Business Guidance

Tips to Tackle Financing for a Startup

Are you thinking about starting a business, but have struggled with the concept of obtaining necessary financing? There is no doubt that starting a business is difficult. We’ve all heard the “conventional wisdom” that 90% of businesses fail within their first year. But how accurate are those statistics?

According to the Bureau of Labor Statistics study of Business Employment Dynamics, approximately two-thirds of businesses with employees survive at least two years, with about 50% making it for five or more. After those first few volatile years, success rates improve. So perhaps those doom-and-gloom startup statistics are based more on long-held legend than quantitative data. This is certainly not to say success is guaranteed, but you shouldn’t be afraid to have a conversation about your startup idea.

So, you have a winning concept. You’ve worked in the industry. You’ve formulated a business plan. You are confident in your ability to succeed, but now you face one of the greatest obstacles in starting your business – obtaining financing.

Money is often the most daunting part of a startup experience. Few people have the savings necessary to start a business while still maintaining current living expenses, so entrepreneurs have options to weigh. Perhaps they use their own equity sources such as dipping into their retirement savings, taking out a home equity line of credit, relying on family, or taking on personal and credit card debt. Maybe they are inspired by TV shows like Shark Tank and seek an angel investor for their startup. If these are viable options for your startup business, by all means pursue them. However, one often overlooked solution is an SBA loan.

SBA loans, which are guaranteed by the U.S Small Business Administration, have a negative connotation as being cumbersome and difficult to obtain. This may be true at some banks, but certainly not at Univest. As an SBA Preferred Lender, we strive to make the process easy. There are things you can do to make the process even more efficient (though not all of these items are necessarily required):

• Create a detailed and well-prepared business plan with projections.
• Sustain an income stream outside of your startup venture.
• Have a strong personal credit score.
• Access to collateral to be offered as security for your loan such as business assets, business property, personal residences and specific vehicles.
• Allocate 15% to 20% of total project cost as equity injection. This can include cash and/or soft costs.

With an SBA loan, your startup business can enjoy the security and benefits of a longer loan term, competitive interest rate, often no prepayment penalty, and the resources of experienced lenders by your side. These are benefits that other non-conventional financing methods can’t provide. And, one of the best parts about getting an SBA loan at Univest is that all decisions are made locally.

Are you thinking about starting a business, but have struggled with the concept of obtaining necessary financing? If so, reach out to Univest at 877-723-5571 to discuss your options. Our team is dedicated to helping make your small business dreams a reality. A great example is this article featuring a one of our clients who has successfully started and grown a small business.

Univest Bank and Trust Co. is Member FDIC, Preferred SBA and Equal Opportunity Lender

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