Small business loan options have become more available over the past months as not only are there indications that traditional loans are becoming accessible to certain companies and, in some cases, entrepreneurs but there are resources outside of traditional small business loans that may offer financial assistance for individuals starting a new company or looking to grow and establish a business. Obviously, small business loans can be helpful when it comes to getting a company off the ground, as there are some basic costs that must be met for these businesses to simply get to a point where they can open their doors for customers or clients.
Yet, there are aspects of financing when it concerns new businesses that many advisors feel business owners must research and be aware of before turning to a loan for their financial needs. Understandably, it depends on what type of business and area an entrepreneur is attempting to establish a startup, but there are some companies that immediately turn to a small business loan option when they are attempting to get their company off the ground. While there are also options beyond traditional loans for this type of financing, as the SBA recently launched two initiatives to help streamline the application process for SBA loans and offer more funding to companies in underserved areas, there are some advisors who feel that a great deal of funding may simply not be necessary.
As an example, an article on Foxbusiness.com says not to “…automatically assume that you need a lot of capital to get your business off the ground…Putting a lot of money into something doesn’t mean it will be successful and if things don’t work out, you’ll be glad you aren’t out too much money.” For this reason, some companies will avoid a small business loan initially and look for options like small business credit cards or funding from outside investors.
While these options are not always in a business’s best interest as, again, it will depend on the type of company that is being started, for smaller businesses that are simply in their early stages, a small business loan could be more problematic as it is usually a larger sum of money that a business owner is having to pay back with interest, as opposed to credit card purchases that can be kept to a minimum or angel investments that will, obviously, not have to be repaid by a business owner.
Yet, no matter what resource a small business turns to for financial assistance in getting their business up and running, proper planning is necessary for a variety of factors and a business’s mission statement and priorities must be carefully outlined before certain forms of financing may be available. While there are some individuals who have used their own money to acquire a location to establish their business, those who may use a credit card, investors, or even a small business loan might have to show they are a safe bet or maybe a good investment opportunity.
Particularly for traditional small business loans, companies who may have little or no history in terms of growth and profits may have a difficult time acquiring funds from these source of financing, and even when businesses approach angel investors, they must meticulously outline their goals, future intentions, and essentially sell either a bank or investor own why they feel their plan is the optimal method for making their business successful.
While, again, small business loans have helped numerous companies establish themselves and start down a path of success, exploring other options that may be just as helpful like funds from outside investors, simple small business credit card use, or even microloans that may be acquired at a much smaller amount have all been viable options for new businesses that may be in need of financing to help meet costs in the initial stages of a startup.