What came first the job or the experience? This well-known chicken and egg scenario is all too familiar for job hunters. In most cases, the amount of experience you have before applying for a job will affect the job that you ultimately get. And the same is true when applying for a business loan.
Both are unfair. What if this is your first job? What if this is your first business venture? It’s frustrating that these industries will judge based on experience but it’s hard to blame them for it, after all, the more experienced you are, the better your chances of success – in both cases. Especially when you consider that 75% of venture-backed startups fail, a hard pill to swallow.
The question on everyone’s mind remains, what is a desirable business age and how does business age affect loan eligibility?
When applying for unsecured loans, that is, those without collateral for lenders to seize should everything come crashing down – lenders will rely on your business’s ‘health’ so to speak. No, we aren’t talking about your business coming down with flew, but if it isn’t coughing up enough profits and paying off its debts on time, that’s when issues start to arise. A longer business history (i.e. larger business age) will provide lenders with more data to help determine how likely you are to pay back funds on time.
How Much Time in Business Do Lenders Look For?
Lenders will usually look for a bare minimum of six months in business and in an ideal world, they’d prefer to see one-two years plus (startups, don’t give up just yet, everyone has to start somewhere). The lenders heavily rely on bank statements, something a very new business will have few of leaving them with scraps of financial data that aren’t nearly enough evidence to prove their ‘financial-worthiness’. Once a lender has your financial data in hand, they’ll draw their attention to the last three-six months of bank statements, studying the stability of the business in terms of the monthly income and a positive bank balance.
Are There Alternative Solutions If Your Business Is Too Young for Business Funding?
In short, always. If you own a new business but happen to have another existing business, that could certainly help. It might be possible to get funding solutions by simply directing the funds through the other business and then use the funds for the new one. At the end of the day, it’s up to you what you do with the available funds (so long as it runs through your business).
There are also other solutions that new businesses should keep in mind such as start-up loans (seek capital), personal loans or utilizing a credit card. Start-up loans offer the perfect opportunity for entrepreneurs at the very beginning of their business venture.
Click here to see if you qualify for business funding solutions via Become.