Loans advertised for startup companies mean different things to different people. The average vetrepreneur understands startup to mean a business he or she is getting ready to launch, but the SBA and banks can define a startup company as one that has operated for five or fewer years.
Business loans are extremely competitive and difficult to qualify for, and pre-venture money is even scarcer. If you are in that stage, the lender is going to look at your personal creditworthiness, your current financial stability, the reasonableness of your business plan and the amount you are investing.
Almost always, you'll be required to personally guarantee the note and, depending on your credit, may or may not need SBA backing.
As a veteran, you and your spouse have access to the Patriot Express (PX) loan from SBA, which has the most favorable terms in the industry. However, any loan that needs SBA backing is always going to be more expensive than a loan that can stand on its own. Lenders can only use an SBA guarantee in the event that the business would not qualify for a loan on its own but is close. In these cases, the PX can guarantee up to 85 percent of the outstanding balance and will go up to $500,000. But again, these loans come with a cost as much as 4.75 percent above prime, which right now is around 3.25 percent. With an SBA loan, you could be looking at as much as 8 percent plus fees.
A lot goes into determining whether your business is right for a small-business loan or not, and we will be happy to work with you.
Louis J. Celli Jr. is CEO of the Veterans Business Resource Center. Readers can send questions for "On Point" to firstname.lastname@example.org.