Startup funding is the process of raising capital to finance a new business venture or idea. This funding can come from various sources, including private investors, venture capitalists, angel investors, crowdfunding, loans, and grants.
While there are a ton of funding options available, bootstrapping is the most popular solutions for most startups. Private investors, angel investors, and venture capitalists are harder to get funding from because they require hundreds of thousands in sales and/or a percentage of equity in your company.
What is Bootstrapping?
Bootstrapping is a method of funding a startup with personal savings, credit cards, or loans from family and friends. This method can be a viable option for startups with limited resources or those who are just starting out.
However, if you are considering applying for a loan from a financial institution to bootstrap your startup, there are certain requirements you should be aware of. These are not hard requirements, as each institution is different, but these are a good baseline to measure your probability of approval.
Requirements
One of the most important requirements that financial institutions look for is a good credit score. Typically, financial institutions are looking for credit scores in the high 600s with prime offers in the 700s. This indicates that you have a good track record of managing credit responsibly and are less likely to default on a loan.
In addition to a good credit score, financial institutions will also look at your financial history to determine your eligibility for a loan.
They will typically look for no late payments in the last 12 months. No bankruptcies on your credit report. No open collection accounts except for medical tradelines. No charge-off accounts in the last 5 years, and less than 5 inquiries in the last 6 months.
It’s important to note that meeting these requirements does not guarantee approval for a loan. Financial institutions will also consider factors such as your income, debt-to-income ratio, and the amount of credit you currently have available.
Conclusion
In conclusion, bootstrapping can be a viable option for startups looking to fund their business with personal savings or loans from family and friends. However, if you are considering applying for a loan from a financial institution, it’s important to have a good credit score and a clean financial history to increase your chances of approval.
By meeting these requirements, you can demonstrate your ability to manage credit responsibly and increase your chances of securing the funding you need to grow your business. By understanding the various funding options available and the requirements that come with them, startups can choose the best approach to meet their financial needs and goals.
If you’re looking to secure startup funding from financial institutions, DMAR Capital can help. As a financial services firm specializing in securing loans for small and medium-sized businesses, DMAR Capital has established relationships with numerous financial institutions and can help business owners find the right funding options for their needs.
Schedule a call with us or submit an application to learn more and apply for startup funding.