Business start up loans are renowned for being tricky to secure when your company is in its infancy. A lack of trading history makes it difficult for lenders to determine how reliable your business will be in paying back borrowed money.

There are a few finance options that start-ups can choose from, but many involve investment from family, friends, or drawn-out government schemes. Angel investors can be a helpful option to speed up the funding process, but they also compromise control of your business.

An unsecured business loan is a great way to get the money you need to take your business off the ground. But every funding journey is different and comes with its unique challenges, so we’ve outlined some tips that can boost your eligibility for business start up loans.

Security

Unsecured business loans do not require assets as security (like secured business loans) as they use personal guarantees. This means that the business owner is required to pay the remainder of the loan if their business permanently stops trading.

Whilst this arrangement doesn’t require you to use an asset as security, it can certainly help your chances of approval if you have a high-value item of some sort.

If you’re a homeowner, it reassures lenders that you have a history of borrowing and have a sizeable asset to your name. This reduces the risk of missed repayments and offers collateral if you do.

Nonetheless, a personal guarantee proves to lenders that the business owner is comfortable putting their name to the agreement and has confidence in their venture. It works in favour of directors seeking business start up loans.

We recommend that you talk with your finance broker about the options available to you.

Part-Time Job

It can be helpful to your loan application if you are earning money elsewhere.

It highlights that your finances aren’t solely dependent on the potential success of your new business, and you have a backup income as insurance.

Of course, many entrepreneurs need to take an initial hit to their income to prioritise a new project, so huge amounts of money are not expected. A business owner that has multiple sources of income can be assuring for lenders. It can allow for a higher loan amount and a more flexible loan term.

Personal Savings

Many people seek business start up loans to set up their company without draining their personal savings. It’s an efficient strategy to protect your funds and secure the capital you need to launch your business.

However, you can increase your eligibility for funding if you prove that you have a significant amount of money saved. It offers a fail-safe for lenders to rely on if you can’t keep up with repayments, making you a more dependable business owner to trust with borrowed money.

Also, a sizeable savings pot indicates that you are effective at managing your finances.

Credit

Personal and business credit plays a big part in your eligibility for business start up loans.

Your personal credit score is determined by your experience with credit cards, mortgages, and loans. It can be a major factor in assessing your reliability for repaying debt.

Business credit reflects the financial trustworthiness of the business as an entity, not the people who have founded it. Your startup business is not likely to have any financial history so personal credit is analysed far closer.

When applying for business start up loans, finance brokers can perform a basic review of your credit without soft or hard checks. This means you don’t have to worry about it appearing on your credit report.

Also, business loans for people with bad credit can still be arranged. Get in touch with Crispcap to learn more about your finance options.

Documentation

As start-up businesses are in such an early stage of development, gathering documentation for their trading history is usually not possible. Ideally, lenders would receive the business’s last set of full-filed accounts and the last 3 months of bank statements.

But that isn’t to say there are no options for people seeking start up business loans. Any documentation that business owners can provide will support their application, this includes their company registration number, personal details, proof of savings, and business plan.

In some cases, lenders will want to see records of personal bank statements where business statements aren’t available.

Your application will benefit from some record of trading history, particularly if you can’t satisfy some of the other tips above.

The main takeaway from this article is that there are no fixed eligibility criteria for commercial funding. A combination of factors such as your security assets, job status, personal savings, credit score, and trading history will contribute to the success of your funding request.

How Do I Get Quotes for Business Start Up Loans?

You can apply for business start up loans here. Our application process takes just 30 seconds. Once you’ve submitted your request, Crispcap will contact you to help you get funded as soon as possible.