Bank Loans

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Banks lend money to existing businesses but for a start-up, it may be very difficult to get a bank loan as they do not have a track record. Banks require a sound business plan and must be convinced of the viability of your business before they agree to lend you money. Banks also normally need collateral as security.

If you have a solid business plan and the lender agrees, this can often be the cheapest (interest rate-wise) loan sources available. The risk is that besides the fact that it's often hard for a startup to qualify - since there's little evidence you'll be profitable - if you do get a loan, it can be like a ticking time bomb if your business isn't doing well.