Kick starting your business : start up loans explored

Are you in search of small business start up loan? There are several options you can explore especially from diverse business lenders. Most startup loans are flexible; hence they can allow you to fund just any part of your business growth. There are several start-up loans you can explore, the most prominent among these are;

Government Grants and Subsidies

Government agencies are constantly providing grants and subsidies that are available to small and medium scale startups and it can be very easy to qualify for such. In some areas, the criteria for qualification can be stringent depending on the government agent granting the loan.

In order to qualify for Government startup loans, you need to provide a detailed project description, the economic benefits of your business expansion, the detailed work plan and costs, Details of your experience and background in key business management, and completed applications.  You will be assessed based on your approach, innovation, and significance. When fully accessed, government loans are simply the best startup loans because most are interest-free.

Bank Loans

Most startup owners who don’t have access to government funds and loans may resort to bank loans to finance their startups.

Bank loans are usually the most popular source of funding, and banks normally offer different types or options depending on the size of funding required. Bank loans can sometimes become the most difficult startup loans you can get and they normally come with the highest interest rates. Banks are constantly looking for individuals with businesses that have excellent credit ratings, and solid track records.

Having a good startup idea is not enough to secure a bank loan, you will have to back up your idea with a solid business plan, and a personal guarantee. In most cases, Bank loans will require a collateral standing that has an equal or higher value than the amount of loan you are applying for. Different banks offer personalized repayment options for debtors but generally the longer the repayment option the lower the interest rates but the more you will end up repaying.

You need to shop around for different bank loans for startups in order to get the best deals, especially on interest rates.

Business Incubators

Business Incubators are funded by private individuals or government establishments. Business incubators fund businesses at each stage of development before giving startup owners soft loans to fund business expansion. Most government-funded business incubators are targeted at job creation and revitalization of struggling businesses.

Those who fund business incubators normally invite future startups to share premises together, they will get support for logistical, technical and administrative resources and will be funded for a typical period of 2 years. The startup loans are only offered at the industrial production phase. Most of the businesses that receive this type of start-up loans include Biotechnology, Information technology, and industrial technology.

Family, Friends, and Associates

Perhaps your family, friends and close associates are your first considerations for a startup loan. The creditors, in this case, will normally accept loan repayment once your business flourishes and profits are increasing. In most cases, loans from family, friends and close associates attract little or no interest rates depending on your agreement with the lender, some family members can even be generous enough to wipe out the loan in good faith.

There are several things you must be aware of, family, associates, and friends will rarely provide you a huge capital loan because they are skeptical that you wouldn’t repay, since no collateral backing is involved. Some friends, family, and associates may want to have equity in the business, instead of collecting the loan repayment, this may constitute some financial burden on you as you strive to deliver on your promises.

The Venture Capital Startup Loan

Venture capitalist lenders are looking for viable businesses they can invest in, for the purpose of becoming equity owners. In most cases, the venture capitalists are looking for technology-driven business opportunities, hence you have to show proof that your startup will be a long-term success.

The Venture capitalists will help you carry out those promising but high-risk projects, including business expansion and that means you have to give up some ownership or equity of the business to the loan giver. The venture capitalists will also expect some healthy returns on their investment especially when the business starts selling public shares. If this is your major consideration for business startup, you need to consider venture capitalists who will bring experience and knowledge that will benefit your startup.

Other Types of Startup Loans

It is important to mention some other startup loan types such as Crowdfunding, Personal loans, Invoice financing, Business credit cards, Equipment loans, and Microloans. Microloans are offered by private lenders, aside from banks for inventory, equipment, and working capital. The loans are typically smaller in size with specific conditions attached.  The Personal loans can be taken from a bank or microfinance organizations and you will require moderate to high credit score to qualify.

Equipment loans are startup loans that are offered to startup owners to purchase expensive equipment and repay monthly. Business credit cards are special loans where lenders will provide a set credit limit you can use to pay your startup merchants, vendors, and suppliers. Crowdfunding is a relatively new type of startup funding where hundreds of investors can invest a little amount of money in your startup if they believe in its viability. In exchange for the crowdfunding loans, startup owners may offer investors access to new products, and rewards such as discounts.


In addition to choosing the right source of loans for your business startup, it is equally important that you understand the requirements for qualifying for such loans. You need to be more prudent in handling your startup expenses because all lenders will surely want to know your financial standing in terms of credit score and business proposal. Though your credit score will improve as capital inflow increases through your loan and profit, it is important that you improve on your credit score before you commence shopping for start-up loans.

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