The Ultimate Guide to Business Startup Loans

Starting a new business sounds exciting, doesn’t it? Getting the necessary funding? Not so much. If you’re ready to get your big idea off the ground, keep reading. Business startup loans might be the answer you’re looking for.

Entrepreneurship 101

Checklists

Getting organized is an essential process in the beginning stages of startup business development. Using available checklists and guides can be a helpful way to do just that. Once you’ve done that, ask yourself the following question:

Do I have a business plan?

If not, this is the first step you need to take before you even begin considering business startup loans.
 

The Business Plan

Formulating a business plan isn’t as complex as it sounds either. The first step is simply answering a series of questions. You will then take that information and put it together for potential investors or lenders.

When reading the list below, remember that you’ll be presenting your idea to people who’ve never heard of you. Sure, you’ve thought about your startup a million times! But you’ll be presenting your business plan to people that need reasons and at least some reassurance of your strategy to put their money into your idea.
 

General questions

1. Why do people need my product or service?
2. How is my product or service better and/or different than what’s already on the market?
3. Is there a large enough need for your specific product/service? As in, if you’re specializing in one particular thing, will there be enough demand to sustain your business?
4. Who is your target audience?
5. How do you plan to market to your target audience?
6. How will you stay in demand when competition inevitably arrives on the scene?

Financial questions

The general questions will be important if you’re applying for business startup loans. But there’s more. Certain financial information needs to be presented as part of your business plan as well. Such as:

1. What are my initial costs going to be? (Will you need equipment, supplies, etc.?)
2. What are my ongoing costs going to be? (Utilities, insurance, etc.)
3. What do you expect your initial profits to be? For example, if you’re making a physical product, how much will you have in the product compared to what amount you will sell it for?
4. How long will it take to make back the initial costs?
5. What does the return on investment look like for investors after the startup costs are regained?

You!

As much as investors and lenders of business startup loans are looking at your pitch and business plan, they are also looking at you. You will be the driving force behind the business. You will be the one guiding it toward success.

If you will have other people on board helping you, make sure you are putting your best foot forward. Present a team that people can believe in. Make sure you are all on the same page and that they have access to the information you will be presenting to potential lenders and investors.

Oftentimes these folks will be visiting your team and/or your proposed work site to complete their due diligence before making a lending decision. Make sure your team knows that and can be prepared for it when and if it happens.

Learning about Lending

If you’ve financed anything before, you are already somewhat familiar with the process of borrowing money. Many business startup loans are not that much different.

When applying for a small business loan, most lenders will be looking at your personal financial situation as much as your business plan. A good credit score will go a long way in helping you get approved, just like in personal financing applications.

But even if you have a great credit score, business startup loans are still considered somewhat of a risk. You may be presented with some lending terms and rates that were not as good as you’d hoped. But don’t give up!
 

Traditional vs. Alternative

Traditional banks are great, especially if you already have good, established relationships with them. But many entrepreneurs are looking to alternative sources for business startup loans.

Many of these alternative sources are online with applications that can be completed in 30 minutes or less. Just be wary, and do your research on a lender before accepting a loan.
 

Government funding opportunities

For Canadian entrepreneurs, there are also government lenders that might be able to provide business startup loans. Some of this type of financing is geared toward very specific types of businesses that target very specific demographics.

But there are also some government lending options available to more diverse business ventures. And there may be some grants and contributions that don’t even have to be repaid. Learning what is and isn’t available to you will require time and research.
 

Have an Exit Strategy

Many lenders will also want to know your exit strategy, that is, what your plan or method will be to “exit” your investment in the company, should the opportunity arise. This could involve selling your business or portion that you own back to the employees or to another company.

It could also mean complete liquidation or attempting to sell it on the open market. Either way, many lenders will want to know your plan, so be prepared to answer that question when applying for startup business loans.

Managing your Business Startup Loans

Once you’ve secured the funds for your startup, the work is just beginning.

One of the best decisions you can make is to either hire a professional to keep your books or invest in some good accounting software. Or both! The initial investment into your startup will be its lifeblood. Take care of it.
 

Keep Separate Accounts

Even if you’re going to be a one-person operation, keep separate accounts for your business and your personal finances. This might sound like basic advice, but it will definitely help you manage the proceeds from your business startup loans in a more organized way.
 

Incorporate

Taking your business to the next level means actually incorporating it, otherwise known as registering as a separate legal entity. Before you do this, you should run a search to make sure that the name you’re using isn’t already registered.

Registration is a relatively simple process to complete and can be done entirely online.
 

Stay Informed

Even if other people are handling production or marketing, know what your business is costing you. If your initial projections about these costs were off, make necessary adjustments so they won’t affect your profit margins.

In addition to this, stay informed about the changing trends within your market and be flexible to those changes. Work with your customers, not against them.
 

Make Timely Payments

You will have your hands full in the first few months or even years of a new business. But making timely payments on your business startup loans is not something you can afford to forget.

Create payment reminders on digital calendars or, better yet, take advantage of automatic drafts from that business account so you don’t even have to think about mailing in or manually submitting an online payment.
 

Keep Impeccable Records

Having good financial records to go back to can help you in all kinds of ways. There are several situations where this type of documentation can help you down the line, even if it doesn’t seem important in the moment.

Always retain copies of:

• Receipts
• Donation records (of time, money, products)
• Invoices
• Payroll

These documents will come in handy for tax filing, an audit (yikes!) or the next time you seek financing. Just because you secured one or more business startup loans doesn’t mean you will automatically qualify for financing again. Make sure you’re monitoring your finances with a critical and organized approach.

Speaking of which….

Take Care of Yourself

Starting a business is definitely an exciting process. But it can also be stressful. The early days of a startup are some of the longest you will ever have. Make sure you’re looking out for your own best interests, along with those of your new company.

Here are a few tips to do just that.
 

Delegate

As much as you are watching your bottom line, make sure your staff is operating at their full potential. If you notice areas where time management for yourself and others can be improved, shift responsibilities as needed. Even if that means letting go of some of yours.

A startup business doesn’t begin running like a well-oiled machine overnight. It takes periodic adjustments to get into a good rhythm of production and profit.
 

Hire Additional Staff

If the number of employees you have isn’t enough to get the work done even after you’ve made adjustments, it may be time to hire more. You might initially balk at this, but if that’s what it takes to ensure optimal performance of your business, just bite the bullet and hire the help.
 

Remember Why You Started

At the end of the day, remember why you started your company in the first place. Keeping those initial goals in perspective will keep you motivated on the longest days.