How to apply for Startup Business Funding

It can be a daunting challenge to find the startup funds required for your small business. It may seem risky when searching for willing investors or you may need to apply for a business loan. You may also be tempted to consider applying for a small business  grant or “free” money that does not need to be paid back. The application process for a small business grant, however, is not a simple one, and are typically given to organizations that work to meet the needs of the greater good, and not just for one’s benefit. Therefore, it is very important that you fully understand the complexities of pursuing state and federal small business grants, before relying on the funds as a means of financing your company.

Understanding the process

The application process for small business grants can be wide-ranging and much more complex than just filling out a few forms. Indeed, you will have to determine whether you are eligible before applying for a federal small business grant, so you would need to search into other funding options. Make sure you understand, in return, what the donors expect of you. So have a good idea of what other people may be offering your company. In addition, please note that after the funds have been released you will be responsible for documenting accurate information and for making detailed reports on how the money was used.

Determine your eligibility

It’s a good idea to make sure you’re eligible for a small business grant before you leap into a grant application being put together. For a small business applying for a federal grant, you have to follow specific criteria to qualify for it. Generally speaking, government funds are donated to businessmen if the company truly serves the common good of society. In other words, non-profit and educational groups engaged in activities such as scientific exploration or state-of – the-art technology development would be eligible to apply for a federal grant.

You will be able to access other government services before funding is provided for the small business and work for a positive outcome. However, rather than a federal grant, this funding is more likely to be a lower-interest loan or contract incentive. In fact, the business model must fall under a particular size requirement to qualify as a “small” company. Essentially, the USA Funding Pros aims to help small companies find financial resources to expand their businesses. Please visit the USA Funding Pros website to determine if your company is eligible to apply for start-up business funding based on the total number of your employees or based on your average annual receipts.

What eligibility criteria do I need to meet for a business loan?

The great news is that business owners today have far more options available than they did years ago, when it comes to finding small business financing. However, you will find that eligibility for those business loans will vary amongst lenders.

In this section you can find common business loan conditions when applying for a business loan:

Credit Score.

Lenders usually check your credit report when you apply. Lenders will also allow good loan borrowers to have a personal score of at least 650. If you are already in the company, always request a credit report for your business.

Your Corporate Era.

You will need to be in operation for at least one year to apply for most online small business loans. Your typical bank may require your business to have operated for, at least two years. If your company is younger than a year, you should get a startup loan, today.

Annual Income.

Lenders often require companies to bring in $50,000 to $150,000 in annual revenues.

Ratio of Personal Debt to Credit.

It sounds counter intuitive, but if your company runs out of money, some lenders will find too much personal credit a risk— you might turn to that credit and use the funds to pay off your debt.

The Net Income from Sales.

Most borrowers are looking for a total income that is at least 1.25 times higher than that of your total expenses, to be sure that you can meet their repayment criteria.

Collateral Opportunity.

When applying for a secured business loan, you may need to specify your assets — machinery, inventory, or immovable property— to back the default loan application. If you decide not to provide collateral, you will have to equate unsecured business loans instead.

How you would want to use the money.

You may need to specify exactly how you intend to use the borrowed money. Some lenders may limit how you spend the approved funds. For example, when lending money for equipment, financial institutions will limit you to only use the funds to buy equipment for your company.

You can qualify for more than one form of financing from a variety of lenders, depending on the size of your company and the required loan. Note that traditional banks often have more stringent eligibility requirements and application processes. Online lenders find that providing business loans with comparable interest rates and fees is a better option for your small business financing needs.

Explore your financing options and research various lenders’ criteria to find a business loan that best suits your situation, and helps you stay profitable and effective in the years ahead.