A lot of people are asking how someone gets money to start up a business that they have no experience in. Start up business loans are one of the hardest loans to get. The bank wants to lend you money, they reap a huge profit if you pay the loan back. Unfortunately most people don’t know how to put their best face forward when it comes to the application but more importantly what bank to go to to fulfill their needs.
DIFFERENT TYPES OF BANKS
All banks and lending institutions are monitored and controlled somewhat by the federal and state government and their corresponding agencies. However, with 2000 plus banks throughout the United States each bank operates differently according to whether they are publicly listed, their internal business structure (CEO, CFO policy’s) and what type of industry they like to lend to. Other reasons why some banks are lending and other aren’t are what their internal books look like and their aversion to risk.
TWO DIFFERENT WAYS TO GET START UP CAPITAL
The 2 different ways to get capital is either through a secured loan or an unsecured loans. The secured loan mean your will put something up for collateral such as a house, car, or equipment. You have to have equity or trapped value in what your putting up or the bank won’t accept it. The unsecured loan or unsecured line of credit may be the better way to go. Most of the time you need a minimum of a 660+ credit score. There are 3 different type of credit scoring systems Equifax, Experian, and Transunion. All three of these companies compute your scores in different ways and different banks use one, two, or all 3 scores to determine your ability to pay back the noted.
Once you decide whether you can go secured (asset based with equity) or unsecured (you have the credit to sign or know someone that does) you have to decide how much money you need for initial costs as well as ongoing costs before you start to make a significant profit. The amount of money you will receive in financing as well as the interest rate and the bank will determine whether starting your own business is a feasible option.
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