Ah, youth — the time of a million great ideas that are a million dollars short of ever coming to fruition. Of course, if you believed that, you wouldn’t be an entrepreneur.
In truth, while finding financing for a business run by a young entrepreneur may be difficult, especially considering the current economy, it’s not impossible. In fact, some funding sources are practically designed for the unique needs of young entrepreneurs.
To the collective sigh of young entrepreneurs stateside, the Small Business Administration (SBA) offers several loan programs that don’t penalize you for lacking experience. Most of these programs are administered through banks and underwritten by the SBA, so make sure you ask your bank’s commercial loan officer about SBA-related options.
The 7(a) Loan Program is tailored to business with special needs, and young entrepreneurs have reported obtaining them. Of course, these success stories have put in a great deal of hard work: Completing the average 7(a) packet demands roughly 25 hours. But for all that work, you can get a loan up to or, in some cases exceeding, $150,000 at a reasonable interest rate.
To expedite the paperwork and approval process, look for a bank enrolled in the Certified Lender Program or the Preferred Lender Program. You may also inquire about the SBAExpress program, though this option may prove more difficult as it means the lender eats more costs and receives a smaller guarantee from the government.
You’ll also want to explore the SBA’s Microloan program, which provides up to $35,000 in short term loans, though the average size is closer to $13,000. You’ll likely have to look outside of your bank for this financing, as the SBA entrusts various nonprofit agencies and state authorities to administer these loans. While they can’t be used to pay existing debts and are intended to purchase items, microloans can offer a solution to a relatively small cash need or supplement existing financing.
Of course, it’s not just in the federal government’s best interest to promote small business growth; it’s also a central concern for states and local communities. Make sure you search your state’s and local area’s funding and grants resources to see what’s available for up-and-coming entrepreneurs.
As you narrow in on the right loan for you, don’t neglect all the work involved in the application process. No matter what institution decides to lend a helping hand to your business, all lenders have similar concerns before approving your loan. Ensuring your credit report is clean, your financial statements and books reflect sound financial judgment and your character references will vouch for you are vital components to receiving funding. Practicing sound judgment now is the best step you can take toward receiving funding later (or sooner).
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