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What are Business Start up Loans?

What are Business Start up Loans?

business loans are offered to companies that are not yet established, but are
in need of financing. Also known as business start-up loans, these forms of
financing are awarded to small companies that are typically started by one
entrepreneur, or a group of entrepreneurs. These companies are held separate
from already established, yet small businesses.

start-up company is not established, it has no source of income, or a dedicated
following; it simply possesses an idea or premise off of which to earn income.
That being said, start-up business loans are similar to personal loans.

The bank or lending institution is not interested
in losing money–a loss is realized through loaning a risky company money.
Those companies that fail to earn an income or struggle with initiating a sound
business practice will be more likely to default on their loan payments than
established or well-to-do companies. If the business is too much of a risk-if
it fails in gathering enough income to pay off the loan or possesses a meager
credit history-the bank or lending institution will not offer them a small
business loan.

a start-up business does not possess the established intangibles of a regular
company, the qualification process that goes into awarding a start-up business
loan is crucial. Additionally, the process is stringent because the vast
majority of start-up businesses fail within the first few years of initiation.

It is
unlikely that a lending institution will offer start-up business loans. The
prospect of receiving a loan from a bank is only awarded to companies that have
sound business plans, an enormous amount of capital, or who possess perfect
credit ratings. Even if such specifics are met, business start-up loans offered
by banks will be attached with a very high interest rate. As a result of a
bank’s unwillingness to finance start-up businesses, the majority of business
start-up loans are offered by family and friends of the entrepreneur.