Your dreams are finally coming true. You’re opening your very own business.
Perhaps you scored the perfect property or you just think the market is right for you to dive into it. Regardless of what spurred you on, you’re going to need some cash to get your business off the ground.
So what’s your next move? Do you ask your great-uncle Al for a loan? Do you wait on your dream for a little while longer so you can save up more money? Or do you look into an SBA loan for new business?
An SBA loan is a great option if you’re a new business. Keep reading to learn the essentials of what you need to know about SBA loans.
Options for an SBA Loan for New Business
Not all SBA loans are the same. The Small Business Association has a few different loans for a new business.
Do some digging for more info so you can better understand if your particular business is ready for SBA loans. New businesses may receive favor since they need more capital to get off the ground.
Here are a few of the options for SBA loans:
- 7(a) loans
- 504 loans
Each of these loans has its advantages and parameters. For example, a 504 loan typically goes to repairing or purchasing new equipment for your business.
If you’re just starting your business, look into microloans. These loans provide up to $50,000 to startups or businesses that are just opening their doors. While you can borrow up to $50,000, the average loan is around $13,000.
Getting an SBA Loan
When you want an SBA loan, first calculate your startup costs. Leave no cost unmentioned. Consider factors like the time costs, licenses, equipment purchase, permits, and the basic business costs like rent, inventory, and payroll.
A thorough budget such as this will help you know how much you need and thus if you can get what you need from an SBA loan.
Calculate a Business Plan
After putting together your budget, draft a clear business plan. When you want to borrow money, you need to prove you will spend the money responsibly. Consider the target market for your business as well as the marketing and pricing costs.
You want to show lenders your business will succeed, even if your business looks much different than what you normally do.
Make a Wise Choice
Often when we borrow money, we feel powerless to the lender. Now is your chance to have some power. Do some shopping around to determine which lender has the best loan for your business.
After all, you will be working with this lender for several years, so choose a lender that meets your personal criteria.
Gather Your Documents
Once you’ve decided on a lender, fill out the loan application provided to you. A startup loan application typically requires the following documents:
- Written business plan
- List of collateral
- Cash-flow projections
- Personal tax returns
- Purchase agreements, contracts, or quotes.
These documents will ensure that you’re ready to talk to your lender seriously.
Apply and Thrive
If you want to see your business thrive, look for the capital that will help you meet your goals. An SBA Loan for a new business is a perfect way to get the startup cash you need so you can start your business right. Shop around for a lender that will work for you, and then put together the documents you need for a proper application.
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