It’s one thing having a great business idea. But when you’ve thrown real effort into developing a viable business plan to match, excitement takes hold. You’ll probably want to get started right away. You’ll go to sleep dreaming about its potential.
But then reality hits you. You’ve got to fund your business. How on earth are you supposed to do that? The good news is there are funding options available to you. A start-up loan being a prime example. You could also crowdfund.
Like it or not, you will likely need the help of a third party to get your business started. Unless you win the lottery. In which case, you might put your feet up and your business plan through the shredder.
Funding for start-ups
You probably won’t win the lottery. The odds are against you. But the odds of being approved for a loan aren’t. Start-up loans are a great way to fund a start-up. Secured and unsecured loans are available depending on your circumstances. Secured loans are usually the best option, however, because they feature less risk for the lender which allows them to offer lower interest rates versus secured loans.
You could borrow anywhere from £10k to £500k. For most start-ups, those amounts are plenty. For going into space, not so much. But it’s important to remain flat-footed. The loan itself is merely a stepping stone to help your business develop. Or to put it another way, if you have a viable business plan, a start-up loan will help you realise it. In time, your business might indeed generate enough income to send you into space.
What to look for in a start-up loan
Ok, that’s enough about winning the lottery and going into space. Let’s get into the good stuff and discuss what to look for in a start-up loan.
First up, it’s all about the interest rate. The loan itself should offer a fixed rate of interest over the loan term, or at least a mapped variable interest rate. Independent lenders usually offer the best interest rates versus high-street banks. Nationwide Corporate Finance for example have interest rates starting from 3.6% annually. By way of comparison, the average high-street bank might charge an interest rate of 9.9% annually. Yikes.
Next up, flexibility. You want a lender who considers applications individually to accommodate your needs. Most start-ups for instance do not generate a positive cashflow for months. A lender who understands this will be more accommodating for business ideas that do not set the world alight immediately.
Last up, we have time. You want a swift or no answer with the application process, so you can start planning immediately. Independent lenders are the best for this. They can approve loan applications within a few hours of receipt. High-street banks can take days, even if they offer a claimed ‘instant online decision’. Furthermore, many lenders will transfer the money the same day as the decision is made. Instant cash in the bank? Check.