Start-ups are attractive in periods of low interest rates because the costs of raising capital are comparatively low. Depending on the capital requirement, there are different models that have different advantages and disadvantages. Before applying for a loan, as a company founder, you should estimate the amount of capital required so that you can identify the optimal model for your needs from a variety of loan options.
Loans under 25,000 dollars – overview
In particular, start-ups who have no other employees have a comparatively low capital requirement when they are founded. Often it is only a few thousand dollars that are incurred for the purchase of a home computer or a printer. In this case, company founders can cover their financing needs with a microcredit or via an online credit marketplace.
Microcredits are loans with a loan amount of less than 5000 dollars, which differ from one another in terms of their loan terms. They can be differentiated from small loans in that they are specifically designed for the start-up phase of companies. Compared to conventional installment loans, interest rates are usually higher because the risk of default for the lender is also higher. Alternatively, start-ups can request a loan on online credit marketplaces. After reviewing the data provided by the borrower, cooperating companies decide whether to grant a loan or not.
Loans over 25,000 dollars – the start-up loan
With a capital requirement in the five-digit range, a loan from the house bank is often a good choice. The interest rate, repayment modalities and special repayment rights are decisive for this consideration. Business start-up loans are aimed at business customers of the bank and therefore cannot be applied for by private individuals.
Anyone asking the house bank for a loan should be well prepared, after all, the bank will only grant a loan if the investment can withstand the in-house risk assessment. A business plan with a conclusive financing concept and milestones to be achieved can do valuable persuasion. In addition to the business plan, a balance sheet and a profit and loss account (if available), an income and surplus statement, credit information and a statement of assets of the borrower should be available.
What should be considered when borrowing?
Loans differ in terms of interest, their term, repayment modalities and other special repayment rights. If you want to take out a loan, you should calculate the monthly capital requirement that you need to settle the liabilities arising from the loan agreement. In the start-up phase, liquidity is scarce, which means that the financial burden should not be too high. If it turns out that the business idea has been successfully implemented (sufficient liquidity is available), it is advantageous if residual debts can be reduced through special repayment options.
The type of loan depends primarily on the capital requirement. If you only have a small capital requirement of a few thousand dollars, you will find micro-loans and an interesting financing option. Crowd funding models can also be a financing option. If the financial requirement is over 25,000 dollars, going to the house bank is usually necessary.