Know Your Options
The traditional bank loan is now one of many loan options for new business owners. If you have poor credit and no collateral, you may want to explore another option. You could bring in an experienced business partner that is willing to invest. Crowdfunding has grown in popularity and could be especially effective if you’re already well-known within the local community. You may even be better off with a line of credit, which works similarly to a credit card in that you pay only on what you borrow.
Know Your Plan
Know exactly what it will cost to finance your business and document it in a well-researched and professional business plan. Loan officers will probably ask to see it, and it’ll help you be realistic about your goals. This research is crucial to understanding your market and potential road blocks you may encounter. Who are your competitors? What do you want the money for specifically? Why is your location the best for your business?
Know Your Risks
If you’re a new business owner, chances are you won’t have any established business credit yet. Depending on the legal structure of your company, you could be personally responsible for repaying the loan even if the business fails. Seriously consider how a small business loan could impact your personal finances. If you offer up collateral, you could end up losing it.
While small business loans can be a largely beneficial to small business owners, there are plenty of reasons to make this decision carefully. Consider all potential consequences and determine which funding avenues will most benefit you and your company. Despite the risk, the right loan could get your business off to the right start and establish you as a trusted business owner within the local community.