5 Business Loan Options for Aspiring Entrepreneurs
Since the 1980’s, the total number of banks in the United States has decreased from 15,000 banks to less than 5,000 banks. What makes this problem worse is the fact that only 12 of these banks control around 70 percent of all banking assets in the United States, and they usually favor corporations and big businesses over startup organizations. This means we now live in a time where aspiring entrepreneurs must know of many different business loan options available to them to start their business.
Business loan options for aspiring entrepreneurs
There are many business loan options available to choose from; some of them are:
1. Startup loan
Startup loans are issued by private lenders, and they are best for aspiring entrepreneurs who need financing during the concept phase of creating a product or service. These loans require physical collateral, but unlike traditional business loans, startup loans don’t require business owners to forfeit any equity or shares of the business to the lender(s). Borrowing limits for startup loans vary for different lenders, and they usually have loan amounts ranging anywhere from $500 to $750,000 with loan terms of one to five years.
2. SBA loan
SBA loans are offered by The Small Business Administration to small business owners. These loans work best when you are looking for long-term capital to start a new business, finance inventory or construction costs, purchase real estate for your business or refinance an existing debt. Payment terms for SBA loans can be extended up to 20 years, and any assets or securities bought with the loan will serve as collateral. Loan amounts for SBA loans are usually between $5,000 to $5,000,000 and loan terms can range from five to 25 years.
3. Business credit cards
Business credit cards could in fact be one of the easiest solutions for aspiring entrepreneurs in need of financing to get their business ideas up and running. Business credit cards work much in the same way consumer credit cards work, but they offer many rewards such as cash back for business related purchases, making them great for use with startup marketing and fulfilling inventory or supply related needs. Business credit cards usually have credit lines ranging from $10,000 to $50,000 or more and last approximately four to five years.
4. Peer to peer loans
Peer to peer loans are best for new businesses that need large amounts of capital but don’t have a sufficient credit history needed to acquire a loan from a bank. These loans are becoming increasingly popular options for aspiring business owners with a bad credit or no credit history because of the huge loan amounts they can get in a relatively short period of time. However, with peer to peer loans, lower credit scores usually lead to a higher APR, so it is best to only consider this option if your credit history is so insufficient that practically all traditional loan options are not available to you. These loans usually have loan amounts ranging from $2,000 to $500,000 with loan terms of about one to five years.
5. Angel investors
Angel investors are private investors who provide financing for a startup business in exchange for convertible bonds or equity in the business they are financing. Angel investors are usually wealthy individuals looking for a rate of return much higher than they would get with traditional investments. These individuals can be doctors, lawyers or any other affluent professional with lots of spare cash to invest, and they are usually found through word of mouth or online angel investor networks. Loans from angel investors can be as low as $1,000 and they usually have quick turnaround times and relatively high interest rates.
Contact me so we can discuss the best business loan options available for you and what you will need to do next to turn your business ideas into reality.