Business Start-up Loan

Business Start Up Loan

Script Your Own

Success Story

With the Right Finance

Method September

2020

Audit / Tax / Advisory

Article Courtesy of: Dawgen Global Jamaica 47-49 Trinidad Terrace Kingston 5 Jamaica Tel Fax

876 926 5210 876 929 1300

Smarter and More Effective Decisions

www.dawgen.global info@dawgen.global Tel: 876-926 5210/876-6302011

Business Start Up Loan – Script Your Own Success Story With the Right Finance Method If you thought generating ideas for your business was a difficult task, then arranging necessary finance in the form of business startup loans would seem even more difficult.

Many entrepreneurs succumb at this stage, only to lead their idea to dumps. Entrepreneurs, who withstand the challenges of the process, continue to shine in the world of business.

Capital has been rightly referred to as the lifeblood of any business. Business starved of capital during the initial stages of its formation, would be similar to malnourished children who were not fed properly during their childhood. The growth of the business will be stunted, often affecting negatively its productivity and efficiency.

Entrepreneurs no longer have to depend solely on their own resources for purposes of capital. Many loan providers are ready to finance promising business ventures. The loan is referred to as business startup loan.

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Amounts on business startup loan ranges from $1000, 000 to $25,000,000 depending on the business and the lenders. Entrepreneurs can qualify for more loan amount, provided the business plan is very attractive. Loan proceeds will primarily be used for purchasing the necessary machine and equipment, paying for legal documentation, maintaining office and any other expenses that crop up during the initial formative period. Moreover, business startup loan contributes towards the working capital.

Borrowing through business startup loan is fraught with a number of challenges. The very first task in the process will be to generate faith in loan providers that the amount lent on account of business startup loan will be safely returned. Preconceived notions about new entrepreneurs make the task difficult. The negative notions are further strengthened through two factors: •Firstly, borrowing entrepreneur has zero or very less credibility in the market at the particular point of time. Loan providers fear risking the loan amount on borrowers with low credibility.

•Secondly, the borrowing entrepreneur is still to form business or the business is still to show results.

Lending at this stage, without having knowledge about how the business fares in the long run, is perilous for the loan provider.

The borrowing entrepreneur is thrown into a dilemmatic situation wherein they cannot prove their worth till they start business. They cannot start business until they get the necessary finance. And they cannot get the necessary finance till they are able to prove their worth.

However, not all loan providers look at new venturists with suspicion. New venturists are considered a unique group of people who have a unique set of characteristics. A sound and foolproof business plan works well for new entrepreneurs. Bankers study the plan well and then decide if it will be viable to lend.

Guaranteeing payback through collateral is another important method of getting good deals in business startup loans. These are referred to as secured business startup loans. As a part of this method, the borrower will have to offer lien on certain asset/assets to the loan provider. This process is also referred to as hypothecation. Though the asset will continue to be in possession of the borrower, loan provider has every right to claim the asset in case of non-payment of loan.

Loan terms for business startup loan ranges from 5 to 25 years. Given the unique income structure of businesses and self-employed individuals, wherein income is not guaranteed, flexible repayment schedule will be especially helpful. Under a flexible repayment schedule, the borrower gets to repay in the manner that he chooses. Monthly repayments can be increased, reduced and discontinued altogether depending on the entrepreneurs’ finances.

The arrangement will have to be accepted by the loan provider. Sometimes, regular payments for a certain period may be the prerequisite for flexible repayment schedule.

Business startup loans may exceed personal loans in terms of interest rate. The typical APR on a business startup loan will be anywhere between 7-18% in Jamaica. Online comparison and searching loan providers will ease the process, besides improving the quality of deals. Rates may go upwards depending on the presence and value of collateral and the credit status of the borrower.

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Business loans will not suit borrowers who want full control over their business. Some loan providers would like to dictate terms and thus curb the control of the entrepreneur over his business. The borrowing decision must be made only after an impartial and impatient study of the pros and cons of the method.

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