Description

1. 

Not All Loans Are Created Equal—Understand the Types First

Most new entrepreneurs don’t realize how many types of loans are out there, and they often chase the wrong one for their stage. There are term loans, business lines of credit, SBA loans, microloans, and equipment financing, just to name a few. Some are great for buying inventory, others for building working capital, and others for startup costs.

Explain each type simply and include how they’re typically used. For example:

• A term loan works like a mortgage—lump sum up front, repay with interest over time.
• A business line of credit is more flexible—you borrow what you need, when you need it.
• SBA loans are partially guaranteed by the government, so they come with lower risk for lenders (and often better terms for borrowers), but the process can be slow and paperwork-heavy.

2. 

SBA Loans Are Great—But Not Always Easy to Get

SBA (Small Business Administration) loans are one of the most popular funding options for startups because of their lower interest rates and longer repayment terms. But here’s what many people don’t know: they aren’t actually given bythe SBA—they’re issued by banks and guaranteed by the SBA.

You’ll need:

• A detailed business plan
• Strong personal credit
• Proof you’ve invested some of your own money (also known as “skin in the game”)

They’re not fast, and approval is far from automatic. But if you’re building a strong foundation and need significant capital, they can be worth the effort.

3. 

Your Personal Credit and Financial History Matter—A Lot

Most startup loans rely heavily on your personal credit because the business itself doesn’t yet have a financial track record. If your credit score is low or your debt-to-income ratio is high, you’ll likely be seen as a high-risk borrower.

Teach your audience that your personal finances are your business’s credit until you build business credit. That means it pays to:

• Clean up personal credit reports
• Reduce outstanding debt
• Show consistent income and financial responsibility

Also, if possible, start building business credit early by opening a business checking account, getting a DUNS number, and responsibly using a business credit card.

4. 

Start Small with Microloans or Local Lenders

If you don’t qualify for big bank loans, microloans (usually under $50,000) from nonprofit organizations or Community Development Financial Institutions (CDFIs) can be a great starting point. These lenders are often more flexible, willing to work with new entrepreneurs, and focused on helping underserved communities.

Many local credit unions and regional banks also have small business lending programs that are more personalized than big national banks. You might not get rich overnight, but you’ll build a solid relationship and credit history that can lead to bigger financing later.

5. 

Have a Clear Plan for the Money—and for Paying It Back

The worst thing you can do is borrow money without knowing exactly how it will help grow the business—and how you’ll repay it. Lenders want to see a detailed use of funds: Are you using it for marketing, product development, payroll, or equipment?

Talk about the importance of cash flow forecasting, profit margins, and your break-even point. You don’t need to be a CPA, but you do need to know:

• How this loan will bring in more revenue
• When you exp