Start up loans



It is difficult to get start up loans from banks as a new entrepreneur. But don’t let this discourage you from meeting your bank and building society for assistance for start-up loans. Before you start looking for lenders for star-up loans make sure you have done your homework properly.

Your business plan must be put in good order and figures in it should be familiar to you.Let us look at the various type of start up loan you can get from lenders.

Secured loans

A secured loan is a loan in which the borrower pledges some assets as collateral. This asset normally has more value than the amount of loan received.

On default, the lender claime the asset or collateral as payment for the loan. This kind of loan can be easily available for a small business looking for start up loan or one with poor credit history.

Unsecured loan

Unsecured loan is a type of loan that is not secured on any asset of your company. These types of loans are usually short term in nature and are within a period of one to three years. Most unsecured loans are usually under $15,000.

Unsecured loans are usually provided by banks and other financial institutions and brokers.Some small business will rely on unsecured loans to operate their day to day expenses. Don’t forget to pay your unsecured loan within the agreed period or a period of two years whichever is shorter.

Unsecured loan normally attracts higher interest rate. This is because of the risk involved to the lender being that the loan is not tied to any asset or collateral.

Things to consider when applying for a loan

the following points are worth considering before applying for a start-up loan for your small business.

Your business credit history

Before applying for a start-up loan for your business, you should consider its credit history. Does your business have one? A business in its start-up stage may probably not have one.

Loan size

Will the amount of money be enough for its purpose? When applying for a loan make sure you have make a proper plan of the required amount. Don’t take a loan that is more than what you need.

Cash flow projection

What is your business projected cash flow? Do you think the cash flow will be enough to pay your expenses and part of the loan and interest as proposed?

APR

The term APR means Annual Percentage Rate. It describes the interest rate for a whole year to be paid on a loan or credit card. It is a financial charge expressed as an annual rate. It is the interest rate the borrower will pay on a loan.

Before signing a loan agreement make sure you check the APR. If you have poor credit rating you will likely pay a higher APR. Note that unsecured loan normally carried a higher APR.

Repayment holiday.

Some lender will give you a break before you start paying for a loan. That break is termed repayment holiday. You may think that it is a good feature as it allows you to take a short break before repaying your loan.

No it is not a break. You are still incurring interest on your debt during this time. Such holiday will make it take longer for you to complete payment. Be wise.

Early repayment charges

Paying off a loan early is good because it will save you money in interest. Some lender will charge you a penalty if you want to early. Take note of a loan repayment option when applying for a loan.



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