Water Zap Business News

Monday, July 16, 2018

New Business Loan

A new business loan can be granted by lending institutions such as a bank or credit union; however, there are a plethora of other sources that offer them to those that apply. This type of funding is easier to get than previously thought by thousands of aspiring entrepreneurs around the country; businessmen just don’t know where to look. Some common private lenders include non-profit companies that cater their lending to women and minorities. While this is not always the case, a woman or minority owned business may have an easier time getting a new business loan from a private lender if they have been turned down by the traditional application process through a typical lending institution. Fortunately, God makes a way for even those who have trouble borrowing. “In the way of righteousness is life: and in the pathway thereof there is no death” (Proverbs 12:28).
In order to have a chance at approval, an entrepreneur must create a proposal. This proposal must be original and must describe to the viewer, the bank, how the company will succeed, and how it will be able to make payments on the loan once established. New business loans are harder to get for a start-up company compared to a franchise. A franchise usually has a documented method for achieving a profit and banks are more inclined to lend to them before taking the risk on an original start up idea. If .05% of amounts are not repaid, then they will tighten up their standards for granting new business loans.

An entrepreneur seeking financing should have at least a 10% down payment for the amount they would like to borrow. New business loans with lower than 10% down are typically denied. Banks recommend an entrepreneur to take out a home equity loan to come up with the 10% or allow a friend or relative to make a one-time gift towards the new business loan cause. Repayment arrangements can be paid privately if needed with the friend or relative making the money gift. If there is no way to fund the down payment, then there are private organizations who do not lend, but will grant an entrepreneur money for a down payment.

Once the amount has been granted, it is up to the borrower to ensure that the repayment requirements are met. If the business did not utilize real property, then the lender has nothing for collateral, which coincidentally also makes approval much more difficult. At least if the business included the property, then it could be pledged as collateral. Having no collateral and attempting to borrow is not wise. It has been known to happen, but usually for very small new business loans in which the borrower only needed under $5,000 to start.