Business Start Up Loans

2007-10-15 12:53:47

( Business )



The Business of Starting Up

A new business has potential for huge profits, especially if it involves a new product. However, it also has a high probability of failure due to uncertainties about market behavior, and perhaps due to your own lack of business experience.

Normally you would be starting up a business with only very limited resources. Your own resources may not always be adequate to meet the demands of your business operations. You definitely need a small business start up loan to provide enough working capital to keep afloat.

Forms of Business Start Up Loans

The most common form of business start up loan is an overdraft credit facility. An overdraft credit line will enable you to service your liabilities with suppliers especially during periods of lean sales. It keeps your bank account from getting overdrawn and fills in the gap for any cash shortages. You will draw only enough funds to cover any outstanding payments against your account balance.

Another business start up loan option is in the form of an asset financing loan, where you borrow for the purpose of acquiring office equipment, machinery, or business vehicles. The assets you acquire will then be pledged as collaterals for the loan, until you are able to pay for the loan in full. In case you are unable to service your start up business loan, the lender has the right to foreclose or make a claim against your pledged assets.

A third alternative type of loan is receivables discounting. It is highly similar to asset financing loan, because you need to put up collateral. In this type of loan, you submit post-dated checks from your customers to your lender, who then gives you the loan proceeds. The amount of the proceeds is based upon the check amounts less the discount rate. You can repay the lender either by collecting on the check as it falls due, or by allowing your lender to collect directly from your customers.

Where to Get Business Start Up Loans

Your own depository bank is the best place to apply for business start up loans, since it already knows you well. Your existing deposits and investments will provide the bank with an excellent basis for granting your loan request. You may possibly be able to get preferential rates as well.

Sometimes, though, you may not have enough banking relationships yet, especially if you are starting your business in an entirely new place. In such cases, you may need to shop around for possible lenders and what loan products they can offer.

You can facilitate your search for the right business start up loans by looking up lenders through the internet. You can conveniently make inquiries and apply directly through the site.

As in credit card and home mortgage applications, your credit record will be one of the most crucial factors that the lender uses to determine the terms and conditions of the business start up loan.


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