Starting a business requires capital to run and steer the business to profitability. There are many sources of financing so that you can meet the needs of startups and small businesses. Business financing usually varies depending on factors such as the source of funds and the size and the type of business.
Apply for Government Business Loan
Government business loans are offered primarily through banks and direct lenders that partner with government agencies. These are a long – term, low-interest "Quick Small Business Loans" that entrepreneurs can use to start a business and expand it further.
The most popular type of government business loans are SBA loans, and it should be on the radar of every small entrepreneur in need of business financing. SBA loans have the lowest interest rates that you are likely to come across in your search for financing your business. The qualification required is easier as compared to traditional loans.
There are various kinds of SBA loan programs, so it's important to understand how each one works and which one do you require.
How Government Loans Are Helpful to Small Business?
Banks and other traditional commercial lenders offer affordable interest rates, but they hesitate to lend to small business owners because they are risky investments because only half of the small businesses survive their first five years. If the business goes under before the owner has finished repaying the loan, it's unlikely the lender will get their money back.
To protect themselves from this situation, lenders prefer lending only to the most qualified and established businesses. The SBA expands access to affordable financing to more business owners by offering a government loan guarantee of up to 85% of the loan size on loan. If you default on the loan, it's on SBA to fulfill their guarantee and pay back the lender.
How to Qualify for Government Small Business Loans?
Government "Small Business Loans" are an excellent option for small business owners, but there are certain rules and regulations to obtain it. If borrowers default on their SBA loans, then SBA will pay back to the lenders. This money comes from fees that borrowers pay at the outset, as well as from taxpayers.
These Are the Following Requirements to Qualify for A Government Business Loan.
1. Strong personal credit score.
2. You must have invested your time and money in the business.
3. You must have tried, unsuccessfully, to obtain other financing options.
Example – (a local bank turned you down for regular loan)
1. Business is profitable.
2. Business is over two years old.
Documents Required for Business Loan
1. Signed application form.
2. Identity proof.
3. Residential address proof.
4. Last 12 months bank account statement (self and business).
5. Certificate and Proof of business existence.
6. Business profile.
7. Office address – ownership / lease/ rent agreement/utility bill.
If you have started a business or have a nontraditional business such as a food truck or doing any freelancing business or having a consultancy, then it's very difficult to qualify for business loans because the risk here is very high and chances of getting back the loan amount is very low.
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