Navigating Business Loans: When and How to Secure Funding for Your Startup

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There are two things that we can say are for sure true about launching a startup .

First, it can and should be one of the true joys of life. There are few times in life when the stars align just so that you have the time, inspiration, support, mojo, and vision to launch a new business. It truly is an exciting and fun moment.

But it is also equally true that creating a startup is challenging. Coming up with the right idea, leaving your familiar job, regular paycheck, and sweet benefits and finding the funding to get the venture off the ground is usually fairly stressful.

Let's dig into that last issue, funding, because it can be the most challenging of all. The good news is that it does not have to be. There are two questions to be answered, and once you answer them, the funding piece of your puzzle should fall right into place.

When to secure funding

There is an old Chinese proverb that goes, "The best time to plant a tree is 20 years ago. The second best time is now."

This is true of start-up funding. The best time to begin to secure your start-up funding is as soon as you begin to contemplate the entrepreneurial life.

Waiting until you are on the verge of quitting your old job and starting is way too late, for a couple primary reasons:

1. It typically takes a while to line up all of the funding you need, and it also typically requires tapping into several different sources. Given that, funding the venture should be at the very top of your list of things to do as you begin the journey.
2. Second, you will need to spend money even before you ever have that "Grand Opening" party. You will need funds for legal help, initial marketing, website and social build-out, and, oh, about 50 other things. So you need to secure funding as soon as possible.

According to the Small Business Administration, fully 75% of new startups rely on a combination of business loans, credit cards, and lines of credit for their initial rounds of funding.

How to secure start-up funding

In my latest book, Your Small Business Boom , I have two full chapters on ways to fund a business. What is great is that there is no shortage of ways to fund a startup these days. Here are your best bets.

Small Business Administration (SBA) loans

What if I told you that there is a multi-billion dollar agency within the federal government whose sole purpose is to help your new business succeed? Well, there is -- and it's called the SBA. The SBA has a wide variety of business loans for a wide variety of businesses.

But note: The SBA does not make the loans, it simply guarantees them. But even that is good news for you as, with an SBA guarantee, these loans are typically easier to get than a normal bank loan. Search for a local bank that offers SBA lending and off you go.

Microloans

If you need funding under $50,000, a microloan may be right for you. The SBA makes microloans (up to $50K), and local nonprofits do as well, for smaller amounts. Again, usually these are easier to get than a typical bank loan.

The reason for this is two-fold. First, lower amounts are generally easier loans to fund, and second, microloans are often funded by nonprofits whose mission is to help small businesses get funding, often by relaxing loan underwriting requirements.

Bank loans and lines of credit

Banks want to lend you money. That is their business. Your job then is to make their job easy. You do so by having collateral, a good credit rating, a solid business plan, and a great team (if that is what your new business will require).

The real trick is to show the lender generally, and the banker you are working with in particular, that you have a solid plan for your startup. Aim to show that there is a need and a market for what you plan on selling, and that you have the expertise and ability to fill that market need.

Your own resources

Most new entrepreneurs cobble together a patchwork of funding, and that often includes their own capital. It could be money you have saved, or proceeds from some sale, or a loan from Uncle Joe, or even credit cards .

Other lenders will want to see that you have some skin in the game. Having your own money on the line shows the lender that it isn't the only one at risk -- it shows that you are so committed and so passionate, that you are willing to risk your own capital too to see your business succeed.

The bottom line is that there are more options than ever for funding a new business. Get out there, get creative, and go for it. Your empire awaits!

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