Start-ups can be difficult to get the funding needed in order to start your business, but your first step into building a business starts off with a plan that maps out all the necessary milestones ahead. Along the way, clarity on your business progresses while new discoveries predict any obstacles ahead.
Take a look at the key elements you should be considering while looking for a startup loan for your business. If you’re ready to start applying, you should have your EIN number, mission statement, and marketing strategy ready to share with the lender.
Start Your Business
Registering your business with either an LLC, S Corp, or a C Corp lands you respectfully in the professional eye when inquiring about a startup loan, and it creates an opportunity to receive one thanks to proper documentation and credibility. The steps you need to take in order to become an official business are as follows:
- Name your business
- Pick a business structure LLC, S Corp, C Corp, etc.)
- Register with Secretary of State
- Receive an EIN (Employee Identification Number) free with IRS.gov
- Get professional contact information (business phone number, email, website, etc.)
- Get a business checking account
- Get a DNB (Dun and Bradstreet Number) free on Dnb.com
Personal Credit vs. Business Credit
Before seeking out the appropriate lender, it is imperative to know the difference between personal credit and business credit, especially when aiming to get your startup headed in the right direction. The two are completely separate and are structured by different functions. With personal credit, there are three credit bureaus:
- Equifax
- Transunion
- Experian
Within these credit bureaus, personal credit utilization is taken into account. This means that a credit score based on how your credit has been utilized via any other loans, such as Mortgage Loans, Personal Loans, Auto Loans, or Credit Cards, has been documented on your credit report. When it comes to receiving loans with personal credit, your debt to income ratio is greatly factored in.
Lenders consider how much you earn vs. how much you owe before allowing you to receive a loan by calculating how much of a risk it will be when providing you with one.
Business Credit
With business credit, there are three credit bureaus as well; all the same except for one:
- Equifax
- Experian
- Dun & Bradstreet
With business credit, lenders focus less on debt to income ratio and more on how well debt is managed. In return, you are rewarded particularly when a business credit limit has been met and payments are made on time. More importantly, startup loans are interchangeable with business credit cards and are managed under the same scope utilization. Overall this allows your business to receive the best opportunity to thrive and get ahead.
Build Your Business Credit
Once you’ve established and legitimized your business, you can begin building credit as you would with your personal credit for the same reason. Building your credit allows you to show lenders your business can in fact manage debt well. The way to jumpstart your business credit score and receive a loan from a lender is by building vendor credit with certain companies such as Uline, Granger, and Quill.
These kinds of companies report your credit history to Dun and Bradstreet. When you begin to manage small debt with your business, particularly with bad personal credit, these reports will help make it easier for you to receive a startup loan.
Lenders Who Will Provide Your Business with a Startup Loan
Now that you’ve started your business and established some credit history, you’re ready to apply for a startup loan. Here are a few banks willing to lend your business money to accelerate forward.
- Chase
- WellsFargo
- Bank of America
- Citi
- Capital One
Manage Your Business Debt and Get a Startup Loan
Legitimizing your business, putting together a plan, registering it through the state government, and understanding the difference between personal and business credits are all essential steps towards acquiring a startup loan. How to start a business, building credit history, and where to go to present well-managed debt consequently lands you with the best lenders for a business venture. In the end, you want your business to excel, and lenders are willing to aid in that success financially. Therefore, debt organization is essential, and your spending habits will notify lenders that your business is beneficial.
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