How to Choose the Right Location for Your Business
March 4, 2022
Choosing a business location is complex. We’ve put together a list of 9 considerations to help you choose the best place for your business.
Every city I have ever been in has had a shopping center that seemed like it was cursed. No matter what types of businesses opened in the location, they could never maintain a full shopping center. Do you have a location like that where you live?
If so, you know the importance of choosing a location for a business. You want your new business location to excel because you chose the best location for your business. We talked to David Schomer, the owner of Espresso Vivace and the person who is considered the originator of Latte Art. Amongst other things, he gave us some information about how to select the location of business activities.
We’re going to provide you with the information you need to pick the best business location for a retail business and other businesses including:
- How the location of business impacts the success
- Types of business locations
- What is the right location for a retail business
- Business location factors to consider
Let’s jump in and explore the question: “Why is the location of a business important?”
How the location of business impacts the success
When you choose a business location, it is one of the most important decisions you can make because it factors into every other aspect of your small business. As David pointed out there is a reason for the saying:
“Location, Location! L – O – C – A – T – I – O – N !”
Here are just some of the ways location impacts success:
- The pricing of property impacts your costs and profit margin. Retail Minded has an article about how Britain asks commercial properties to reduce rents to stimulate economies.
- Some locations can make it hard or dangerous for employees to get to work, impacting companies’ eligible pool of talent.
- If a company is far from its target audience it will cost more in travel costs. If they are a service business it will likely result in fewer customers if they will need to come to the business location.
- Failure to follow zoning laws can incur penalties. In New Jersey, the penalties can be up to $10,000.
- If two salons are right next to each other, one will probably go out of business (or be bought by the other. This goes for many businesses that are fairly interchangeable.
As you can see, a small business location strategy can determine whether a company succeeds or if it is driven out of the community by high costs and local zoning ordinances. Since choosing a potential location for your business is obviously important, let’s look at the types of business locations you can choose.
Types of business locations
Business locations typically fall into several categories. The most common type of business locations are:
- Shopping centers – Great places for retail space, grocery stores, restaurants, and salons
- Business parks – Best for offices spaces
- Coworking spaces – Best for knowledge-based workers that need a quiet space to work and to meet clients
- Home businesses – Best for companies starting off that have no inventory and no customers come to their locations
- Industrial areas – If your industry lets off major pollutants, you’ll probably need to be in an area zoned for this.
- Arts districts – Best for companies focused on creative work.
- Malls – Best for companies targeting teenagers and companies that can operate booths
- Warehouses – Best for construction businesses
- Standalone – Car washes, mechanics, fast food, restaurants
- Agricultural – Rural areas with land for growing food. Make sure it isn’t protected by EPA before buying or the business owner could lose lots of money.
If you aren’t quite sure you’re ready to choose a business location, check out our business launching guide. Otherwise, keep reading for more information on the most common type of business started.
Business location factors to consider
There are a ton of considerations when choosing the perfect space, but the following are some of the most important:
- Near your demographic
- Square footage
- Pricing
- Zoning
- The other businesses nearby
- Foot traffic
- Parking
- Government Incentives
- Access to Transportation
Keep reading to find out why!
Factor 1: Near your target market
The right location should always be near your target audience. Small businesses are so competitive that they have to be conveniently located to the target demographic. If the desired location is not near prospective customers, it is a bad location. You won’t get the customer base you want.
David had a little to say about choosing a location for a coffee shop. Watch that segment of his interview below:
For those of you who aren’t able to listen because it will disturb those around you, he said:
“Coffee shops need an urban location with lots of foot traffic. I wouldn’t open a coffee shop in a rural location or a drive-through. The business would be garbage.”
That’s why you should have a demographic profile of your potential customers in mind and check out the Census Bureau’s statistics on income before trying to pick the right community for your business. Disposable income is available for most cities by zip code.
Keep reading for other factors that go into choosing a specific site for your business location.
Factor 2: Square footage
A location strategy for business people should include considering how many square feet are needed for the business. You can look at similar businesses in the local market to get an idea of how many square feet you need.
Alternatively, this guide from the City of Davis provides the number of square feet per employee that the city requires. While this is only applicable for the Davis local area, most cities should have something similar. Make sure to do thorough market research about the local ordinances before shopping.
You may want to plan for a certain location to grow with your business. If you do, the right location should be able to hold any growth in employees you have for at least three to five years. Unless you are building, there’s no need to go beyond 5 years, but when building you may want to go out 10+ years.
Keep reading to understand how pricing should factor into choosing the right location.
Factor 3: Pricing
You should be aware of how to judge the cost of a property by several methods. A site will typically be charged on a price per square foot that is converted to a monthly or annual rate. If a location has higher prices than the general area, that could mean there is high demand for the location.
Meanwhile, low rent could be an indication of problems with the site, such as bad parking options, an oddly shaped space, or previous tenants did a lot of damage to it. Make sure to look at the property in person before committing to it.
You might pay a higher price if the site offers a street-side sign to encourage customers to visit your location. This can be really beneficial because the sign is effectively a marketing expense and should increase revenue.
Factor 4: Zoning
A zoning ordinance is a rule regarding how land in a specific area can be used. Zoning regulations normally specify a few different types of land:
- Agricultural – Land for growing food, cotton, tobacco, and marijuana (where it’s legal)
- Commercial – Restaurants, retail stores, and salons
- Residential – Homes, duplexes, apartments
- Industrial – HVAC, electrical, manufacturing, supply houses, and businesses targeting the employees of the previously listed companies.
- Mixed-use – Typically a mix of commercial and residential, but could be mixes of others
There may be more but these are the typical zones. Check with your local SBA office to find out your city’s zoning requirements.
Factor 5: The other businesses nearby
Nearby businesses can influence where you locate your business in a community as well. There are two primary scenarios you want to consider:
- Are there certain types of businesses that would be good to be near? For instance, a Lululemon might want to be near a 24 Hour Fitness so they can sell athletic gear to the gym’s customers.
- How close are competitors or your other locations? You don’t want to have two coffee shops in the same parking lot, or even on the same cross streets unless the cross streets have an insane amount of traffic.
Factor 6: Foot traffic
The community activity in a shopping center can dramatically increase the number of customers that come into a newly opened store. If you are right next to a grocery store, you are likely to have more customers visit your site than if you are in a standalone building with no other businesses nearby.
Make sure to go to the location during different times of day to verify what the traffic patterns look like. Alternatively, you can talk to current tenants and ask them questions like:
- How many walk-in customers do you have per weekday? Weekend days?
- What are your busiest times of the day?
- Do you have seasonal fluctuations? If so, what are they?
Factor 7: Parking
The parking scenario should also be considered when you research “what is the right location for business.” In general, sufficient parking would include:
- One parking spot for each of your employees
- One parking spot for every three customers based on maximum occupancy of service businesses
You should also make sure the parking lot is in good condition. If it’s not, there is a good chance the property owner doesn’t take good care of the building either.
Factor 8: Government Incentives
There are government incentives from federal, state, and local governments to encourage businesses to open in certain locations. You’ll need to talk to each local government to find out what incentives they are offering but check out HUD incentives for the most common incentives.
Often the incentives are in the form of tax waivers, credits to your taxes, or increased deduction limits. Make sure to do your research and talk to a tax attorney.
Factor 9: Access to Transportation
Employees need to get to work. If you are in a town with public transportation, determine routes and where they make stops. You can take that information into account by finding spaces to rent that are near the route stops. It will make workers’ lives easier.
Go Find Your Perfect Business Location
Now you know how to choose a location for a small business. You’ll need to work with a commercial real estate professional to find the location that works best for you. Presearch it!
If you’ve already chosen a business location, you’ll need to remodel it to suit your use. Check out Service Wise Electric’s blog about remodeling for advice on how to go about renovations.
Alternatively, check out our interview with a boutique owner who has some good insights about a commercial buildout.
We hope you enjoyed learning why location is important, envisioning the types of locations, and understanding what to consider when selecting a business location.
At UpFlip we aim to write content that helps you solve your most pressing business needs. While analyzing search results can help us find some of the most searched inquiries, we know that sometimes SEO doesn’t give you the exact answer you need. What would you like us to provide more information about?
Author
Brandon Boushy
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Cleaning businesses are among the most commonly started businesses in the United States. In fact, Thimble estimates there are nearly 2 million cleaning companies in the U.S.
Christobal and I have worked together to develop this cleaning service checklist. We’ve broken it into the following sections:
[su_note note_color="#dbeafc"]
1. Create a Plan Checklist
2. Name Your Cleaning Business Checklist
3. Form the Cleaning Business Structure Checklist
4. Get the Financial Tools to Run Your Cleaning Business Checklist
5. Get the Insurance to Run Your Cleaning Business
6. Get Equipment to Operate Your Cleaning Business Checklist
7. Get the Software to Run Your Cleaning Business Checklist
8. Marketing Tools for a Cleaning Service Checklist
9. Cleaning Company Supplies Checklist for 15 Types of Cleaning Companies[/su_note]
If you want to learn about the process of starting a cleaning business, you can also check out our podcast or YouTube video where we interview Christobal Mondragon, Christobal started Queen Bee Cleaning Services for less than $5K and is making $120,000 per month!
[su_youtube url="https://www.youtube.com/embed/d4Iip7BHXwg"]
Keep reading if you need to start a cleaning business from scratch.
Every cleaning business will need to have some financial tools to operate successfully. Cleaning business owners should take some time for each of the following points:
You’ll need marketing tools to help your cleaning business grow and find prospective clients. Small business owners will benefit from the following brand assets:
If you want to serve Airbnb, Vrbo, and other short-term rentals, you’ll need the same cleaning supplies as you would for a home or apartment:
Commercial cleaning services are also in high demand. You’ll want the following supplies when cleaning offices:
We grouped pressure washing businesses and property cleaning services together because they are similar and both outside. They are both outside and can be done as a team to improve the number of customers helped in a day. You will need:
Every Great Cleaning Business Starts with a Plan
Starting a cleaning business requires juggling a lot of different tasks. Something will surely fall through the cracks if you don’t have a plan. Our first checklist involves creating a plan for how you’ll start a cleaning business. You’ll need to document each of these at a minimum: [su_note note_color="#dbeafc"] 1. Cleaning business ideas 2. Goals for your cleaning business 3. Your budget 4. Your pricing strategy 5. Your marketing plan[/su_note]Name Your Cleaning Business Checklist
Every cleaning company needs a name. You’ll want to consider the name of your cleaning company early in the process of becoming a professional cleaner. You’ll want to cover each of these tasks before starting your own cleaning business:- Make the name easy to spell
- Purchase a domain
- Register and pay the DBA fee (if not included with the business structure)
- Trademark the business name and logo
Form the Cleaning Business Structure Checklist
You’ll need to register your business with the state to become a cleaning business owner. Each state, county, and municipality has business license regulations. You can also expect different insurance requirements depending on where you are located, your business structure, and whether you have employees. For any of the 50 U.S. states, you’ll need an EIN. These are the most common requirements for forming a cleaning business:- Register your business with the state (choose one).
- Sole Proprietorship
- Limited Liability Company
- Corporation
- Partnership
- Get a DBA if you will operate under a different name.
- Apply for an EIN on the IRS website.
- Get county and city licenses.
- Apply for the required insurance.
- Get a seller’s permit (state tax ID).
Get the Financial Tools to Run Your Cleaning Business Checklist
Every cleaning business will need to have some financial tools to operate successfully. Cleaning business owners should take some time for each of the following points:
- Set up a business bank account.
- Apply for a business credit card.
- Consider getting business loans.
- Find a payroll solutions provider.
- Get a payment processor.
- Choose and set up accounting software.
- Decide whether you want to set up a 401K.
Cleaning Business Insurance Checklist
A startup cleaning business will probably need insurance. The requirements will be different based on what segment of the cleaning industry you are in, but most cleaning companies will need one or more of these: [su_note note_color="#dbeafc"] 1. General liability insurance 2. Worker compensation insurance (if you hire employees) 3. Bond insurance 4. Unemployment (if you hire employees) 5. Professional liability insurance 6. Cybersecurity insurance 7. Commercial vehicle insurance 8. Health insurance (if required by law or if you want to be an awesome boss)[/su_note]Cleaning Business Equipment Checklist
Most cleaning businesses will need the following equipment to operate effectively:- Company vehicle
- Laptop or PC
- Smartphone
- Business phone number
- Internet
- Point-of-Sale machine or credit card reader
Get the Software to Run Your Cleaning Services Checklist
Unless you plan to run your business old-school (which may be less than ideal), you’ll need software to run a cleaning business. We’ve provided a list of the most common software you’re likely to need when starting a cleaning business. As you begin, consider which ones you need right away and which you can wait until you hire employees:- Payroll solutions
- Payment processor
- Accounting solutions
- Scheduling software
- Professional website (domain from GoDaddy and hosting)
- Online booking software
- Marketing tools (We have a complete list for them.)
Marketing for a Cleaning Service Checklist
You’ll need marketing tools to help your cleaning business grow and find prospective clients. Small business owners will benefit from the following brand assets:
- A logo
- Business cards
- Signs on location (if you run a dry cleaner or another cleaning shop)
- Signs on vehicles (for a mobile business model)
- Click Funnels
- Google My Business
- Google Local Ads
- Siri and Apple Maps
- Angi.com
- Yelp for Business
- Thumbtack
- Alexa
- Blanket
- Bing
- Baidu
- Yahoo
- Yandex
- Ask.com
- DuckDuckGo
Cleaning Supplies Checklist
Depending on the type of cleaning services you offer, you’ll need different cleaning supplies and equipment. We’ve broken the cleaning supplies you’ll need into different categories based on the kind of cleaning business you plan to start. Use the list below to skip to the section with supplies for starting a cleaning business in your sector:
- Home Cleaning
- Mobile Laundry Cleaning Services, Laundromat, Clothes Cleaning Business, Dry cleaning
- Decluttering Services or Organizer
- Green Cleaning Services
- Airbnb, Vrbo
- Home or Commercial Construction Cleaning
- Move-In, Move-Out Cleaning
- Office Cleaning
- Duct Cleaning
- Carpet Cleaning
- Window Washers
- I.T. Cleaning
- Property Cleaning, Pressure Washing
- Hazardous Waste Removal
- Boat Cleaning
Home Cleaning Supplies Checklist
This is the checklist I would expect most cleaning services to want, so I put it first. You’ll need the following supplies to clean homes:- Glass cleaner (Windex or similar)
- Aprons
- Vacuum cleaner
- Wet floor signs
- Microfiber mop (optional if you are just starting)
- Regular mop
- Gloves
- Toilet bowl brush
- Bags for dirty rags
- Bags to carry clean rags
- Neutral floor cleaner (Bona or similar)
- Disinfectant cleaner
- Cleaning bucket
- Mini grout brush
Mobile Laundry Cleaning Services, Laundromat, Clothes Cleaning Business, Dry cleaning
- Hangers
- Rolling baskets
- Laundry soap
- Cleaning chemicals for dry cleaning
- Dryer sheets
- Clothing racks
- Washing machines
- Dryers
- Garment covers
- Spot cleaner
- Information tags
- Clothing conveyor
- Presses
Decluttering Services or Organizer
- Trash bags
- Boxes
- Cleaning materials
- Tape
- Sharpie
- Storage bins of various sizes
- 3D modeling software to model spaces
- Carpentry tools for creating more storage space
- Shelving units
Green Cleaning Services
- Organic glass cleaner
- Aprons (from recycled materials)
- Vacuum cleaner
- Wet floor signs
- Microfiber mop
- Regular mop
- Eco-friendly gloves
- Toilet bowl brush
- Reusable bags for dirty rags
- Reusable bags to carry clean rags
- Gas mileage-friendly, hybrid, or electric car
- Natural floor cleaner
- Natural disinfectant
- Cleaning bucket
- Mini grout brush
What do I need to start a cleaning business for Airbnb properties?
If you want to serve Airbnb, Vrbo, and other short-term rentals, you’ll need the same cleaning supplies as you would for a home or apartment:
- Glass cleaner (Windex or similar)
- Aprons
- Vacuum cleaner
- Microfiber mop (Optional)
- Regular mop
- Gloves
- Toilet bowl brush
- Bags for dirty rags
- Bags to carry clean rags
- Booties for shoes
- Neutral floor cleaner (Bona or similar)
- Disinfectant cleaner
- Cleaning bucket
- Mini grout brush
- Spare sheets
- A deal with a local laundromat
- Dish soap
- Shampoo
- Conditioner
- Body wash
- Towels
New Home Construction Cleaner or New Commercial Construction Cleaning
Some commercial cleaning businesses are focused on post-construction cleanup. They have unique needs because the debris in construction zones is horrible for indoor air quality. These cleaning jobs pay more, but they require special tools that you might not need with other cleaning companies. You’ll want to have the following:- Glass cleaner (Windex or similar)
- Aprons
- Vacuum cleaner
- Indoor, outdoor vacuum
- Booties for shoes
- Microfiber mop (optional if you are just starting)
- Regular mop
- Gloves
- Toilet bowl brush
- Bags for dirty rags
- Bags to carry clean rags
- Neutral floor cleaner
- Disinfectant cleaner
- Cleaning bucket
- Mini grout brush
- Dust mask
Move-In and Move-Out Cleaning, Apartment Cleaning
- Glass cleaner (Windex or similar)
- Aprons
- Vacuum cleaner
- Indoor, outdoor vacuum
- Booties for shoes
- Microfiber mop (optional if you are just starting)
- Regular mop
- Gloves
- Toilet bowl brush
- Bags for dirty rags
- Bags to carry clean rags
- Neutral floor cleaner
- Disinfectant cleaner
- Cleaning bucket
- Mini grout brush
- Degreaser
- Putty to help fill holes
- Putty application tool
Office Cleaning
Commercial cleaning services are also in high demand. You’ll want the following supplies when cleaning offices:
- All-purpose stain and spot remover
- Baking soda
- Wet floor signs
- Toilet paper
- Bucket
- Broom and dustpan
- Dish soap
- Clorox disinfecting wipes
- Facial tissue
- Feather duster
- Floor cleaning solution or vinegar
- Cleaner for glass and mirrors
- Gloves
- Bulk supply of hand soap to refill dispenser
- Sponges
- Disinfecting spray
- Micro-fiber cleaning cloths
- Paper towels
- Sponge mop and/or dry mop
- Toilet cleaner
- Trash bags
- Vinegar
- Vacuum
- Industrial mop bucket
- Wood polish
- Floor polishing machine
- Extension cords
Specialty Cleaning
The following services are specialties that come with additional challenges. They may require special business licenses, services, or equipment. Lean about specialty cleaning services you can offer.Duct Cleaning
Duct cleaning removes indoor air pollutants from the ductwork of a home or business HVAC unit. If you are going to offer this service, start by going to the National Air Duct Cleaners Association website to learn how to do it right. Without the proper equipment and training, you might cause damage to residential cleaning customers' HVAC units. Nobody wants to have to replace an HVAC system because a house cleaning business didn’t follow proper quality control standards. You will need these items:- Caution signs
- Air compressor
- HEPA vacuum
- Duct restoration products
- Parts for maintenance of equipment
- HEPA filters and bags
- Indoor air quality testing equipment
- Tape
- Safety goggles
- Booties
- Latex gloves
- Electric shock prevention gloves
- Masks to protect against dust in lungs (or chemicals in some industrial facilities)
- Lockout, tagout system (a lock with a tag that specifies who locked the breaker)
Carpet Cleaning Business, Rug Cleaning
- Vacuum
- Spot cleaner
- Caution signs
- Carpet shampooer
- Air scrubber
- Carpet cleaning wand
- Rubber gloves
- Corner guards
- Defoaming agent
- Crevice tools
- Carpet rake
- furniture protectors
Window Cleaning Business
- Two 18” squeegees
- Window cleaner with silicon (keeps dust from sticking to windows)
- Rags to catch excess liquids
- Booties
- Scrapers
- Replacement s-channels (the rubber part of a squeegee)
- Sleeves (goes over squeegee to wash the window)
- Step stool
- Ladder
- Hard hat (primarily for use on scaffold)
- Safety harness (use with scaffold)
- Scaffold (for larger windows)
IT Cleaning Business
Cleaning computers and other equipment that has circuit boards requires specific cleaning chemicals. In addition, make sure to carry proper insurance because the potential data loss from using the wrong chemicals could destroy a business. The Association of Data Center Cleaning Professionals is the leader in standards for IT equipment. Review their standards before using this checklist. The following is from their standards on cleaning equipment:- Vacuums: Two Options
- Preferred: ULPA (Ultra Low Particulate Air) filter with 99.999% efficiency at 0.12 microns
- OK: HEPA (High-Efficiency Particulate Air) filter with 99.97% efficiency at 0.3 microns
- Tools, Attachments, and Supplies: Requirements
- Non-conductive
- Low-lint materials
- Packaging specifies that it is designed to be used in cleanroom environments
- Cleaning Chemicals
- Floor surfaces
- Non-ammoniated
- Designated as safe for data center environments
- Intended for HPL floor tiles
- Equipment Surfaces
- Anti-static cleaner
- Designed to be used in a data center environment
Property Cleaning Services, Power Washer Business
We grouped pressure washing businesses and property cleaning services together because they are similar and both outside. They are both outside and can be done as a team to improve the number of customers helped in a day. You will need:
- Broom and dustpan
- Trash picker
- Trash bags
- Blower
- Rake
- White and yellow paint (maintain the parking lot lines)
- Graffiti removal kit
- Pressure washer
- Water tank
- Towing hitch (if tank won’t fit in vehicle)
- Nozzles
- Hoses
Hazardous Waste Removal, Mold Remediation
We grouped hazardous waste removal and mold remediation businesses together because they have similar requirements, but each type of hazardous material will have its own requirements. For many of these you will need:- Portable air scrubbers
- Filters
- Negative air machines
- Mobile containment tent
- Meters to measure levels
- Asbestos testing kit
- Dehumidifiers
- Zip walls
- Disinfectants
- Sealants
- Knee pads
- Kneeling mats
- Gloves
- Ventilators
- Hazmat suits (for some materials)
- Special licensing based on type of removal
Boat Cleaning
You’ll likely need the same items as when cleaning a home, plus some outdoor items. Based on my time in Florida, I would recommend products that help protect against salinity (salt in the air). Don’t forget these:- Bucket
- Rust remover
- Deck brush
- Degreaser
- Metal polish
- Wood varnish
- Soap
- Mop
- Mop bucket
- Fabric cleaner
- Rubber cleaner
Hopefully, You Found the Cleaning Company Checklist You Need
Use these lists to get your brain rolling as you prepare for the cleaning company course with Chris. If you want more help to simplify starting your cleaning business, sign up to be one of the first to take the Cleaning Business Master Course. What kind of cleaning business are you thinking about starting?
Are you struggling to find new business startup loans? Don’t worry; you’re not alone. Fifty-nine percent of business owners do not have their funding needs met, but we’ll show you how to improve your odds of getting startup business loans.
Startup companies can still get loans. Lee Smith, the owner of Urbanity, was six months out of college when he wrote a 75-page business loan and got a $250K loan. Today he’s making over $1.5 million selling clothes. That’s a great return on investment, and it shows how much the right plan and funding can help you succeed.
We’ve partnered with National Business Capital (NBC), the number one online site for getting small business loans approved. They’ve helped secure over $2 billion in business loans for over 25,000 small businesses like yours. That’s an average of $80,000 for business startups.
[su_note note_color="#dbeafc"] We’ll explain:
- What is a startup business loan?
- How do startup business loans work?
- What are the best startup business loans?
- How to apply for startup business loans
- Alternatives to new business startup loans [/su_note]
What Is a Startup Business Loan?
A startup business loan isn’t a specific type, but a catch-all for business loans you can get to start a business. Startup business loans are one of the hardest types of business loans to get. Since the company has not built a track record, the decision is made based on how well the lender can tell the business owner thought through the business plan.
Lee Smith, the owner of Urbanity told us:
[su_quote]I sat down for two months and put together a 75-page business plan. I went and got a loan for a quarter million dollars.[/su_quote]
Check out our interview with Lee below:
[su_youtube url="https://youtu.be/_wUc28d8KkE"]Why Is It Hard to Get a Startup Business Loan?
It’s hard to get a startup business loan because startup businesses often fail in the first five years. In those cases, a business startup loan might not be paid back, which causes lenders to be more cautious when lending to a startup business. Don’t worry! There are ways to improve your odds!
How Do Business Startup Loans Work?
A startup business loan will normally rely on the personal credit history because the business does not have the same financial records and credit length to evaluate whether the risk is worth taking. Because banks back the business owner, a business startup loan often requires a personal guarantee. You’ll want to make sure you have the following before you apply for business startup loans:
- Personal Credit Score
- Tax Returns
- Bank Statements
- Accounts Receivable
- Credit Card Sales
- Unpaid Invoices
- Business Plan
- Legal Documents
Keep reading for more about each one.
Personal Credit Score
You’ll want at least a 650 minimum personal credit score when applying for a business startup loan, but higher is better. A higher personal credit score improves your odds of approval and normally reduces the interest rate.
Tax Returns
You’ll need at least two years of personal and business tax returns for most lenders. National Business Credit does not normally require tax returns.
Bank Statements
You might need three months to three years of bank account statements depending on the lender. National Business Credit is typically three months.
Accounts Receivable
These help lenders establish how much money people owe your small business and can be used to help secure financing.
Credit Card Sales
This document is another proof of revenue. It also helps lenders calculate a commonly overlooked cost of doing business.
Unpaid Invoices
Unpaid invoices fall into two categories:
- Money owed to the company: Invoices that a customer has not paid yet could be used to secure startup loans.
- Invoices the company needs to pay: These invoices will negatively impact your loan because they reduce the amount you can pay towards the loan. Try to clear as many of these as possible before applying for a startup loan.
Business Plan
Be prepared with a business plan that shows lenders that you have considered how you will make your business thrive.
Legal Documents
Remember to have copies of your business license, LLC or incorporation documents, EIN, and other documents that prove you are a legal business entity. Corporations are commonly viewed as more credit worthy because they have more reporting responsibilities that make it easier for companies like Dun & Bradstreet (D&B) to analyze your credit.
Check out our blog about how to get a business loan to learn more about D&B and other business credit-building tips.
What Are the Best Startup Small Business Loans?
The best small business startup loans are the ones you can actually get! Fortunately, National Business Credit has some loans that are really simple to get:
- Equipment Financing
- Asset-Based Lending
- Small Business Administration Microloans
- Personal Loans
- Franchise Loans
Let’s look at each.
Equipment Financing
An equipment loan requires a 650 FICO score OR $120K in annual sales. The equipment secures the loan, so if you don’t pay the business loan, you won’t be able to operate. Find out more about NBC’s equipment loans.
Asset-Based Lending
If you have assets to bank your startup business loan, you can qualify for a business loan with three months of bank statements and a soft pull of your credit. People with higher credit scores and higher asset values are more likely to qualify for asset-backed startup loans.
Personal Loans
If you have stellar personal credit, you can qualify for a line of credit or a personal loan and use it for your startup business financing. Alternatively, you can refinance your mortgage and pull out equity for your startup business.
Franchise Loans
Franchises tend to have an easier time getting a startup business loan. If you’re considering a startup loan as a franchisee, check the SBA franchise registry to make sure the business is on the list of companies that get easier and faster approvals.
There are other business financing options that small business owners may come across, but the majority of business loans are not open to startup companies unless they have:
- 2 years in business
- $100,000 annual revenue
- 650 personal credit score (or 80 D&B score)
Small Business Administration Loans
The Small Business Administration is a government agency that helps small business owners succeed. They offer four main services:
- Business Guides: They have good overviews of how to plan, start, run, and grow businesses.
- Funding Programs: We’ll talk about these below.
- Federal Contracting Assistance: Federal contracting has a range of requirements that the SBA can help you meet.
- Local Assistance Centers: Every state is different so going to a Small Business Administration office can be beneficial for state-specific guidance.
Let’s look at the business loan options available from the SBA.
SBA Loans Startup Business
A new business can apply for an SBA loan or business line of credit. There are three categories of SBA loans:
- 7(a) Business Loan
- 504 Business Loan
- Microloans
Let’s look at each.
7(a) Business Loan
7(a) Loans are the SBA’s most common loan program if you are buying real estate because they back loans of up to $5 million that can be used for:
- Short- and long-term working capital
- Refinance current business debt
- Purchase furniture, fixtures, and supplies
- Real estate
Businesses have to meet the following qualifications to get small business loan:
[su_note note_color="#dbeafc"]- Must be profitable company
- Must be operating and based in the U.S.
- Owner must be invested in the company
- Exhausted all other resources
- Demonstrate the need for the loan
- No delinquencies to the U.S. Government
If you are buying an existing business or franchise, you may need to ask the existing business owner for the following:
- Current balance sheet
- Profit and loss statement
- Three years of tax returns
- Proposed bill of sale with full terms
- Asking price
- Schedule of inventory
- Machinery and equipment
- Furniture and fixtures
- Licensing agreements from franchise, Jobber, and other companies
- Proof of equity
- Additional SBA forms based on the scenario
Check out the SBA for more 7(a) information.
504 Business Loan
This SBA loan is for businesses to upgrade property through a Small Business Development Center as long as they have less than:
- $15.5 million in total 504 loans
- $15 million tangible net worth
- $5.5 million in current needs
- $5 million of net income based on the last two years tax returns
A 504 loan is meant to create both business and job growth through the construction or upgrading of:
- New buildings
- Existing buildings or land
- Long-term equipment and machinery
- Streets
- Parking lots
- Utilities
- Landscaping
You cannot use a 504 loan to increase working capital or inventory, restructure debt, or speculate on real estate. Learn more about 504 loans.
Microloans
These are the smallest type of startup loan you can get from the Small Business Administration. They are up to $50,000 and can be used for anything except buying real estate or restructuring debt. A microloan lasts for no more than six years and will normally have interest rates of 8% to 13%. Find a microloan lender.
How to Get Loans for Startup Business
Applying for startup business loans is simple. Just follow these seven steps:
- Build your credit score.
- Choose a loan type.
- Choose a lender.
- Prepare your documents.
- Update your business plan.
- Apply for a startup business loan.
- Build for growth.
Step 1. Build your credit score
As mentioned before, you’ll want a 650+ personal credit score or an 80 business credit score from D&B. If you don't already have the necessary business and personal credit score, consider these options:
You can also use NAV to find ways to build your business credit score.
Step 2. Choose a loan type
You’ll need to sort through and choose the type of startup loan you want to apply for if you go through a financial institution, but lenders like National Business Capital (NBC) will discuss the best startup loan options for you. NBC will help you get better startup financing because they work with 75 business lenders. That means you get the best business startup loans for your scenario. You can choose from:
- Term Loans
- Equipment Loans
- Lines of Credit
- Asset-Based Loans
- Invoice Financing
- Merchant Cash Advances (MCAs)
- SBA Loans
- Industry Specific Financing
Find out why more people go to online lenders for startup financing than traditional financial institutions.
Step 3. Choose a lender
In this step, you’ll look for a financial institution that will help with your startup financing. You can get a startup loan from:
- Local banks and credit unions
- Major banks
- Finance companies
- Online lenders
Let’s look at each of these.
Local Bank or Credit Union
If you have a bank account with a local lender like a credit union, they are more likely to approve you than larger banks or online lenders. Unfortunately, fewer small business owners apply for bank loans from smaller banks according to the FED Small Business Survey.
Major Banks
According to the Federal Reserve Small Business Survey, most business owners go to a traditional lender like Wells Fargo, Chase, or Bank of America when they apply for business loans, but they do not offer great odds of approval. You’re better off going to almost anyone else. The table below shows what percentage of business owners apply at each location and what the odds of approval are. Finance companies and small banks are the most under-utilized.
Finance Companies
These lenders focus on activities like equipment financing. They tend to be alternatives to a traditional business loan, but they have the best approval odds because the monthly payments are secured by something other than your word and credit history.
If you need credit, business lines from vendors can be a phenomenal way to start a business. The loan amount may not be as big, but there are benefits to running a lean startup. These may be online or in-store. Synchrony (formerly GE Finance) is a major player in this market, but you can also find plenty of other lenders on National Business Credit.
Online Lenders
Online lending tends to be more friendly to small business startup loans for bad credit. The loan amount might be lower than other business loans and the interest rate higher, but when you want funding for a business start up it makes sense to consider them. One of the nice things about National Business Credit is they bring together private lenders for business startup loans. This helps you get better credit offers and reduces the number of hits on your credit.
Step 4. Prepare your documents
Make sure you have all the documents you need to apply for a startup loan. If you don’t, they can hold up the processing time, which for many lenders can be three to nine months. Make sure to ask about the business loan application process before you get started. That way you are fully prepared with everything you need to apply for startup capital. We discussed what you’ll need in earlier sections of the blog.
Step 5. Update your business plan
If you haven’t already, you’ll want to update your business plan with the most up-to-date information. Better information helps you be more likely to receive a line of credit or business loan. Pay special attention to the financials and the explanations, especially on how you’ll use the business line of credit.
Step 6. Apply for a startup business loan
Once you have everything ready, it’s time to apply for your small business loans. Startup companies will often be denied credit from traditional financing options unless they have a good personal credit score, business credit, and offer a personal guarantee. Online lenders tend to be more generous as long as you have a 650 credit score and are using the loan amount for something that can secure the business.
What to consider before accepting startup loans for business
Before you accept startup loans for new business ventures, you’ll want to consider:
- Interest rates
- Lump sum loans vs business lines of credit
- Monthly payments
- Impact on working capital and cash flow
- Duration of startup loan
Let’s look at how each of these impact business success.
Payment Terms
Before you accept startup business loans with no revenue, you’ll need a plan to pay them back. The payments will be a combination of interest payment and principal. Depending on the loan, you might have:
- Daily Payments: This arrangement is common with merchant cash advances.
- Weekly Payments: This is also common with merchant cash advances and invoice financing.
- Monthly Payments: As the most common type of payment arrangement, these are used by traditional bank loans, business credit cards, SBA loans, and business lines of credit.
- Paid Upon Triggering Event: Invoice financing often reroutes the invoice payments to the lender and then they pay you. When this occurs, the triggering event is the receipt of the invoice payment.
Make sure you can afford the payments otherwise you may default on the loan or lose your business. This is especially important if you have a period of time between when you accept the startup loan and when you receive revenue. If you keep part of the loan aside to pay the loan payments, you can protect against this risk.
Interest Rates
Your interest rates are effectively a business expense. Every time you pay interest, you have less money to reinvest in your business. We created a table of common startup loans to show you how much you’ll be spending on interest for different types of loans using the SBA data and calculator.net.
| Interest for Different Loan | ||||
| Type of Loan | Total Interest | Total Repaid | Monthly Payment | Interest per Year |
| 6 Year $50K Microloan 8% | $13,119.67 | $63,119.67 | $876.66 | $2,186.61 |
| 6 Year $50K Microloan 10% | $16,693.02 | $66,693.02 | $926.29 | $2,782.17 |
| 6 Year $50K Microloan 13% | $22,266.78 | $72,266.78 | $1,003.71 | $3,711.13 |
| 25 Year $250K Fixed Rate 9.52% | $406,315.50 | $656,315.50 | $2,187.72 | $16,252.62 |
| 10 Year $250K Fixed Rate 10.52% | $155,141.03 | $405,141.03 | $3,376.18 | $15,514.10 |
High rates are one of the main reasons that successful small business owners discourage taking out small startup business loans with bad credit.
Next, we’ll discuss why business lines of credit are some of the best small business loans you can get.
Term Loans vs Business Lines of Credit
Always choose a business line of credit over a term loan if you are offered it. Lines of credit are some of the best loans for startup business operations. Term loans pay you a lump sum upfront and you pay interest on the full amount. A line of credit is similar to how a business credit card works; it charges you interest on the amount of credit you use.
Let’s look at how that can impact your payment using the 25-year loan from the example above. Pretend you only need $25K in the first month. Instead of paying $2,187.72, you’d pay 9.52% interest on $25,000 making it where your payment is only $218.77. You just saved $1,968.95.
As you pay the line of credit off, your available credit goes back up. This doesn’t happen with a traditional loan.
Impact on Working Capital and Cash Flow
A startup loan will impact your working capital and cash flow. Let’s look at a few definitions:
Working Capital = Current Assets (convert to cash in less than a year) minus Current Liabilities (must be paid within a year)
Cash Flow = Money In minus Money Out
Here’s how a loan impacts your capital and cash flow:
- The loan will initially provide working capital and cash flow to help with startup costs.
- Payments on the loan will reduce working capital and cash flow.
- Depending on how well you convert the investments into revenue, the working capital and cash flow may increase or decrease as you earn revenue and make the loan payments.
Duration of Startup Loan
The duration of the loan will impact the payments and interest rates. Assuming the loan amount stays the same, you’ll see the following impacts on other aspects of the loans for startup business operations.
Step 7. Build for growth
Once you get approved for a startup loan, it’s time to put your business in hyperdrive. Use the loan for the purposes you stated in the startup loan application. If you received an SBA loan, make sure you aren’t using it for items that are specifically excluded from your terms. Lee told us:
[su_quote]I spent way too much on the build-out (remodeling the business.) If I had it to do over again, I would have reduced the amount spent on bathrooms and invested in more inventory.[/su_quote]
Next, let's look at some alternatives to loans for startup businesses.
Alternatives to New Business Startup Loans
Creativity offers a ton of ways to start a business without applying for a startup loan. Consider some of these alternatives to a startup business loan:
- Credit Cards
- Small Business Grants
- Friends and Family
- Crowdfunding
- Equity
We’ll look at each of these below to help you with more ideas to get business funding.
Business Credit Cards
You can use business credit cards instead of a startup business loan. It’s easier to qualify for these forms of credit, but they most likely won’t cover more expensive costs like buying equipment or property. In addition, business credit cards tend to have higher interest rates than startup business loans. That means lower profits.
Small Business Grants
Startup grants are by far the best way to get money for your small business if you can get them. The Small Business Administration has grants for:
- States to Help with Exporting: Learn more about the SBA exporting grants. Apply with your state to get exporting assistance.
- Research and Development: Grants for developing scientific or military applications are available from the Small Business Innovation Research (SBIR) and Small Business technology Transfer programs.
- Management and Technical Assistance: If you want to provide managerial or technical guidance to small businesses, there are grants for you too. It’s called the 7(j) program.
Check out other SBA grants.
Friends and Family
Friends and family can help you become a small business owner. They can either give you money or offer you a startup business loan. You’ll need to find a provider that offers loan servicing for individuals, but it can be done.
I financed my home through a friends and family loan that was managed by WestStar to get a lower interest rate than was available on the open market. You may want to ask if they service business loans that way too.
Crowdfunding
Business owners can also get startup funds through crowdfunding. When you use this method to start a new business, you may be committing to deliver a product in exchange for help covering business expenses. Learn how Pooch Selfie approached crowdfunding below:
[su_youtube url="https://youtu.be/TFvmb2E3-Kw"]Equity
Selling equity requires incorporation, but business owners can raise far more money through selling equity. This method of fundraising involves selling stock, which means the business has multiple small business owners and each is entitled to part ownership. You’ll want to hire a business lawyer to help you draft the incorporation documents if you plan on taking this approach.
Build Your Business
It’s not always easy to get loans for startup business operations, but if you can acquire one, it can help you accelerate your business growth. Just make sure you have a solid plan for how you’ll use it or you may find yourself in a worse spot than when you started.
What kind of business loans have you used?
Equipment Financing
Asset-Based Lending
SBA Microloans
Personal Loans
Credit Cards
Other: Specify
Food truck business owners are some of the most dedicated business owners on the planet. They know that everyone needs to eat and that Americans love convenience. If you dream of owning your own mobile restaurant, you might need food truck financing.
You've come to the right place. We'll show you how to get a food truck loan with information from food truck business owners, NAV, and National Business Capital. We've partnered with them to help future food truck businesses get approved for a food truck loan easier.
We'll answer questions about food truck financing like:
There are three main types of mobile food vendors:
Food truck financing may be impacted by how you choose to get the food truck and equipment. You have three main ways to get equipment:
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Keep reading because there are a ton of loans available for food trucks.
If you want to become a food truck business owner, equipment financing is the easiest to get when you enter the mobile restaurant industry. These secured business loans provide the funds to:
If you qualify for loans backed by the Small Business Administration (SBA), they are some of the best loans you can get. SBA loans typically require:
Before you get a loan for food truck business expenses, there are a few things you’ll need to do:
- How to Buy a Food Truck?
- How Much Is a Food Truck?
- What Are Food Truck Loan Options?
- How to Get Financing for a Food Truck Business?
- How to Get Food Truck Financing with Bad Credit?
- How to Improve Your Credit Scores with NAV?
- Why Should Food Truck Owners Start with National Business Credit financing?
How to Buy a Food Truck?
There are 48 different ways to buy a food truck. Food trucks range in price depending on several factors including:- Type of Food Truck: Are you buying a food truck, food trailer, or food cart?
- Condition of Food Truck: Have you found a new food truck or used food truck for sale?
- Buying a Food Truck Business: Are you buying a used food truck business?
- Equipment in the Food Truck: Is the equipment already in the food truck?
- Means of Purchase: Will you buy, rent, or lease your food truck and equipment?
Type of Food Truck
There are three main types of mobile food vendors:
- Food Truck: These are usually a modified box truck, conversion van, or RV.
- Food Trailer: Connects to the towing hitch of a truck, SUV, or other vehicles. They are normally enclosed.
- Food Cart: You’ll either have to move these manually or connect them to a form of transportation. Food carts are not normally enclosed.
Condition of the Food Truck
The age and condition impact food truck financing because both impact the life of the equipment. Many financial institutions will not offer food truck loans for vehicles more than ten years old. They may also have mileage requirements that impact the ability to get food truck financing.Buying a Food Truck Business
You might find it easier to qualify for a small business loan if you buy an existing business in the food truck industry. In these scenarios, you’ll be able to use the current cash flow, annual revenue, and business assets from the existing business to help secure small business loans. You’ll want to work with a business broker to help you get the best value.Food Truck Equipment
Equipment loans are a common type of business loan. You’ll likely be using some type of equipment financing when you enter the world of food truck entrepreneurs. If you are buying new equipment, you can safely get food truck financing for longer periods of time than if you are buying used equipment. If the equipment breaks down, you’ll lose cash flow and still be on the hook for the business loans.Purchase Agreement
Food truck financing may be impacted by how you choose to get the food truck and equipment. You have three main ways to get equipment:
- Buy: Most options for food truck financing. The food truck equipment counts as both an expense and an asset.
- Lease: This is a direct competitor of equipment financing, and the tax consequences can be treated differently for each. These are often offered directly by the food truck equipment manufacturer. You probably won’t be able to use the food truck to secure additional business loans when you lease.
- Rent: This way of securing a food truck and equipment is likely to be considered under working capital loans or a line of credit, but not equipment loans because you will not own the food truck.
How Much Is a Food Truck?
Food trucks range in price depending on several factors. We’ve already mentioned these, but it’s worth mentioning again. Consider:- Type of Food Truck: Are you buying a food truck, food trailer, or food cart?
- Condition of Food Truck: Have you found a new food truck or used food truck for sale?
- Buying a Food Truck Business: Are you buying a used food truck business or just the truck?
- Equipment in the Food Truck: Is the equipment already in the food truck?
| Food Trucks | Food Trailers | Food Carts | Food Truck Businesses | |
| New, Equipped | $70K+ | $9395+ | $2000+ | $200,000+ |
| New, Not Equipped | $20,000+ | $3,000+ | $539+ | Not Applicable |
| Used Equipped | $8,000+ | $8,500+ | $1000+ | $22,500+ |
| Used Not Equipped | $6,000+ | $3,000+ | $100+ | Not Applicable |
| Note: Roaming Hunger Used For Source of Pricing Without Hyperlink | ||||
What Are Food Truck Loan Options?
There are a variety of food truck business loans you might qualify for, depending on your situation. Financing a food truck will typically use one of the following types of loans:- Equipment financing
- Working capital loan
- Merchant cash advance
- Business line of credit
- Business term loan
- Small Business Administration loan
- Vendor leasing programs
Equipment Financing
If you want to become a food truck business owner, equipment financing is the easiest to get when you enter the mobile restaurant industry. These secured business loans provide the funds to:
- Buy or rent a food truck
- Get the initial supplies
- Upgrade equipment
Working Capital Loan
A working capital loan can be used for almost anything. Short-term working capital loans help businesses cover operating expenses during slow periods, purchase inventory, and finance expenses like food and supplies. Most working capital loans last for 18 months or less. You can get them from traditional lenders or online lenders like National Business Capital.Merchant Cash Advance
Most people think merchant cash advances are for retailers or wholesalers, but food trucks can use this financing, too. A merchant cash advance lends you money you need quickly and takes a percentage of your business’s future sales. When you get food truck loans that are a merchant advance, your business will be judged based on its cash flow. Hear how Joe Camberato explains merchant cash advances below: [su_youtube url="https://youtu.be/Ixx40PRYQTs"] Your food truck qualifies for this type of repayment terms as long as you have been in business for over 6 months and make at least $120K in annual revenue. NBC uses an example of repayment terms that take 15% of credit and debit card sales. That means if you want to pay off the financed food truck in a year, you’ll probably only qualify for around $10,000 per $120K of revenue. They offer food trailer financing of up to $5 million using merchant advances.Business Line of Credit
A business line of credit is basically a business credit card with lower interest and higher limits. Business lines of credit are the best food truck loans if you meet the income and credit score requirements. You only have to pay for the outstanding balance and interest, plus you can use a line of credit to fund most business expenses. You can assume business lines of credit will require at least:- 600 personal credit score
- 2 years in business
- Meet specific financial requirements
- Cash flow for up to $250,000
- B2B accounts receivable for up to $10 million
Business Term Loans
Food truck business owners might also be interested in business term loans. Business term loans work similarly to a mortgage. You apply for a loan, put down a down payment, and receive a lump sum of cash upfront. Then you repay the term loan according to the loan terms for a period of 6 months to 10 years. A term loan might be a better option than a line of credit if you prefer consistent repayment terms. Term loans can help you finance food truck business expenses including:- Financing food trailer upgrades
- Hiring workers
- Refinancing debt
- Purchasing materials
- A year in business
- $10,000+ monthly revenue
- 580 credit score
Small Business Administration Loan
If you qualify for loans backed by the Small Business Administration (SBA), they are some of the best loans you can get. SBA loans typically require:
- A 680 credit score
- Personal guarantee
- 2 years in business
- Down payment
- Business plan
Vendor Leasing Programs
A vendor leasing program like Roaming Hunger is one way to cover the food truck cost that is managed by the vendor. They may offer terms for good credit for a:- Small food truck
- Small food trailer
- Used food truck
How to Get Financing for a Food Truck Business
Before you get a loan for food truck business expenses, there are a few things you’ll need to do:
- Create a business plan.
- Choose a business structure. (Corporations get the highest Dun & Bradstreet ratings because they disclose the most. LLCs are second best.)
- Register for an EIN number.
- Get a business bank account.
- Get a DUNS Number (not necessary at National Business Credit).
- Meet the minimum requirements.
- Choose a lender.
How to Get Food Truck Financing with Bad Credit
If you have bad credit, your options aren’t as good (but still possible). Many online lenders will loan to people with bad credit, but you’ll be paying higher interest rates or be forced to accept secured loans. You might consider finding used food trailers for sale to get your new business started. Then build your credit score before you try to finance food trailer options. Once you have revenue and meet the minimum credit score, online lenders will be happy to help you with equipment purchases through an equipment loan or merchant advance. You can also look for food trailer finance options like:- Borrowing from friends and family
- Taking out a secured loan
- Borrowing from your retirement accounts
How to Improve Your Credit Scores with NAV
NAV is like Credit Karma for businesses. It helps you find business solutions, monitor your finances, and suggests the best credit cards or loans for your financial scenario. For $59.99 (rate subject to change), you can use NAV’s business credit builder to report trade lines directly to credit agencies. Better credit means better business funding options. Nav will help you build both. Sign up now.Why Every Food Truck Should Consider National Business Credit Financing
Whether you’re looking for a taco truck for sale or dealing with unexpected expenses, National Business Credit has fast funding for food truck owners. You just:- Apply online.
- Have a consultation call to establish what your small food truck business needs.
- Get the best offers for secured and unsecured lines of credit from more than 75 lenders
- Get the money in a couple of days.
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