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Start-ups And Loans

Provided by EnterpriseOne

Start-ups with little assets and track record might face challenges when applying for loans.

            How Start-Ups Are Usually Funded
            How Lenders View Start-Ups 
            
What Start-Ups Must Be Prepared To Do
             Other Things To Note

How Start-Ups Are Usually Funded

•    Start-ups are usually funded by the owners and business partners.

•    They dig deep into their own savings and personal credit lines, and they tap on funds from
     friends and family.

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How Lenders View Start-Ups
 
•    It is difficult for start-ups to get loans from banks and financial institutions.
 
•    With few assets, limited cash and no prior track record, lenders view start-ups as extremely
     risky investments.

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What Start-Ups Must Be Prepared To Do

•    To get a loan, start-ups must be prepared to put up assets as collateral.

•    The owners often have to give personal guarantees, with some even putting up their family
     home as assets.

•    Start-ups must present a business plan. You are likely to have to convince the bank, through
     presentations of business plans and financial projections, that your business is viable and will
     lead to positive cash flow.

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Other Things To Note

•    Start-ups will find it easier to apply for working capital loans rather than for fixed asset
     loans.

•    Fixed asset term loans are viewed as riskier for new firms because of the longer repayment
     periods and the larger amounts being loaned.

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