Business start-up loans are often the best option for funding a new business, but it is important to do your homework before settling on a loan. Money is always available, it is just a matter of how much it will cost in the end. This cost can have a dramatic impact on a new business.
The Cost of Money
Just as new business owners are taking a risk in embarking on a start-up company, banks are taking a risk by offering business start-up loans. The larger the risk, the more expensive the loan will be in terms of interest. The more collateral a company has available, the lower the risk and the smaller the interest rate.
The type of business is important to consider when determining the factors involved in the cost of the loan. If the business manufactures a product, it can grant security interest in the form of said product, which gives the bank more collateral if the company defaults. If the start-up is a services business, it can grant security interest in the form of customer bills or receivables.
Of course, there are other methods for obtaining start-up funding. Crowdfunding, microloan programs, unsecured loans and even seed money from a relative or other gifter can be useful in financing a new business. These alternate forms of funding have driven the price of money down so the interest rates on business start-up loans can be more favorable as a result. The government is working to create these opportunities in the current economy that make funds available for business and job creation.
Succeeding in the Business Start-Up Loan Application Process
When applying for a business start-up loan, preparation is key. In recent years, low-doc loans have become more popular, reducing the amount of paperwork and documentation necessary when applying for a loan. These two- to three-page documents are designed to get money out the door to get businesses started up more quickly.
Despite the expedited loan process, it is important for prospective business owners to come prepared with tax returns and a detailed business plan, complete with financial forecast. The bank will make its decision based on the business ideas as well as the effort and character behind the presentation. The pitch to the bank for a loan is often a start-up’s first major test. If the loan is successfully obtained, it is generally a sign of a successful business future.
Chicago corporate law firm Carslon Dash is uniquely qualified to offer financial guidance to start-ups, as some of the firm’s clients include respected banks in the region. Understanding the importance of being prepared and being fully aware of funding options have helped many small businesses in recent years, including Carlson Dash itself. The Chicago attorneys took advantage of having this expert legal knowledge when the firm was established in 2011 and have been helping companies with their financial matters ever since. From business start-up loans to restructuring financing to bankruptcy issues, Carlson Dash tackles challenging corporate law issues with ease.
This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.