability is your liability. Be prepared to answer questions like:
- Have you ever declared bankruptcy?
- Have you ever been arrested or convicted of a crime?
- Have you ever received an injunction?
- Have you ever or do you currently own and/or operate another business?
In addition to your personal identification information, you will likely be asked about your work history and education. Of course, any bank or lender will run a thorough credit report.
Business Information
You will need an official business name, phone number and physical address for each location you intend to operate. Be prepared to state which entity you plan to operate under–sole proprietorship, a partnership, a corporation or an LLC. Your potential lender will also require the following information:
- Start date of the business
- Number of partners if incorporated
- Number of shareholders if incorporated
- Number of members if an LLC
- Federal and state tax identification numbers
Be sure to bring complete contact details for every member, shareholder and partner. Lenders will also want to know where you currently bank and if you have any present leases or loans.
Know Your Options
Before you apply for financing, do some research to learn about special options you might qualify for. The SBA offers some great programs geared toward the small business community. Contrary to popular belief, these funds are not free. However, they do come with competitive rates, great support and some decent tax benefits.
- 7(a) – The SBA’s most popular program is designed to lower your risk to lenders. It’s geared toward asset purchases, leasehold improvements and working capital. You can borrow up to $750,000, but you will need to personally guarantee the loan if you own more than 20 percent of your company. 7(a) is typically only available to new businesses with less than $7 million in assets. However, you may be required to prove a short history of operation. Moreover, some banks will consider money borrowed from family as part of your equity.
- 504 –This program is designed for large asset purchases like equipment and real estate. Most loans are backed by the SBA as well as a certified development company, which greatly lowers your risk.
- 7(m) –This is a microloan that comes directly from SBA funds. If you’re just starting out, this may be a good option, especially if you plan on opening a child-care center. You can qualify for up to $50,000, although the average amount is approximately $13,000 per business.
Preparing For Your Visit
Always call ahead to make an appointment. Walk-in loan applicants tend to raise eyebrows. Also, be sure to bring several copies of each document. This will streamline the process and help you look more professional and prepared. Whether or not you get approved, be sure to track your progress. The more you grow, the more accountable you become. If you ever decide to go public, you’ll need to all of this information and more.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.