By ELLE GREWAR
When you feel it’s time to broaden your horizons, starting a business can be an amazing adventure. And if you’re starting a home-based business, keep in mind that you can reap financial benefits from upgrading your workspace. For one thing, you can write off the expenses on your taxes. In the bigger picture, you could potentially raise the value of your home, which could be key if you’re thinking you’ll be outgrowing the space down the road. This growth, of course, is dependent on a solid marketing plan.
One thing about startups, however, is that funding can be particularly difficult to find. Many lenders require a few years of business history, proof of revenue, and good business credit, and not everyone has an extensive list of investors or sufficient savings to get their businesses up and running. Even though funding may be more elusive for startups, there are several programs that can help, a few of which Little Big Marketing San Diego presents below.
SBA Microloans
The Small Business Administration has a number of programs for various entrepreneurs, some of which can help startups specifically. The SBA microloan was originally designed to provide accessible business-related funding to underrepresented demographics, such as women, veterans, and minorities, but has since expanded to include new entrepreneurs. These loans can value up to $50,000, with interest rates ranging from 8% to 13% and terms never exceeding six years.
To qualify for an SBA loan, you must be a small, for-profit business operating in the United States with a robust business plan. The likelihood of getting approval for a microloan depends on various factors, such as your credit and character. Those with average credit can apply as long as it’s at least 575. You can boost your potential by offering sufficient collateral, getting a co-signer, and having a clean criminal record. To search for lenders, use the SBA lender match tool.
SBA 7(a) Loans
The 7(a) loan program is the most commonly used SBA program because of its flexible applications and high loan amounts, the maximum being $5 million. Although this loan program is usually used for more established businesses, startups can benefit from this program if they meet the requirements. As with all SBA loans, you’ll need a business plan detailing your company and how you plan on using the funds.
You’ll need a high personal credit score of at least 680, have sufficient industry knowledge and business experience, and have no history of bankruptcies or foreclosures. Collateral is not always a requirement, but for startups, having sufficient collateral can boost your chances of approval. Additionally, if you are planning on using the money to purchase property or equipment, a down payment of at least 10% is typically required.
SBA Community Advantage Loans
The National Association of Development Companies explains that Community Advantage Loans are perfect for startups in underserved markets. They can value up to $250,000 and can be used for working capital, stocking, or various startup expenses. Interest rates are variable, ranging from 2.75% and 6%, and the terms depend on the intended use. If you’re involved in real estate, you can have a term lasting as long as 25 years. Everything else is generally between seven and 10 years.
Grants
Grants can be an excellent option for startups because, as Bench points out, they’re essentially free money. There’s no repayment plan. The catch is that grants are usually offered for specific industries or demographics. Each grant, particularly government grants, will have different requirements for eligibility, but the essential piece of the application is your business plan. Make sure your plan is specific and forward-thinking.
Startup financing is out there. Sometimes, it just requires a bit of digging. Take advantage of the multiple opportunities available to you and secure the right funding in order to realize your vision for your business.
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