Whether you are well on your way into starting a company or just considering it, you are probably asking yourself what’s the best loan for starting a business. Well, wonder no more, because this post was made for you.
What’s the Best Loan for Starting a Business?
As with many other things, the answer will depend on your specific needs and goals. Some of the most common financing alternatives for starting a business include:
- Conventional loans
- SBA loans
- Bridge loans
You should choose the option that helps you overcome the pitfalls you face as you get your business off the ground. In the next sections, we’ll take a look at what those challenges are and review your financing alternatives in greater detail.
Challenges You Face When Starting a New Business
Before determining the financing option that works for you, you need to get a clear picture of the speed bumps ahead.
Not only will this help you strategize, but it will also give you a more realistic sense of the amount of money you need. Whether it’s hiring employees or marketing your new business, almost every challenge represents an extra portion of capital you’ll need to get your business in motion.
Developing a Business Plan
Having an effective business plan is key because in addition to giving you clarity, it also plays a role in helping you secure financing. A good plan outlines all aspects of running your company—from marketing strategies to financial forecasts—and serves as a roadmap for achieving your goals.
If you don’t know how to write a business plan, don’t worry. This blog will help you get started: “SBA Loans: How to Prepare a Business Plan”
One of the biggest challenges that entrepreneurs face is finding financing for their business. If you don’t have enough money saved up to fund your startup costs, you may need to look into other options like investors or loans.
And while there’s no denying that it can be difficult to secure financing for your business, there are plenty of resources available to help you find the funds you need. In the next section, we’ll take a detailed look
Finding the right talent is another challenge entrepreneurs encounter when starting a new business. Be sure to do background checks on potential hires before making any decisions so that you choose wisely and hire individuals who will be an asset rather than a liability for your company.
Marketing is essential for any small business; without it, potential customers won’t know about your products or services and won’t have any reason to choose your company instead of a competitor. And while a lot of marketing is DIY these days, you’ll want to have at least some professional assistance to ensure that the results live up to the image you want to convey. –
Finding the Right Location
Your business will likely need a physical space that serves as a base of operation. You’ll need to get a mortgage, lease a place or, if you are looking enough to own a space, you’ll have to pay for things like renovations and equipment.
The Best Loans for Starting a Business
Now that you have a clear picture of what starting a new business entails, let’s take a look at the best loans for starting a new commercial venture.
SBA loans are partially guaranteed by the Small Business Administration, a government agency geared toward helping Americans start and expand businesses.
The two most popular SBA lending programs are 7(a) loans and 504 loans. 7(a) loans are general purpose loans, while 504 loans focus on large fixed assets such as heavy machinery or real estate.
Use 7(a) Loans for:
- Working capital
- Purchasing equipment, machinery, furniture, fixtures, supplies, or materials
- Buying real estate, including land and buildings
- Construction of a new building or renovation an existing building
- Establishing a new business or assisting in the acquisition, operation or expansion of an existing business
- Refinancing existing business debt (under certain conditions)
Use 504 Loans for:
- Buying existing buildings or land
- Building new facilities
- Purchasing long-term machinery and equipment
- Improving existing facilities, land, streets, utilities, parking lots and landscaping
“Conventional” is just another word for “traditional,” so a conventional loan is exactly what you picture when you think of a loan: an institution such as a bank or credit union lends you money, which you commit to repay in monthly installments plus interest.
Compared to SBA loans, conventional loans give you more flexibility because there are fewer requirements as to how you are allowed to spend the loan proceeds. On the flip side, the approval process for a conventional loan tends to be more strict than that for SBA loans.
Bridge loans are a special case because although they’re not specifically designed for starting a business, they can prove of great help throughout the process.
Bridge loans are also called “interim loans” because, unlike conventional loans or SBA loans, they are designed to be short-term loans. A bridge loan acts as a stopgap while you secure a more permanent financing solution. Here are some situations where bridge loans come in handy:
- You need capital to purchase real estate but you haven’t sold your current property yet. In this case, you can take out a bridge loan and repay it when you sell the property you are selling.
- You want funds to take advantage of a time-sensitive offer to purchase inventory. You buy the inventory with the bridge loan, which you then repay with profits from sales.
To learn more about bridge loans, check out our previous blog, “Bridge Loans: the Ultimate Guide.”
Looking for Business Financing? Gellyfish Commercial Can Help
Gellyfish Commercial offers efficiency and certainty of execution across a full range of business financing options.
Contact us today by email (email@example.com), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or tap the chat icon on our homepage to schedule a free consultation or to learn more about our financing solutions.