Start up Business Loans: Advantages of Using a Private Lender
Starting a new business requires capital. Some businesses require more capital than others, but how you fund a startup could determine its long-term financial viability. We recommend private lending whenever possible. Small business loans are available through commercial and retail banks, but private lenders tend to bring more to the table.
If you are planning to start a new business, think long and hard about how you will fund it. Startup business loans are not likely to provide 100% of the funding you’ll need. You may have to partially bootstrap your startup. You may have to ask family members or friends to invest in your enterprise. You might even consider combining private loans with supplemental retail loans.
Start up Business Loans: Qualifying Is Easier
The number one reason we recommend private lending relates to qualifying. Simply put, private lenders make it easier to qualify for business funding. There aren’t nearly as many hoops to jump through as compared to banks. This is by design.
Retail and commercial banks operate under a strict set of guidelines designed to mitigate risk. They are very choosy about whom they lend to. As such, they will leave no stone unturned. Banks will run a full credit check and income verification. They will look at previous business experience along with your written business plan. They will require that you document absolutely everything down to the last penny.
Private lenders take the necessary steps to protect themselves as well. However, They are not required to follow such strict guidelines. This gives private lenders a bit more flexibility. For example, we can pre-qualify applicants with a soft credit pull. A complete credit check is still possible, but a soft pull gives us a pretty good idea of whether or not you present a good risk.
Start up Business Loans: More Flexible Collateral Requirements
Some types of startup business loans may require the entrepreneur to put up some form of collateral. In such cases, private lenders tend to be more flexible in what they will accept. Existing business assets are a good example.
You might already run a successful business and wish to use its assets as collateral for a startup loan. Convincing a bank loan officer to accept those assets could be a difficult task. Yet a private lender is much more likely to work with you as long as the assets have enough intrinsic value. The end result is more flexibility for both you and the lender. The chances of the two of you working out a mutually acceptable deal go up.
Retain Full Ownership of Your Business
In the absence of startup loans, you might consider raising all of your funding through outside investors. This isn’t a bad option except for one thing: bringing on investors means giving up at least some measure of control. You might even have to give up a portion of the ownership of your company. That’s the way private investment works. You trade control and ownership for financing.
Business loans from private lenders have no bearing on ownership. You retain full ownership of your business along with exercising full control over its daily operations. The lender is only interested in whether or not you make your monthly payments. As long as you do, you are free to do with your business as you see fit.
Faster Turnaround Time
Private lenders tend to present loan applicants with a less complicated application process as compared to banks. There is less paperwork to fill out. You are required to provide less documentation. The icing on the cake is that your application won’t have to go through the same type of underwriting process bank loans are subject to.
In the end, it all adds up to a faster turnaround. Depending on the private lender you choose, your business loan could be funded in as little as five days. No bank can offer that kind of speed. What a private lender can do in a matter of days can take a bank weeks to get done.
Startup business loans are one option for funding a new business. They can be used in conjunction with investor financing, financial help from friends and relatives, and bootstrapping. If you are considering applying for startup loans, we encourage you to consider private lending. Private lenders offer greater flexibility, a streamlined application process, less stringent qualification requirements, and faster turnaround times.