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The SBA, investors, crowdfunding and “family and friends” are all options for your startup business to find working capital. But, are you interested in securing a more traditional loan to help grow your business? On the Furtenburg Capital Group Marketplace, we have several small business startup loan products that can help you get the capital you need to grow. These products are a more traditional form of capital and a great option if you have a strong personal credit score, and are looking to start building on your business credit, too!
How Small Business Startup Loans Work
Line Of Credit
Think about this as similar to a credit card, but tied to your business rather than your personal credit. Especially because these lines are typically interest-free for the first 9-15 months, they can be a great way to cover expenses without having to worry about making interest payments while getting your business off the ground.
With a startup line of credit, be aware that you need to have a nearly perfect credit score (700+). You will work with our partners to apply to multiple banks, so approval can take up to one month. A detailed credit report is the only requirement to get this process started. There is no collateral required for this credit line, and it is revolving, to allow continued usage.
Equipment financing is a small business startup loan which uses the equipment being purchased as collateral. This typically allows the lender to take slightly more risk at a lower interest rate, and it allows you to pay off the cost of equipment as you are generating revenue for the business.
Just as with a startup line of credit, you will also need a great credit score (680+). To complete the application for this type of loan, you will need a vendor quote, a statement on how you intend to use the equipment and a detailed credit report. One of the advantages is that you can use the depreciation of the equipment as a tax benefit over several years.
Line Of Credit
With a startup line of credit, you will have 0% interest for the first 9-15 months. After that, interest will be similar to a credit card, approximately 7.9-19.9%.
The important thing to keep in mind is that after the first 9-15 months, you will you only pay interest on the amount you use (like a credit card). So, let’s say you get a $50,000 line of credit for your startup. Your draw $10,000 to help cover some initial expenses. Since all you pulled out was $10,000, you will only need to pay back the $10,000, plus the applicable interest. The interest only applies to that $10,000 and not the full $50,000.
If the interest is 12%, you would need to pay back $10,000 + $1,200, or $11,200. You can continue to draw on the remaining credit line ($40,000) and once the borrowed amount is paid, you can continue to make additional draws on the total line, while only paying interest on what is borrowed at any given time.
The interest rates with equipment financing will fluctuate, but an average rate is about 20%. The interest rates can run high, but it will help offset some of your initial startup costs.
To put this in terms of numbers, if the equipment you would like to purchase costs $20,000 and the lender upfronts you enough cash to cover the total amount, with 20% interest, that means you will need to pay back $24,000 total to the lender. If they give you 5 years to pay them back (loan terms are usually based on the expected life of the asset), then that means you will have monthly payments of $400.
Many young and new businesses can qualify for a small business startup loans. As your business is young and won’t have a lot of revenue history, the most important factor is going to be your credit score. The higher your personal credit score, the more chance you have of qualifying for a small business startup loan.
At Furtenburg Capital Group our strategy is simple, we focus on funding money for our client’s through multiple different channels offering a variety of terms and rates. As a result, whether we are funding the deal ourselves in-house or partnering with a larger institution or lender to bridge the gap, Furtenburg Capital Group will put the money in your account fast, every time.