Money is the key ingredient to the success of a startup. A third of small businesses get started with less than $5,000 while 58% get started with less than $25,000. The most popular financing methods for businesses include personal funds and bank loan.
Other sources include online lenders, angel investors, venture capital and crowdfunding. Did you know you can fund startup with an installment loan?
Read on and learn 5 reasons to fund your startup using an installment loan.
1. Easy to Manage Payments
As a startup, you are yet to make a sale or even launch your product. Since you have no cash flow, an installment loan can help you start your business. Unlike credit cards, installment loans have fixed payments and interest rates.
As such, they don’t change from month to month. This is great news for your business. How? You can settle your monthly payments without straining your resources.
With each payment, you get to reduce your loan and interest. Remember, if you make extra payments, you can lower your payments with a recast.
2. Build Your Credit
Most startups get locked out of financing options due to having a low credit score. Want to build your credit score and fund startup as well? Get an installment loan.
Thanks to the fixed monthly payments and interest rate, you can plan ahead. Also, you can use only what you need. For instance, if you need $25,000 to fund your startup, you don’t have to borrow $50,000 or $100,000.
Borrow only what you need. Never go crazy with installment loans. If you do, you may hurt your credit score making it difficult for you to secure another loan.
3. Comprehensive Business Plan
One of the requirements before getting an installment loan is to prepare a business plan. If done right, a business plan connects the dots in your business allowing you to have a realistic picture. It also helps you to keep track of the right things.
As such, you are able to allocate your time, resources and effort strategically. This helps you grow your business, aid in managing changes, and catch new developments.
4. Quick Availability
As one of the best ways to fund a startup, an installment loan is also one of the fastest ways to get money. In fact, if approved, the funds are available within 24 hours or less. The paperwork process during your application is simple.
As such, you can get the funds fast and start your business.
5. Less Strict Requirements
If you borrow a long-term loan from a bank or credit union, you will be eligible for a longer repayment period. Not only that. You will have the option of repaying via monthly installments.
Problem is, banks have strict requirements. For starters, your business must have been in operation for 2 years. You should also have strong revenues and good credit.
If you borrow from an online lender, the requirements are less strict. For instance, you can get an installment loan if you have a credit score of 620 to 650. You can also qualify if you have been in business for at least 6 months to 2 years.
How to Use an Installment Loan to Fund Your Startup
Apart from fund your startup, you can use your installment loan to expand your product line. It is also useful for buying out a partner, acquiring a competitor, or advertise your business. Remember, repay your loan early to boost your credit score.
Looking for experts who can help improve your financial situation? We at Bonsai Finance.com can help. Contact us today and let’s help you solve your financial problems.
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