Starting your own business can be one of the more challenging and rewarding experiences that you can go through. In particular, securing financing for the startup can seem like an overwhelmingly complicated task for you to do. However, learning the following couple of questions and answers should help to provide you with a better understanding about what to expect when obtaining financing your new enterprise.
Will Your Personal Credit History Play A Role In Financing Your New Business?
There are some people that make the mistake of assuming that lending institutions will only consider the credit history of the business itself. While this may be the case for long-established enterprises with positive credit histories, it may not be applicable for startups due to a lack of financial history or revenue. In these instances, the lender will likely need to see financial information for the owner or the principal investors.
Unfortunately, individuals that have poor credit histories may assume that it will be impossible to obtain this approval, but it should be noted that many lenders may still consider lending to these individuals as long as the loan is secured with collateral. Therefore, it may still be worthwhile to start the application process to see if you are approved with this condition.
Are Traditional Loans The Only Option For Small Business Capital?
For those that find it is impossible to be approved for a traditional business loan, it is important to note that there may be other options available. Unfortunately, some individuals may assume that credit cards will be the best option for raising capital after they have been declined for a loan. However, the interest rates on credit cards can be extremely high, which can place a tremendous burden on your new enterprise.
Fortunately, it may be possible for you to be approved for special lending programs from the Small Business Administration or your local or state chamber of commerce. These programs will still have minimum criteria for approval, but these requirements are often more lenient than loans from traditional banks. As a result, this may prove to be an excellent option for individuals and small businesses that are struggling to obtain capital.
Raising capital for your new company can be a critical step in helping to get it off the ground. Unfortunately, new entrepreneurs are often ill-informed about this aspect of starting an enterprise. By knowing that the credit history of the owner may be considered in business loan decisions and that there are programs available for those with credit problems, you will be in a better position to give your new company the best chance of success.Share