Requirements For A Small Business Installment Loan
When starting a business, you will have more expenses than income. Capital gets burned fast, and it is at this point that a business progresses or stagnates. Established companies do not have a problem accessing credit. For one, they have had a long time creating assets that they can use as collateral. They also have a credit history, which can be used to access a loan from a commercial bank.
Large companies have various ways to access the capital that they need. They can float their shares to the public through an IPO and get funding. Since they are making profits, they can use them to repay loans from existing lenders. This is, however, not available to a startup. Some are still at the idea stage, and this means they have not started making sales from their products. Getting credit from conventional banks poses a challenge for startups.
Use an Installment Loan As An Alternative To A Small Business Loan
A new business owner can choose to borrow from friends and family members. But, the borrowed amount depends on the relationship with the family member or friends. Unsecured payday loans are another way that a startup can acquire funding. The owner will apply for the loan just like they do for a direct installment loan. Payday loans are fast ways for the startup to get cash. In most cases, the company has yet to report a profit so they need to generate income.
Applying for a direct installment loan is simple. You can use a list of installment loan companies and find a legitimate lender. After selecting a company, you will then fill out the application forms. This should take you a few minutes. The lender will assess how much to advance the startup owner based on your application. The repayment period is usually less than 30 days. Short term loans are not a long-term solution to run your company. For one, the interest rates are very high and increase if you default. The loan amounts are also small. But, installment loans are suitable if you have bad credit or lack a credit history. They are a great way to fund your short-term financial needs.
The other alternative to payday loans is a car title loan. The startup owner can use his/her car as collateral to acquire a short-term loan. The application process is the same as payday loans, with the key difference being that your car will need to be valued to ascertain how much to loan. Typical loans are 25 to 50 percent of the car value. The lender will repossess your vehicle if you fail to meet your loan obligations. That’s why choosing a lending option that best fits your financial needs is always best. In most cases, an installment loan will be the best choice because you will borrow exactly what you need. Besides that, you can get financing at a comfortable rate that won’t cause hardship. Compare this to a cash advance that has high interest rates and rollovers and you can see the long term benefit.
Most business loans have lower interest rates than direct installment loans
The benefit of getting a payday loan extends to how easy and fast you get the loan. With unsecured loans, the lender will not come after the business assets should you default. You are also not restricted on how you spend the funds received. The only condition is that you repay on time. You also do not incur any prepayment penalties when you repay in full early. You can also build your credit history when you repay a direct lender installment loan early. This will go a long way when applying for a loan from conventional direct installment lenders. Remember, the best option for small businesses is to check with the SBA. The SBA features many programs and resources for companies looking for a loan.
Other than Government resources, financial resources for startups are often limited when it comes to small business installment loans. The primary reason being – lenders, are unable to gauge the economic potential of the company. If you look at the statistics, it is estimated that over 90 percent of startups fail before they enjoy their second birthday. That is why banks shy away from lending to startups. Payday loans are an alternative option for startups.