Smarter Loans Inc. is not a lender. Smarter.loans is an independent comparison website that provides information on lending and financial companies in Canada. We work hard to give you the information you need to make smarter decisions about a financial company or product that you might be considering. We may receive compensation from companies that we work with for placement of their products or services on our site. While compensation arrangements may affect the order, position or placement of products & companies listed on our website, it does not influence our evaluation of those products. Please do not interpret the order in which products appear on Smarter Loans as an endorsement or recommendation from us. Our website does not feature every loan provider or financial product available in Canada. We try our best to bring you up-to-date, educational information to help you decide the best solution for your individual situation. The information and tools that we provide are free to you and should merely be used as guidance. You should always review the terms, fees, and conditions for any loan or financial product that you are considering.
A start-up company is a business that Is at the very first stage of operation. It is a new business which is basically unknown and unproven, but has great potential. Like any business, start-ups need funding for short and long term business projects. Start-up loans are often vital to whether or not the business ever gets off the ground or meets with long term success.
The majority of start-ups do not have credit history or revenue bur still need valuable finances. There are several options for businesses to access start-up loans to keep their companies viable. The sources of funding, amounts, and terms vary depending on the lender.
This article provides an overview of these opportunities for start-up loans:
The key to a successful business strategy is to get information about start-up loans long before they are needed. Preparation in advance will guide business owners in the right direction to get financial help at the right time, with the right lender.
Crowdfunding is an alternative mans of financing for start-up businesses. It provides an online platform in which entrepreneurs can search for the funding they need from a group (or crowd) of investors. The investors are most often individuals in sectors other than financial who have an interest in investment. They work alone or with other potential investors to get new businesses off the ground.
Crowdfunding is gaining in popularity, especially for entrepreneurs that do not have years in the business or do not yet generate a lot of revenue. To participate, the business owner carefully prepares a business plan and a “campaign” which outlines why their start-up company is the best choice for investments.
Below are just some of the suggestions that have proven successful for new business owners interested in getting start-up loans with crowdfunding:
In some locations, crowdfunding platforms let a business owner offer equity in their business in exchange for their investment. Business owners should carefully consider the pros and cons of this option before making such an offer.
An angel investor is a private individual that is willing to provide start-up loans to companies. Angel investors often seek investments in the technology industry. Their focus is on getting in on the ground level of the business and seeing it through to its success going forward. Often, angel investors take equity in the business in exchange for funding, or contract a convertible note which can be changed to equity at a predetermined date in the future
Angel investors are usually wealthy individuals with resources to provide finances for new or existing businesses of strangers. These can be found through investor listings or resources such as crowdfunding. Often, though, angel investors are people who have a business or personal relationship with the business owner.
Some new business owners turn to people they know first for financing. Although some people would be hesitant to borrow from a friend or family member, many have done so with lots of success. Family and friends may be in the position to offer low, or no, interest loans without the strict credit qualifications that most banks and financial institutions require.
According to business owners who have utilized start-up loans from friends and family, the best practices are:
Hurt feelings and broken relationships can result when loans from friends and family go south. The key is to keep communication open and treat each party with the respect of a business associate, leaving personal issues for the casual times.
Very often, new business owners tap into the equity in their home for start-up loans. As relatively easy as this solution can be, it is also one that should be approached with a crystal clear understanding, since something very valuable to the owner can be at risk.
The amount of a home equity loan is based upon the amount principle that has been paid on the loan. In other words, the equity is the amount of money that is the difference between how much a home is currently worth and what is still owed. If a homeowner has lived in the home many years, this can be quite a bit of capital to use to start their business.
However, the homeowner should also consider:
The decision to use home equity loans to start a business is as unique as the business and business owner. Again, care should be taken when thinking about making an investment in the business which could affect future assets, like a home.
Retirement accounts, like 401k’s and IRAs, can also be used as a source for start-loans. The personal retirement account, in these cases, is converted into a new investment in the business. Conversion of retirement accounts to investment accounts is a complicated legal process; it is managed by a third party that oversees the process.
It is of the utmost importance to use a very reputable firm handle the conversion of a retirement account. An attorney should also be part of the team to make sure everything is in order. However, if the business succeeds, start-up loans from retirement accounts can bring an excellent return on investment in the future.
Not much is more exciting and rewarding than starting a new business that has the potential to grow to its fullest. These days, millions of people come up with ideas and products that change the way people live. But they all have to start somewhere; start-up loans are the first step to an extraordinary and lucrative business venture.
Click on a star to rate it!
Average rating / 5. Vote count:
Let us improve this post!
Thanks for your feedback!