Every startup business owner needs capital to grow their business. There are some lenders who can be flexible with their requirements, even when they state a minimum requirement, and provide funding quickly. We’ve evaluated the best startup business loans based on loan terms, fees, rates, customer satisfaction, and overall quality.
No prepayment and origination fees
Max. Loan Amount
Time In Business
If you require cash quickly due to a cash flow shortfall or have a less than perfect credit score, Kabbage could be a promising option.
What we like
- Borrowers with fair credit can apply
- No prepayment penalties
- Streamlined application journey
- No origination fees
What we don't
- Late payment fees are applicable
- Short repayment terms
- Business assets required
Business loans tailored to your needs
Max. Loan Amount
Time In Business
National Funding offers small businesses working capital and equipment financing loans that are suitable for a broad range of businesses, and you could receive approval and funding within 24 hours.
What we like
- Early payoff discounts
- Fast approval and funding
- High approval rates for loan applications
- Personalized experience
What we don't
- Daily or weekly repayment
- High minimum annual revenue
How do startup business loans work?
Startup business loans are available to small businesses, startups, and new businesses that need funding to help get their business or project off the ground. Usually, SBA loans are used for start ups since its backed by the government. The loan is typically used to pay for equipment, inventory, software purchases, etc.
These loans are usually unsecured, meaning there’s no collateral, so you may have trouble getting one if you have bad credit or no credit history. Try applying for a secured loan if you can’t get an unsecured loan because of your credit score.
Startup business loans are often offered at lower interest rates than other types of financing, such as credit cards or personal loans. They also have flexible repayment terms that allow you to repay your loan over time without making hefty monthly payments.
How to apply for startup business loans?
The good news is that plenty of lenders are willing to work with startups. You just need to know where to look and what you need to do to apply for startup loans. Here are some steps for applying for startup business loans:
- Business plan: A business plan is an essential part of the loan application process. It shows that you have seriously thought about how you will make your new business a success and lays out the financials of your idea. It’s also a great way to figure out if what you have in mind is viable or not.
- Credit scores: You will need excellent credit to get approved for most startup loans. If your credit isn’t strong, it might be worth taking some time to improve it before applying for financing.
- Required documents: You’ll need to gather your personal and business tax returns, bank statements, and other financial documents to show how much you make and how much you spend each month. You may also need to provide an appraisal of the value of your property, if applicable.
- Submit: You’ll submit all your documents and paperwork to the lender for review and approval. If everything checks out, the lender will send you your loan funds in one lump sum or over several payments, which you can use as needed for whatever purpose you outlined when applying for the loan.
What are the types of startup business loans available?
There are many types of startup business loans available. Here are the most common:
- Line of credit: A line of credit is a loan that allows you to borrow and repay money as needed. You can use the line of credit to fund different business expenses, including payroll, capital expenditures, marketing, etc.
- SBA 7(a) loans: The Small Business Administration (SBA) offers several types of loans for startups. SBA 7(a) loans are designed for small businesses with less than $5 million in annual revenues that need working capital to purchase inventory or make payroll. The amount you can borrow ranges from $50,000 to $5 million, depending on the loan you apply for and your financial situation.
- Microloans: Microloans are small amounts of capital — usually $50,000 or less — that can help small businesses get off the ground. Many microlenders offer free services and low fees to borrowers who qualify for their programs.
- Equipment financing: Equipment financing is available for businesses that need equipment to run their operations. Equipment financing can buy about anything from computers to cars and trucks to machinery used by manufacturing companies.
- Invoice factoring: Invoice factoring is a way to access the money before customers pay you. You sell your invoices at a discount and get paid immediately through an invoice factoring company. This is great if you need money fast or have trouble getting paid on time.
Why should you get startup business loans?
The benefits of getting a startup business loan are many. Here are some of them:
- Capital to run your business: When you start a new business, you’ll need to invest in various assets to get your business operating. This could include purchasing office supplies, equipment, etc.
- Improves your business credit rating: When you get a business loan, it improves your credit rating because this means that more lenders would trust your ability to repay the money they lend you for your venture. A good credit rating is essential for any business because it helps when negotiating trade deals or borrowing more money from other sources in the future if needed.
How to choose the best startup business loans
The right lender and type of loan can make all the difference for your business. Here are tips for choosing the best startup business loans:
- Length of repayment time: The longer the monthly payments then the easier it will be on your cash flow as the payments will be stretched out. However, you’ll pay more interest. Take into consideration if you want your cash flow stronger or a higher interest payment overall.
- Compare interest rates: The interest rate will determine how much you will have to pay back over time. The lower the interest rate, the less you have to pay back overall.
- Amount of capital: How much money do you need? If you have a business plan, look at the forecast and determine how much you’ll need to cover expenses in the first year. You may also want to figure out how much capital you’ll need to reach profitability and start turning a profit.
- Lender reputation: The most important thing to consider when choosing a lender is its reputation. Reputable banks and credit unions offer better interest rates than non-bank lenders. If a lender has a good reputation, it’s more likely that they can be trusted and be around if something goes wrong.