A Guide to Small Business Startup Loans

Getting a loan for your startup can be daunting if you don’t know how to go about it. However, it doesn’t have to be difficult as anticipated by many people. When you are starting a small business, getting the adequate financing is a critical step that determines if the business will stay afloat and grow.

Today, most startup owners are seeking the most appropriate loans that can match their business models and help them grow. Without a track record, it’s not easy for a small business to get a loan from the traditional lenders.

Benefits of taking a loan

Business loans can be a good way of ensuring you have the required cash flow to run business operations. During tough times, it will help your business remain afloat as you execute the strategies to generate more cash flow. There are also some loan products that give you the option of making payments over a long period which can be very favorable for a small business. If you are thinking about expansion or acquiring crucial business equipment, the long repayment period can be quite helpful.

When you’ve just started a business, a loan can help in dealing with the demands of your employees as well as customer needs. It’s possible to choose from lenders who allow you how much you want to borrow and the repayment period.

Improve your approval rate

There are many options available and it’s easy to find yourself submitting applications to most of them. But before you think about making multiple applications, it’s important you consider the effect it will have on your financial profile. Normally, making multiple credit checks will have a negative impact on your credit score which could lower your acceptance rate.

The best thing to do is to concentrate your efforts on the option that suits you most. When you do this, you not only increase your chances of acceptance but you also ensure that your credit profile remains undamaged.  To begin on this course, here are a few things you need to do.

  • Research and understand all the options that are available to you.
  • Look out for any attractive terms like repayment schedules as well as equity provisions.
  • Read and understand the application criteria so that you won’t be rejected early.
  • If you get a rejection, it’s important to communicate with the lender and find out where you went wrong.

Taking a loan from a bank

The banks have been viewed as a good source of funds for a large percentage of business owners. Although there are other avenues of getting business loans, most people will run to the banks before looking into other avenues of funding.

Normally, the qualification criteria used by banks is quite rigid and you need to have good credit history to be accepted. However, banks can offer good loan terms if you are qualified. But if you are faced with an emergency situation, a bank loan may not be appropriate considering the lengthy processes.

If you want to increase your chances of loan approval by the banks, it’s important you understand how they work. Different banks will have different eligibility criterion but there are some things that are common among most banks.

  • With most banks, your personal credit score is crucial to getting an approval. In most cases, the bank will be looking for a score that is above 700. However, some banks will accept a score of 680 but only if your business is showing a good performance.
  • Most banks will require you to offer some collateral before approving the loan. This helps them have some security just in case you are not able to meet the loan obligations. Having a high-value equipment or real estate raises your chances of loan approval.
  • Although the time you’ve been in business is not directly scrutinized, most banks want to see a good track record. Unfortunately, the time you’ve been in business determines your track record. Before giving you any funds, the banks want to ensure that you’ll be able to service the loan and they’ll look into your past debts and payment records. Having some years in business gives the banks more confidence and it can help you get approved easily.

Online business loans

Although some online lenders like realisticloans.com use policies that are identical to traditional lenders, there are some that are committed to offering loans that are tailored for small businesses. Traditional lenders have not been very helpful to small businesses but online lenders have offered an alternative. Besides leveraging on technology, online lenders have designed loan products that have increased the funds available for small businesses.

Depending on your needs, you can choose to borrow a short term loan or a long term loan. Before you submit the loan application, it’s important to know what terms are favorable to you. For instance, if you need a loan to purchase equipment, taking a loan with longer repayment period may be appropriate. But if you want a loan to deal with some short-term expenses, a loan with shorter repayment period would be better. Although some features are similar between these loans, a short-term loan may be cheaper than a long-term loan.

Unlike traditional loans, submitting an application for an online loan is relatively easy. Because the application is an easy online form, you can get a response within minutes after submission. Most lenders will require you to give your social security number, business tax number, and business bank statements. Although most online lenders have different rules, most of them won’t require you to give specific collateral for the loans.


Whether you settle for an online loan or a bank loan, make sure you understand all the charges and interests involved. Although the loan agreement can be lengthy and boring to read, it contains the most important aspects of your loan. Understanding the terms will help you know your obligations and be proactive to avoid unnecessary penalties. If there is something in the agreement you don’t understand, ask the lender to help you understand better. As a rule of thumb, you shouldn’t take a loan if you think it will not be beneficial to your business.