Does your business qualify for a low-interest loan? Plenty of low-interest loans are available from banks and other institutions, so it’s important to know what they require first before you set out to find one that’s right for you. So make sure you meet these seven requirements before applying for business start up loans.
1. Established Company Structure
Lenders will be looking for a business structure similar to that of an established company in your industry. This can mean incorporating a limited liability company, C corporation, or S corporation.
2. A Business Plan
Ensure you have a business plan and keep it updated with any changes. Next, the startup must demonstrate that there is a need for their product or service in the market and be able to show proof of commercial demand. Finally, they must possess an experienced management team who can execute the company’s vision.
3. Financial Projections
Your business plan should include financial projections for at least three years, detailing your projected expenses and revenue sources.
4. Legal Documentation
If you are trying to set up a formal, incorporated business with its own legal identity, then you will need to file incorporation documents with your state’s corporation division. They include:
- Articles of Incorporation
- Minutes of the First Meeting of the Board of Directors
- Statement of Corporate Purpose
- Listing on an exchange
Legal documentation is essential for any startup seeking financial assistance from banks or other lending institutions. It must also have legitimate files if your company plans to raise funds by selling stocks or securities to become a publicly-traded company.
5. Business History
Before applying for a loan, you’ll need to have a solid business history. Make sure you’ve had some positive revenue in your past and have consistently demonstrated good financial management. And according to Lantern by SoFi, “As a start up, you may not have an established business credit score. In this case, lenders generally evaluate your personal credit history.”
6. Security Of Assets In Case Of Default
The most important thing to consider is that your assets will remain safe in case of a default. So when you approach any lender, make sure it is an asset-based loan.
7. Other Ways Of Getting Low-Interest Loans
Not all companies are successful at getting low-interest loans through conventional means. This doesn’t mean they can’t get one – it just means they have to look a little harder. Alternative options for getting low-interest loans:
- Debt-based lending
- Family and friends
- Crowdfunding sites like Kickstarter or GoFundMe
- Small business administration (SBA) loans
- Equity-based lending; 5. Long-term credit card debt
Banks will only lend money to startups if the company can provide collateral, generally in the form of a house, car, stocks, etc.
If you are a startup business trying to secure low-interest loans, you should ensure that your startup meets all seven requirements. If they don’t, it could cost them more in the long run, as well as time and resources.