“You will never get a loan for your start up business.” Sounds pretty harsh but that is the reality.
Banks do not lend money for start up businesses. They will waste your time telling you that they do. They will ask for all kinds of information, financial projections, business plans, individual financial statements. And at the end, come back to you and say, not at this time.
The reason banks do not give start up business loans is because it is too risky. Banks lend on assets, also know as asset based lending. This means they will lend for the purchase of real estate, land, a building, equipment. They will not lend for an idea. Typically banks will not lend to a business unless the business can show two years of profitable operations.
When you are building a hotel, an apartment building, or a shopping center, there are banks that will lend you money. When you are buying new equipment, there are bank that will lend for that.
The SBA has two loan programs which are suppose to be for start up business. One is the 7(a) Loan, see here and the other is the Microloan program, see here. These loans can be optained by going to your local bank or authorized SBA Lender. To find an authorize SBA Lender, search here.
Where do people go for a Start Up Business Loans?
People find start up business loans from their Friends, Relatives, and their current Boss.
When looking for a loan, try to find someone who understands the business you want to open. Many people are scared to ask their current boss for a loan because they are scared. The truth is that many small business owners are looking to expand their business and invest in their employees start ups. Your boss knows you, and if you boss really believes in you, they will help you start a new business.
Hard money lenders, Mezzanine Financing, Receivables Loans are all not applicable to a start up business. These types of loans are all looking for some sort of asset or receivables to secure the loan.