Are There Any Loans for People Just Starting Their Own Small Business?

Bank Loans

Some banks offer loans to start-up businesses, provided you meet their criteria. Although requirements vary from one bank to another, an application for a business bank loan must have a detailed and well written business plan, as well as financial information, such as a cash flow projection and a list of start-up expenses. Most banks will require you to have collateral in order to secure a business loan, such as a house or personal assets. This is particularly important with a start-up business because your company has no track record, so the collateral offers the lender some recourse in the event of the business' default on the loan.

The Small Business Administration does not directly offer loans to start-up businesses, but it does provide loan guarantees to banks working with start-up entrepreneurs. SBA loans, like bank loans, have stringent criteria and an extensive application process. To qualify for an SBA loan, you must have collateral, such as personal savings or property, to guarantee the loan amount.

Credit cards offer loans to start-up businesses by covering the cost of basic transactions. Credit cards are commonly used for business start-ups because they do not require collateral or lengthy applications. However, credit cards tend to have higher interest rates than most other sources of capital, so you should not use them unless you have explored other options first. Credit cards also offer cash advances, or loans, to cover operating expenses. But cash advances come with high fees, and their interest rates can be even higher than the rates on credit card purchases.

If you have a great business idea and you are articulate and persuasive, you may be able to find an investor who will lend you the money to start your company. Venture capital companies, such as Seattle's Zino Society, lend money to start-up entrepreneurs with great ideas in exchange for a share of the company's equity. Aside from making a formal pitch to an organization that specializes in business funding, a fledgling entrepreneur seeking an investment loan should network among professionals in his field.