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Best startup business loans in February 2024
By Jill A. Chafin | Edited by Abigail Bassett and Janet Schaaf| January 29, 2024
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
Lender | User ratings | Best for… | Max. loan amount | Term length | Time in business | Min. credit score |
---|---|---|---|---|---|---|
User ratings coming soon | SBA loans | $50,000 | Up to 72 months | Not specified | 620 | |
(692) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Short-term loans | $250,000 | Up to 24 months | 12 months | 625 | |
(22) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Line of credit | $100,000 | 12, 18 or 24 months | 6 to 12 months | Not disclosed | |
User ratings coming soon | Traditional bank | $50,000 | 60 months | Less than 24 months | 680 | |
(30) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Fast funding | $150,000 | 12 or 24 weeks | 6 months | 600 | |
(27) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Bad credit | $1,500,000 | Up to 15 months | 6 months | 500 | |
(155) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Equipment financing | $2,000,000 | 12 to 84 months | Not required | 550 | |
(97) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Unsecured loans | $500,000 | 4 to 18 months | 6 months | 600 | |
User ratings coming soon | Invoice factoring | $5,000,000 | Not applicable | Not required | Not required | |
User ratings coming soon | Minority entrepreneurs | $250,000 | 12 to 60 months | 12 months | Not disclosed |
Learn more about how we chose our picks.
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Startups lenders at a glance
SBA Microloan: Best startup business loan for SBA loans
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Loan amounts | Up to $50,000 |
Starting interest rate | 8.00% |
Term length | Up to 72 months |
Minimum credit score | 620 |
Minimum time in business | Not specified |
Pros | Cons |
---|---|
Eligibility requirements tend to be less strict than other government loans Available in all states Funds can be used for a variety of startup expenses | May require collateral and/or a personal guarantee Smaller loan amounts compared to other financing options Can’t use funds to pay existing debt or to purchase real estate |
Startups needing a small loan can borrow up to $50,000 with an SBA microloan that can be used for working capital, equipment, inventory or other business expenses. SBA microloans typically have less strict credit requirements than other lenders, focusing on underserved business owners like minorities, women, low-income or veteran entrepreneurs.
Remember, these are small loans — you might want to explore other funding options if you envision needing more funds.
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OnDeck: Best startup business loan for short-term loans
Read our review
Loan amounts | $5,000 to $250,000 |
Starting interest rate | 35.40% |
Term length | Up to 24 months |
Minimum credit score | 625 |
Minimum time in business | 12 months |
Pros | Cons |
---|---|
Offers same-day funding Fair to low credit accepted No prepayment penalty | High starting interest rate Loans not available in North Dakota Doesn’t fund all industries |
An OnDeck short-term business loan can cover various expenses, such as inventory, marketing campaigns, payroll services, equipment upgrades or consolidation of business debt. To qualify, you must be in business for at least one year with an annual revenue of $100,000. Daily or weekly payments are required, with an average interest rate of 60.90% for term loans.
Note that OnDeck doesn’t serve all industries, namely adult entertainment, loan brokers, firearms vendors and more.
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Headway Capital: Best startup business loan for line of credit
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Loan amounts | Up to $100,000 |
Starting interest rate | Not disclosed |
Term length | 12, 18 or 24 months |
Minimum credit score | Not disclosed |
Minimum time in business | 6 to 12 months |
Pros | Cons |
---|---|
Flexible repayment terms No early payoff penalties Can receive funds the next business day after approval | Not available in all states Might be subject to a 2% draw fee Must have an annual revenue of $50,000 or higher to qualify |
A business line of credit with Headway Capital can provide up to $100,000 in revolving funds, helping cover day-to-day expenses or seasonal dips in income. While you only pay interest on the amount you use, some states require a 2% draw fee.
To qualify, your business must operate for six months to one year with an annual revenue of $50,000 or higher.
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Wells Fargo: Best startup business loan for traditional bank
Read our review
Loan amounts | $5,000 to $50,000 |
Starting interest rate | Prime + 4.50% |
Term length | 60 months (no annual review) |
Minimum credit score | 680 |
Minimum time in business | Less than 24 months |
Pros | Cons |
---|---|
Offers a range of small-business solutions No collateral required Automatic enrollment in free rewards program | High annual fees compared to secured lines of credit Low credit limit Personal guarantee required |
Businesses less than two years old wanting a traditional bank experience can access up to $50,000 with the Wells Fargo Small Business Advantage unsecured line of credit. With over 7,000 physical branches nationwide, Wells Fargo offers a range of small business solutions, including business bank accounts, business credit cards, SBA loans and more.
Once your business has been running for two years, you can upgrade to the Wells Fargo BusinessLine line of credit to access up to $150,000 of revolving funds.
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Fundbox: Best startup business loan for fast funding
Read our review
Loan amounts | Up to $150,000 |
Starting interest rate | 12 or 24 weeks |
Term length | 4.66% for 12 weeks 8.99% for 24 weeks |
Minimum credit score | 600 |
Minimum time in business | 6 months |
Pros | Cons |
---|---|
Receive funds as soon as next business day after approval Low minimum credit score requirement Available in all U.S. states and many territories | Annual revenue of $100,000 or higher needed to qualify Weekly repayments with short terms Doesn’t fund all industries |
If your business needs a quick business loan, a Fundbox business line of credit could fund up to $150,000 with rates starting as low as 4.66%. Use what you need when you need it — and only pay interest on the withdrawn amount.
Your business must operate for at least six months with $100,000 or more in annual revenue to qualify. Funds can hit your bank account as quickly as the next business day.
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Fora Financial: Best startup business loan for bad credit
Read our review
Loan amounts | $5,000 to $1,500,000 |
Starting interest rate | Up to 15 months |
Term length | Factor rates from 1.10 to 1.40 |
Minimum credit score | 500 |
Minimum time in business | 6 months |
Pros | Cons |
---|---|
Low minimum credit score requirement Offers prepayment discounts Quick funding times | Can’t have any open bankruptcies Need at least $180,000 annual revenue to qualify Doesn’t report to credit bureaus |
Fora Financial is one of our top picks for a bad credit business loan with a low minimum credit score requirement of 500 and no collateral required. With Fora Financial’s streamlined application process, you can receive funds within 24 to 72 hours after approval.
While certain lenders charge prepayment penalties on business loans, Fora Financial awards you for paying off your debt early.
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Taycor Financial: Best startup business loan for equipment financing
Read our review
Loan amounts | $500 to $2,000,000 |
Starting interest rate | 4.99% to 28.00% |
Term length | 12 to 84 months |
Minimum credit score | 550 |
Minimum time in business | Not required |
Pros | Cons |
---|---|
No minimum time-in-business requirement Can get approved within hours with minimal information required for application High funding amounts | Personal guarantee might be required Equipment refinance only available to businesses older than three years Requires documentation fee for equipment loans |
Taycor Financial offers financial solutions for brand-new companies with no minimum time-in-business requirement. You can borrow up to $2,000,000 with equipment financing or leasing, or explore other finance options like business lines of credit, bridge loans and term loans.
With a low minimum credit score requirement of 550, low-credit borrowers can access the funds their business needs. Down payments aren’t required, but you might need to provide a personal guarantee.
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National Funding: Best startup business loan for unsecured loans
Read our review
Loan amounts | $5,000 to $500,000 |
Starting interest rate | 1.11 factor rate |
Term length | 4 to 18 months |
Minimum credit score | 600 |
Minimum time in business | 6 months |
Pros | Cons |
---|---|
Doesn’t require collateral or a down payment Next-day funding Early payoff discounts | Requires daily or weekly payments Must have $250,000 or higher in annual revenue Factor rates make it hard to compare with other offers |
National Funding offers unsecured business loans of up to $500,000 for startups with no collateral. You can use funds for working capital, marketing, business taxes, inventory and more. With a quick application process, you could receive funds as soon as 24 hours after approval.
Your business must operate for at least six months and have $250,000 or higher in annual revenue to qualify.
See Your Business Loan Offers
altLINE: Best startup business loan for invoice factoring
Funding limits | Up to $5,000,000 |
Advance rate | Up to 90% |
Invoice factoring fees | 0.75% to 3.50% |
Minimum credit score | Not required |
Minimum time in business | Not required |
Pros | Cons |
---|---|
Works with startups and bad credit borrowers Funds available within 24 to 48 hours Collects outstanding customer invoices on your behalf | Includes origination and wire fees Requires your customers to have good credit Fees increase the longer an invoice is left unpaid |
If your startup generates invoices and needs fast capital, altLINE can provide up to $5,000,000 with invoice factoring. Once approved, you can submit unpaid invoices to receive up to 90% of their face value, letting altLINE handle customer payments on your behalf.
Instead of interest rates, altLINE deducts a factor rate, or discount rate, from each invoice’s remaining balance. Low-credit borrowers can typically qualify since altLINE reviews your customers’ creditworthiness, invoices and payment due dates over your credit history.
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Accion Opportunity Fund: Best startup business loan for minority entrepreneurs
Loan amounts | $5,000 to $250,000 |
Starting interest rate | 8.49% |
Term length | 12 to 60 months |
Minimum credit score | Not disclosed |
Minimum time in business | 12 months |
Pros | Cons |
---|---|
Lends to women, people of color and low-income entrepreneurs Offers business coaching and mentorship Flexible repayment terms | Not available in all states Must have $50,000 or more in annual revenue Doesn’t list minimum credit score requirements |
The Accion Opportunity Fund (AOF) is a nonprofit lender providing affordable loans of up to $250,000 to diverse businesses who struggle to qualify for traditional financing. Focused on minority entrepreneurs and women-owned businesses, the AOF offers educational classes, coaching and customer support in English and Spanish to help new companies launch, develop and strengthen their business ideas.
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What is a startup business loan?
A startup business loan can help new companies without an established business credit score or access to other types of financing get the capital they need to cover startup costs and grow their business.
You can use a startup business loan to buy supplies and equipment, purchase or lease office space, pay utilities, purchase inventory, hire employees, and more.
On this page
- What is a startup business loan?
- Startup business loans vs. traditional business loans
- Small business loan requirements
- Types of startup business loans
- How to qualify for a startup business loan
- How to apply for a startup business loan
- How to compare startup business loans
- Alternatives to startup business loans
- How we chose the best startup business loans
- Best startup business loans summary
- Frequently asked questions
Startup business loans vs. traditional business loans
With traditional small business loans, you typically need excellent personal and business credit scores, a reliable annual revenue, a good debt-to-income (DTI) ratio, a detailed business plan and even assets to pledge as collateral. While you’ll likely need the same with a startup business loan, the requirements tend to be less stringent.
For example, the lender Fora Financial states they take a “big-picture approach” by prioritizing your business’s potential for growth over your credit score. Look for lenders offering loans to start a small business to help get your business ideas off the ground.
Small business loan requirements
While every lender has its own small business loan requirements, you’ll likely need to meet the following criteria to get a startup business loan:
Credit score: If your business doesn’t have an established credit score yet, lenders will likely consider your personal FICO Score. Typically, a score in the 600s is best for qualifying, although some startup lenders accept scores as low as 500.
Annual revenue: To secure financing, you need to meet a lender’s annual revenue requirements — typically ranging from $36,000 to $250,000 or higher. Small business accounting software can help track your business income and expenses. If you have no income stream, try applying for small business grants to get things up and running.
Time in business: The term “startup” can be misleading since most lenders require you to operate for at least six months to qualify for financing. However, Taycor Financial doesn’t have a minimum time-in-business requirement for equipment financing, making them an excellent choice for brand-new companies.
Business plan: Your lender will likely want to see a business plan outlining your company’s overall goals, mission and plan for future growth.
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Types of startup business loans
Here are some common types of startup business loans to consider for your business needs.
Line of credit
A business line of credit allows you to access funds as needed up to a predetermined limit, only paying interest on the amount withdrawn.
Some lenders offer lines of credit to businesses operating for less than two years. However, many lenders require a minimum credit score between 600 and 680 to qualify for a business line of credit.
SBA loans
The U.S. Small Business Administration guarantees a portion of SBA loans, making them an affordable option for companies unable to secure traditional financing. With the popular SBA 7(a) loan program, small businesses can borrow up to $5 million with repayment terms of up to 25 years. You can use the funds to purchase equipment or real estate, provide working capital and more.
Banks, credit unions and community development organizations issue SBA loans. And while the SBA doesn’t set a minimum credit score, lenders offering SBA loans may set their own minimums. You have a better chance of approval if you have a personal FICO Score of 680 or higher.
Microloans
Microloans are business loans for relatively small amounts — usually less than $50,000. They may be backed by the SBA or offered by nonprofit organizations specializing in helping small businesses get funding.
These lenders tend to take a more holistic approach to underwriting loan applications, taking into account your business plan, geographic area, industry and management team’s past success and credit.
Short-term loans
Short-term business loans have shorter repayment terms — usually three to 24 months. These loans can help fill a short-term purpose, such as covering a temporary cash shortage or seasonal income gap. Depending on the lender, you can borrow anywhere from $5,000 to $1 million or more.
Rates on short-term loans tend to be higher than longer-term loans, often ranging from 7% to 50% or higher, depending on the loan.
Equipment financing
Equipment financing helps business owners purchase machinery or equipment for running their businesses. These loans use the equipment as collateral, making them more readily available than unsecured business loans.
Many online lenders require a minimum credit score in the 600s for an equipment loan. You may also need to be in business for at least six months and meet minimum annual revenue requirements, although some lenders have more lenient requirements.
Merchant cash advance
While a merchant cash advance (MCA) isn’t technically a loan, it can still be a good option for your startup business. A merchant cash advance company advances you a lump sum of cash in exchange for a percentage of your daily credit card and debit card sales.
Obtaining a merchant cash advance is typically easy if your business has significant daily debit and credit card sales. However, this type of funding can be expensive — with some advances charging APRs in the triple digits.
Invoice factoring
Invoice factoring involves selling a percentage of an invoice’s face value to a factoring company in exchange for 70% to 90% of the invoice’s face value. The factoring company then collects outstanding balances from your customers. Once the customer pays, the factoring company pays you the remainder of the invoice minus a predetermined factor fee.
Invoice factoring allows your business to get cash immediately rather than wait for customers. However, most factoring companies will only buy invoices issued to other businesses, so you might not qualify for invoice factoring if you run a business-to-customer (B2C) enterprise.
How to qualify for a startup business loan
Many top lenders hesitate to work with startups since they have not built a solid business history or demonstrated their ability to repay debt. If your business is less than a year or two old, you’ll likely need to rely on your personal credit score and financial status to get funded.
Here are some steps to take before applying for startup financing:
1. Improve your personal credit score.
Improving your credit score is a great way to open the door to the most competitive loan offers. Start by checking your credit to see where you stand.
2. Focus on your debt-to-income (DTI) ratio.
Lenders look at your DTI to see how you handle debt. The lower the ratio, the better your chances of approval. Stay on top of your monthly bills and create a business budget to improve your DTI.
3. Offer substantial collateral.
Collateral is anything of value you put up for a secured business loan. Even if it’s not required, offering collateral shows lenders that you’re a reliable, creditworthy business owner who can successfully manage your finances. Secured business loans tend to provide the most competitive rates and terms.
4. Show a strong cash flow.
If your business is already in operation, try to boost sales before applying for financing to reassure lenders that your company is a dependable investment.
Most importantly, be cautious of business and personal no-credit-check loans. Although these sound like an easy way to access capital for your business, they often come with high-interest rates and inflexible terms, or they could be a scam.
How to apply for a startup business loan
While every lender will have its own application process, here are some steps to take once you’re ready to apply for a startup business loan.
1. Decide what type of financing you need.
There are many types of business loans to consider based on your eligibility and immediate needs. Only you can decide what’s right for your startup business.
2. Check your personal and business credit scores.
Poor credit is one of the main reasons business loan applications get rejected. If you don’t have business credit yet, lenders will look at your personal credit score — so be sure to check your credit and take steps to improve your score before applying.
3. Research and compare lenders.
While getting a loan offer can be exciting, you should shop around to find the right loan with the best rates and fees. Read small business lender reviews in advance to see if a potential lender fits your company’s criteria and needs.
4. Gather required documents.
Requirements vary by lender, but most want to see your time in business, personal tax returns, copies of business licenses and registrations, financial statements and bank statements. Some lenders might also require a certificate of good standing or a detailed business plan.
5. Apply and review.
You can usually apply for business loans for small businesses online with a quick and streamlined process, although some traditional banks might require an in-person visit. Read the fine print before signing your business loan agreement to ensure you understand the terms, rates and additional fees.
Startup loans with no credit or revenue
Without a strong credit history, figuring out how to get a loan to start a business can be challenging. Most lenders look at your credit score to determine your creditworthiness.
However, some lenders will look at factors beyond credit history. For example, a lender may scour your bank statements, business plan and cash flow projections to get a clearer picture of your situation and your company’s potential. They may even ask for collateral to help secure the loan.
If you have no credit or revenue yet, you can always consider a no-collateral startup business loan.
But be prepared: Most unsecured or bad-credit business loans typically have higher interest rates and less flexible terms, which can cost more over the long run.
How to compare startup business loans
There’s no one-size-fits-all approach to finding the perfect funding solution for your business, especially since startup costs vary by industry.
Here are a few things to consider when picking the best business startup loan for your company:
Interest rate: Business loan interest rates vary by lender and loan type. Make sure to understand the difference between fixed versus variable interest rates. It’s crucial to shop around to find the lowest rate on a loan that fits your needs.
Additional fees: Watch out for extra charges like origination fees, late charges or prepayment penalties — these can all make the loan cost higher than anticipated.
Repayment term: Loan repayment terms can range from a few months to 25 years. Most loans require daily, weekly or monthly payments over the loan term. However, some lenders may allow you to make interest-only payments during the startup phase and then principal plus interest payments later. Others might call for interest-only payments for the life of the loan with a balloon payment at the end of the loan term.
Time to fund: Decide how quickly you need funds. Alternative lenders typically approve and issue funds within one to three business days, whereas the lending process can take up to two weeks or longer with traditional banks.
Collateral required: Collateral is anything of value you put up as security for a loan, such as real estate, inventory, equipment, accounts receivable or other assets. The lender can seize the collateral if you default on the loan.
Loan purpose: Some lenders restrict how you spend the funds. For example, you can’t use an SBA microloan to pay off existing debt or purchase commercial real estate. If you want to cover the widest range of business expenses, consider a working capital business loan or working capital line of credit.
What to do if you are denied a startup business loan?
If your startup business loan application was denied, contact the lender to review the reasons for their decision. Next, take any necessary steps to address the issues, such as improving your credit score, paying down debt, boosting your business’s revenue or strengthening your business plan.
Alternatively, you can explore other options for startup financing for small businesses, as we outline below.
Lastly, be sure to re-evaluate your business’s most urgent needs. Do you need to upgrade your restaurant’s kitchen this year or can it wait? If possible, focus on the essentials while improving your business’s financial health.
Alternatives to startup business loans
If a small business loan for startups doesn’t fit your needs, consider the following funding options:
Business credit cards
A business credit card is similar to a personal credit card, except for business use. Just about any business can apply for a business credit card. Issuers will check your personal credit score, so you may have to start with a low credit limit if you don’t have a robust personal credit score.
Because businesses tend to spend more than individuals, business credit cards often offer perks, points and other rewards. If considering a business credit card with a yearly fee, ensure it provides enough value in rewards to offset the cost.
You can also use a personal credit card for business purposes, although you won’t be able to claim the paid interest as a business tax deduction.
Personal loans and financing
Using personal money to start your business can help you get the funds you need when business loans aren’t available. Here are a few options to consider:
- Personal savings. Bootstrapping your startup can set your business up for later success since lenders prefer working with business owners with some skin in the game. However, you might not have enough personal savings to fully fund your needs or grow your business as quickly as you’d like.
- Personal loan. Personal loans can be easier to get than business loans because most personal loan lenders look only at your personal credit score. However, personal loans tend to provide lower amounts and higher interest rates than business loans.
- 401(k) loan. If your 401(k) plan allows loans, you’re almost guaranteed to get approved — and you won’t even need a credit check since you’re essentially borrowing money from yourself. However, 401(k) loans are risky since you may have to repay the money immediately if you leave your employer.
- Home equity loan or HELOC. Home equity loans and home equity lines of credit (HELOC) are two low-cost borrowing options worth considering. However, home equity loans and HELOCs can have substantial closing costs, and you also risk losing your home if you can’t afford to repay the loan or line of credit.
Friends and family
If you have friends or family members willing to give you a loan, this can be one of the easiest ways to get money to start your business. However, you’re limited by their available cash. Plus, you risk damaging the relationship if you can’t repay the loan.
Crowdsourcing
Crowdfunding is another way to raise money from friends, family and the general public. Kickstarter and GoFundMe are well-known business crowdfunding platforms business owners use to raise startup capital.
Crowdfunding is a low-risk venture because people donate to your business — not invest or lend. However, donors typically expect some benefit in return for their contribution. For example, they may want your product or service, formal recognition or another kind of reward if your business succeeds.
Business startup grants
Federal, state or local governments, corporations or foundations usually offer various small business grants. The biggest perk of a grant is that you don’t need to repay it. However, there can be a lot of competition for small business startup grants — you could spend a lot of time applying for grants and receive little or no funding in return.
How we chose the best startup business loans
We reviewed the leading small business lenders to determine the best business loans for startups. To make our list, lenders must meet the following criteria:
- Minimum credit score: Personal credit score requirements of 680 or lower
- Minimum time in business: Loan options for businesses that have been operating for 12 months or less.
- Loan amounts: Maximum loan amounts of $50,000 or higher
- Rates and terms: We prioritize lenders offering competitive rates, reduced fees and flexible repayment terms.
- Repayment experience: We consider each lender’s reputation and business practices, favoring lenders that report to all major credit bureaus, offer reliable customer service and provide extra support to customers, such as free business coaching and mentorship.
Best startup business loans summary
- SBA Microloan: Best for SBA loans
- OnDeck: Best for short-term loans
- Headway Capital: Best for line of credit
- Wells Fargo: Best for traditional bank
- Fundbox: Best for fast funding
- Fora Financial: Best for bad credit
- Taycor Financial: Best for equipment financing
- National Funding: Best for unsecured loans
- altLINE: Best for invoice factoring
- Accion Opportunity Fund: Best for minority entrepreneurs
Frequently asked questions
New business loans can be a great way to launch or expand your business. However, you want to ensure you’re getting a loan with reasonable rates and terms and can cover the weekly or monthly repayments, otherwise you risk burying yourself in unmanageable debt.
Startups that have been in operation for at least six months can consider approaching banks, credit unions and alternative lenders for a business line of credit, term loan or SBA microloan.
However, you might need to start with a business credit card, personal loan or crowdfunding if you haven’t hit the six-month mark yet.
New businesses will need to rely on their personal finances when borrowing funds. As discussed above, you’ll need a good credit score, reliable income and a solid debt-to-income ratio. Some small business loans may require a down payment, collateral or a personal guarantee.
The amount you can expect to receive from a startup loan will depend on multiple factors, such as your time in business, credit score, collateral and annual revenue. Small business loans can start at $500 and go as high as $15.5 million, depending on your business’s unique profile.
Newly established businesses should expect a much lower borrowing range with a first-time business loan. For example, the average SBA Microloan is about $13,000. Even if you get approved for a more significant amount, it’s best to limit how much you borrow to ensure your business can repay the debt.
Lenders usually check an applicant’s personal credit score when deciding whether to approve a startup loan. While getting a business loan with bad credit is possible, your options may be limited and you may have to put up collateral or pay a higher interest rate.
Figuring out how to get a startup business loan with no money can be tough since most lenders have minimum annual revenue requirements or require you to be in business for at least two years.
However, some lenders offer loans targeted to startups, so don’t be discouraged if you don’t get approved on your first try. Focus on boosting your revenue and credit history to help improve your chances of approval.
Your lender may require a down payment to qualify for a startup business loan. For example, the Small Business Administration (SBA) typically requires a 10% to 30% down payment for SBA loans, depending on loan type and your qualifications.