Whether you need funds to help fuel your restaurant's growth or to buy equipment for your new photography studio, a small business loan can offer you as little as $1,000 to as much as $1 million. Typically, to get capital for a new business, business owners must take out loans from banks or other lending institutions. Although the government offers financially lucrative contracts to research and development agencies, the vast majority of small businesses don't fall into that category. Opening a nail salon, buying into a franchise, or starting a lawn care service are a few examples of what most American entrepreneurs are investing in. They aren't huge operations requiring a degree in biological engineering. So if you don't qualify for a government grant or contract, then your best option for financing is to take out a small business loan. Getting approved for a small business loan depends on some important factors.
- Awarding 300 grants in 2014, the U.S. government program, SBIR, had an average financing amount of $624,807.
- The fastest way to get your business operations off the ground is to apply for a small business loan.
- Don't overpay your taxes. The IRS provides tax breaks to help small businesses thrive.
First, how much do you need to borrow? The more money you need, the lower your interest rate. Because it will take you longer to repay a larger loan, banks or lending institutions are willing to offer a lower, more attractive rate.
What type of business are you trying to fund? Your interest rate can vary drastically if a lender considers your business risky. Usually, the tech industry or start ups have a higher default on their loans, increasing the risk and the interest rate. If a business can prove they can be financially stable, like an existing business that needs some cash to grow, then a lender would regard this a less risky investment and that lowers your rate.
Lastly, do you have a relatively positive credit history? Depending on your credit history, you could be eligible for a business loan with a lower interest rate. When a borrower's credit history is above average, this informs the lender the borrower is likely to repay the loan, dropping the risk factor and the interest rate
To begin weighing your loan options, view the resources listed in our small business resource directory.