Can I Get a Loan if I Just Started My Business?

By Backd Business Funding, 30 June 2022

Can I Get a Loan if I Just Started My Business?

Starting a business is no small feat. There are all sorts of moving pieces to take care of and tasks that need completing. Despite all the excitement of recently opening, staying on top of everything your company needs can be exhausting and, frankly, overwhelming. 

Putting yourself in the best position to succeed can help ease some of the stress, however. One of the most effective ways to do that is to have a good amount of working capital. Working capital is the money used to fund day-to-day operations of a business as well as larger capital expenditures. 

In an established business, working capital is basically just the monetary difference between current assets and current liabilities. Working capital for a new business can be slightly harder to come up with, however. Since you are still establishing a customer base and likely haven’t reached a point where you can stay afloat based solely on your sales revenue, your working capital might be negative. While that may sound concerning, it’s important to understand that it is totally normal. In fact, many new businesses don’t turn a profit until somewhere between 18-24 months, according to Forbes. Still, it begs the question, if your working capital is negative, how do you fund essential business expenses? There are lots of options, from loans to alternative financing. In this blog, we are going to look at several funding options and answer the most common questions new business owners might have. 

How Can a Beginner Get a Business Loan?

There are several steps to securing a business loan as a beginner, as well as business loan requirements. In order to get started, it might be helpful to ask the following questions. 

Q 1: What Type of Loan Do You Take Out to Start a Business?

Determining the type of loan you want might seem like an obvious place to start, but that’s because it is one of the most important decisions you will make in the entire funding process. There are several loan options available, and depending on what kind of organization you are, you may qualify for small-business or non-profit options. Some of the most common loan opportunities include:

  • Term Loans - These are your traditional loans. They involve a bank extending a lump sum of cash that is to be paid back over a period of time with interest. 

  • Business Lines of Credit - Like a personal line of credit, a lender extends funds up to a certain limit. Only the amount of financing actually accessed by the business owner is subject to interest accrual on a month-to-month basis. 

  • SBA Loans - Offered through the U.S. Small Business Association (SBA), these loans tend to offer higher funding limits and lower interest rates. It is worth noting, however, that the SBA application process is considered to be one of the more difficult ones on this list and is often very time-consuming. 

  • SBA Microloans - Also offered by the SBA, these loans are earmarked for startups in disadvantaged areas as well as those owned by minorities or women. They have a limit of $50,000 with slightly higher interest rates than standard SBA loans. 

  • Asset-Based Financing - This form of borrowing uses assets as collateral for your loans, like inventory, machinery, and real estate. Since the lender has collateral, the terms for this financing are typically more competitive. The downside, of course, is that the lender can repossess the assets if the borrower defaults.

  • Alternative Financing - This form of financing tends to offer quick and more flexible financing options once a baseline of qualifications is met. Backd specializes in alternative financing options! 

Q 2: Can I Get a Business Loan With a 500 Credit Score?

Knowing your credit score is an essential part of any financing endeavor. If you have a lower credit score, you might have a more difficult time finding a lender. Lower scores also typically lead to less favorable loan terms, with potentially higher interest rates or lower amount limits. It’s important to know your score and research what different lenders might be willing to provide with your credit history. 

Q3: What’s The Easiest Way To Get A Business Loan?

After determining what kind of financing you might want and getting a sense of the terms you may qualify for, the easiest way to get a loan is to prepare all of your documents. While the exact ones you will need may vary by loan type, most lenders will require:

  • Tax returns for the last two years

  • Financial records

  • A business plan

  • A bank account for direct deposit

  • Any industry- or business-related licenses or registrations

After you've answered all of these questions and feel prepared, it’s time to go ahead and submit your application. 

If you’re thinking that all of this seems like a lot of work, that it might take too long to get funding, or if it doesn’t sound like something you want to do, you might be right. At least about traditional loans. Don’t fret though, there’s good news. At Backd we’ve come up with an alternative financing option!

Backd…Working Capital That Works For You

Securing traditional financing can be difficult and exhausting, and it may still take months to actually access the funds. Aside from just being a hassle, that can be a real problem if you need working capital ASAP. That’s why we created Backd.

We offer funding ranging from $10k - $2M dollars, with easy payment structures. Not only that, but we also provide a 24-hour turnaround time. If a line of credit is more what you need, we offer credit solutions as well. 

Instead of long background checks and lender applications, all you need to secure your funding  is:

  • More than a year of operating

  • A personal credit score of 600 or higher

  • A minimum annual revenue of $300,000 or more

  • 10 months of deposits in your bank account

Once you qualify and fill out the application, our team at Backd handles the rest.

Grow your business now