Most people think of a loan when it comes to starting a business. Let's take a closer look at how profitable this method of raising capital is and how to get bank approval for a novice entrepreneur.

The main disadvantage of getting borrowed money for a young business project is its uncertainty. It's impossible to confirm one's own income and guarantee future profits. Banks are reluctant to lend money to aspiring entrepreneurs. They see start-up financing as a risky deal with a high probability of no return on investment. Coming from this you have: strict requirements for a borrower, the complexity, and long duration of the procedure for obtaining a loan.

How to make your chances for a loan higher?

Small and medium-sized businesses that have been operating for at least 3-6 months have more chances for approval. With a loan for a new project, it is much more difficult: there are practically no turnovers, customers, suppliers; there is only the founder's desire to develop.

So overall we can conclude that debt financing from a bank is an unreliable business. The probability of rejection is high unless your business has already been running for a few months.

There are countries that have special programs to help small businesses and startups. For example, the U.S. Small Business Administration (SBA). It's a government agency that provides support to entrepreneurs. It can't directly loan money, but it can provide a guarantee for a certain borrower. This borrower will have much higher chances of receiving a loan from a bank.

There are 2 factors indicating that you are ready to borrow money to grow at later stages:

1. Return on business assets is higher than bank interest.
2. You have a solid business plan for future growth.