Business Loans for Startups
Compare funding quotes from LendingTree’s network of 30+ lenders.
There’s an old myth that startup companies can’t get business loans, but while startups can face unique challenges with traditional financing, there are several loan options that are available to newer businesses.
What’s considered a startup loan?
Startup business loans are a type of business financing meant for companies that have been in operation for less than two years. In contrast, traditional business loans usually require a longer operating history and more established financial records.
Often provided by online lenders, business loans for startups play an important role in the small business landscape. According to the Federal Reserve, 64% of businesses with less than two years in business reported challenges paying their operating expenses in 2024. Within this group, 70% said they used personal funds in response to financial challenges, while 44% also obtained funds that must be repaid — including small business loans.
That said, the term “startup business loan” can be somewhat misleading, as most lenders require at least a few months in business before you can qualify for financing. If your startup is brand new and hasn’t started generating revenue, you might need to consider other ways to raise funds for your business.
| Startup business loan | Traditional business loan | |
|---|---|---|
| Time in business requirement | Less than two years | Two years or more |
| Other qualifying criteria | Might be more flexible | Might be more strict |
| Typical loan amount | Likely to be smaller | Likely to be larger |
| Typical interest rates | Likely to be higher | Likely to be lower |
How LendingTree works with startup owners
LendingTree takes the hard work out of shopping around for a loan, connecting small businesses with potential funding opportunities. Here’s how it works:
1. Tell us what you need
Fill out one form and watch our network of 30+ lenders compete for your business. It only takes an average of two minutes to tell us who you are and how much money you need. Plus, the process is free, simple and secure.
2. Compare your options
Depending on your revenue and business needs, you can compare quotes on your own or you may qualify for LendingTree’s concierge service, which gives you a single point of contact to help you find the best deal.
3. Get your money
Pick a lender and sign your loan agreement. You could receive your money in as little as 24 hours.
We use soft credit checks to look for potential matches for your business within our lender network, so getting quotes has no impact on your credit score.
However, if you decide to move forward with a loan offer, your lender may run a hard credit check to finalize your loan agreement, which can affect your score.
What you’ll need to apply for a startup loan
Before you can apply for a startup business loan, you’ll need to have certain documents and information handy. Thankfully, much of what you need can be easily downloaded. Here’s how you can get started:
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Find your employer identification number (EIN)
This is like a Social Security number for your business. If you’re a sole proprietor, you may not have an employer identification number and you may be able to use your SSN to apply. -
Download bank statements
Lenders may require a minimum of three to six months of business bank statements to verify your cash flow and confirm your ability to repay a loan. You can generally download bank statements online, and if you can’t remember your EIN you can usually find it on these statements. -
Download tax returns
You’ll likely need to provide personal tax returns for the past three years, plus business tax returns if you’ve been operating long enough to file them. You can typically download your returns directly from your tax software. -
Pull financial statements
Business loan applications require various financial statements, including balance sheets, profit and loss statements and cash flow analyses. Often, you can generate and download these reports using your accounting software. -
Gather other business documents
In addition to the financial documents listed above, lenders may require some general business documents, such as copies of your business plan and copies of any business licenses and permits.
As you download relevant documents, consider storing them in a secure folder so they’ll be easy to find for any future applications. It’s also a good idea to have your login information ready and check for any missing passwords, as some lenders may ask you to connect your checking account or accounting software for underwriting purposes.
Because startups haven’t had the opportunity to demonstrate their success over several years, they are generally viewed as risky borrowers. To minimize their risk, startup lenders may take several steps.
In some cases, a higher credit score may be required to make up for the lack of business history. In other cases, lenders may be willing to compromise on credit, especially if you generate a large amount of revenue, provide collateral or sign a personal guarantee.
If you’re wondering how to qualify for a startup business loan, note that loan requirements vary between lenders and loan types. However, you’ll generally need to meet minimum credit score, time in business and annual revenue criteria, which can be found online or by contacting lenders directly.
Keep in mind that while alternative lenders may offer startup business loans for bad credit borrowers, these loans often come with higher rates and fees.
How much can I get with a startup business loan?
The majority of startups apply for $100,000 or less, but that doesn’t mean it’s impossible to get a larger loan. The amount of working capital you can receive with a startup business loan depends on several factors, including the lender, the loan type and the financial condition of your company. Though some lenders offer generous loan amounts up to $2 million or more, startup loans tend to be smaller than traditional business loans — and that is not a bad thing.
When your business is new, it’s important to lay a foundation for success before you hit the ground running. Borrowing too much can put a financial strain on your business, limiting your available cash flow and potentially hurting your chances of qualifying for financing in the future.
According to the Federal Reserve, 24% of startups that faced financial challenges in 2024 admitted to making a late debt payment or skipping a payment entirely, both of which can have a serious impact on your credit scores. To avoid borrowing more than you can realistically afford to repay, use a loan calculator to estimate your monthly payments and total borrowing costs.
What’s a good rate for a startup loan?
Business loan interest rates vary widely, with traditional banks and credit unions generally offering the lowest rates. However, startup companies may have a hard time qualifying with traditional lenders, which typically enforce strict eligibility requirements.
Average interest rates land around 7% to 8% for both business term loans and lines of credit, but the most competitive rates are usually reserved for the most qualified of borrowers. As a startup, it’s unlikely that you will qualify for a lender’s starting rate, though offering collateral could potentially help your case.
To get the best startup loan rates for your business, you’ll want to gather quotes from multiple lenders, comparing monthly and total costs to identify your most affordable options.
How to decide what type of business loan to use
Before you rush to apply for a loan, take the time to consider which type of small business financing might best fit your needs.
Term loans provide a lump sum of cash, which is repaid over time with fixed installments on the principal balance plus interest. This type of financing is best suited for businesses that are looking to cover one-off expenses. Depending on your needs, there are multiple types of term loans you could consider, including:
- Traditional term loans. Short-term business loans typically have terms ranging from three to 24 months, and daily or weekly loan payments may be required. By comparison, long-term loans usually require monthly payments over terms from five to 25 years.
- SBA loans. This type of term loan is partially guaranteed by the U.S. Small Business Administration (SBA), which sets interest rate caps to keep costs from getting too high. Many startups choose not to apply for SBA loans because they are often targeted toward more established companies. But while it’s true that SBA loans and lines of credit have the highest denial rates of all business loan types, 19.6% of SBA 504 funding went to startups to open a business in 2024, so it is possible to qualify for an SBA loan as a newer business.
- SBA microloans. The SBA also offers microloans, which provide up to $50,000. Due to the lower loan amount, microloans can be easier to qualify for, and they may provide more than enough funding to cover your startup costs. In 2024, 46% of startups applied for less than $50,000 to achieve their financial goals.
- Equipment loans. If you need to purchase or upgrade essential business equipment, equipment financing may be your best option. These term loans are designed specifically for purchasing equipment, with the equipment typically serving as collateral. Because of this, startups may find it easier to qualify for equipment loans, though it’s important to note that some lenders may require a down payment.
In 2024, lines of credit were the most popular type of financing among new businesses. This may be due to the flexibility of this loan type, which can allow your startup to access funds as needed over time.
With a business line of credit, approved businesses can borrow funds up to a predetermined amount, only paying interest on the funds they actually withdraw from their available balance. This can help your business avoid borrowing more than you really need, keeping your debt payments in check.
Lines of credit often replenish as you make payments, which can potentially allow you to borrow funds on a revolving basis. If you’re looking for funds to cover operational expenses as they arise, a line of credit could be a good fit.
A merchant cash advance (MCA) is not a loan. This alternative form of financing provides a cash advance in exchange for a portion of your future debit and credit card sales. Because eligibility is largely based on your business cash flow, credit and collateral requirements tend to be less strict. This makes merchant cash advances a popular option for bad credit borrowers.
However, keep in mind that MCAs tend to be an expensive form of financing, so they’re usually only a good fit if your business is unable to qualify for other loan types.
What to do if your loan application is denied
If your business loan application is denied, know that you may still have options. Depending on the reason your application was rejected, you may be able to take several steps:
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Apply with a different lender
Lenders set different criteria for their products and services, so if your business is unable to meet the qualifying criteria with one lender, you still may be able to get approved for financing elsewhere. However, be aware that lenders with flexible eligibility requirements may set higher interest rates. -
Offer collateral
Some lenders may be more willing to approve your loan application if you offer business assets as collateral, but this should only be done if you’re confident in your ability to repay the loan. Otherwise, you run the risk of losing your collateral. -
Look for ways to increase your revenue
Some startup lenders set high revenue requirements. If you can find ways to increase your sales, it could potentially help you qualify for financing, even if your business has only been operating for a few months. -
Work on your personal credit
Lenders will almost always consider both your personal and business credit scores, but your personal FICO Score will carry even more weight when your business is new. If you can’t qualify for affordable financing, spend some time improving your personal credit before reapplying. -
Focus on building business credit
It can take three to six months to establish business credit, but doing so can make it easier to qualify for business financing in the future. To get started, you can register your business as a separate entity, apply for business credit cards and establish tradelines with suppliers. -
Give your business time to mature
While each of the factors listed above can potentially improve your odds, there’s one more thing you can do: Wait and reapply for financing when your business has been in operation for longer and has a more solid financial history.
Can you use a startup loan to start a business from scratch?
Most startup lenders require a minimum of three to six months in business before you can qualify for a loan. However, it’s not impossible to get a small business loan as a brand new company. In fact, some loan programs were created with that specific purpose in mind.
For example, Certified Development Financial Institutions (CDFIs) often set flexible lending criteria that centers around your startup business plan, meaning you may be able to qualify for a loan with limited business history if you have a solid idea and a strategy for how you will bring it to life.
In addition to financing, many CDFIs offer business training and support. While these institutions often focus on underserved markets, such as low-income, women-owned, minority-owned and veteran-owned businesses, anyone is typically welcome to apply. You can search for CDFIs in the U.S. Department of Treasury’s database.
Your business typically needs to be generating at least a small amount of revenue to qualify for a startup loan, but some alternative lenders may be willing to work with you during the pre-revenue stage.
You’re most likely to find startup loans with no revenue requirements through online lenders, microlenders and equipment lenders. However, if your business can afford to wait for financing, you’ll likely be able to secure lower rates and better terms once your business is established with steady cash flow.
Alternatives for pre-revenue startups
If you need startup financing and you aren’t able to qualify for a traditional business loan, you may need to fund your business through one or more of the following methods:
- Business credit cards. A business credit card is like a personal card, but it’s designed for business use. This can be ideal for covering smaller expenses. Just keep in mind that interest rates on this type of financing can be high, so it’s a good idea to pay off your balance in full at the end of each month to avoid hefty interest charges.
- Business grants. Offered by nonprofits, corporations and government entities, small business grants are a form of funding that doesn’t need to be repaid. However, grant applications can be time consuming, and there’s no guarantee that you’ll receive any funds.
- Crowdfunding. Crowdfunding platforms can help you raise money from friends, family and the general public. It’s 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, and these platforms will typically deduct a fee from your donations.
- Family loans. 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.
- Personal loans. There are personal loans that can be used for business purposes, though these loans tend to have lower loan amounts and higher interest rates than business loans. Plus, you run the risk of hurting your personal credit score if you can’t keep up with your payments.
Resources for startup owners
LendingTree has a variety of guides for new small business owners: