Best Startup Business Loans in November 2024

A startup business loan can help you access between $500 to $5 million to launch or expand your new business.

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Startups lenders at a glance

SBA Microloan: Best SBA loan for startups

Up to $50,000

8.00% to 13.00%

Up to 84 months

Pros
  • 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
Cons
  • 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

Why we picked it

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Startups needing a small loan can borrow up to $50,000 with an SBA microloan. Funds can be used for working capital, equipment, inventory or other common startup expenses. SBA microloans typically have more lenient credit requirements than other lenders, focusing on underserved business owners like minorities, women, veterans or low-income entrepreneurs.

Just as the name implies, these loans have small borrowing maximums — you might want to explore other options if you envision needing access to more funds for your business.

Learn more about SBA microloans.

How to qualify

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In order to qualify, you’ll need to meet the SBA’s criteria of:

  • Minimum credit score: 620
  • Minimum time in business: Not specified
  • Minimum annual revenue: Not specified

Wells Fargo: Best line of credit from a traditional bank

$5,000 to $50,000

Prime + 4.50%

60 months (no annual review)

Pros
  • Offers a range of small-business solutions
  • No collateral or annual fee required
  • Automatic enrollment in free rewards program
Cons
  • May have a longer funding time than online lenders
  • Low credit limit
  • Personal guarantee required

Why we picked it

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Businesses less than two years old wanting a traditional bank experience may be able to access up to $50,000 with the Wells Fargo Small Business Advantage unsecured line of credit. With a business line of credit, you can withdraw what you need, whenever you need — only paying interest on the withdrawn amounts — up to your credit limit. With close to 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 up and running for two years, you can upgrade to the Wells Fargo BusinessLine line of credit to access up to $150,000 in revolving funds.

Read our Wells Fargo review.

How to qualify

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In order to qualify, you’ll need to meet Wells Fargo’s criteria of:

  • Minimum credit score: 680
  • Minimum time in business: Less than 24 months
  • Minimum annual revenue: Not disclosed

National Funding: Best for unsecured loans

$5,000 to $500,000

1.11 factor rate

4 to 24 months

Pros
  • Doesn’t require collateral or a down payment
  • Next-day funding
  • Early payoff discounts
Cons
  • Requires daily or weekly payments
  • High annual revenue requirement
  • Factor rates make it hard to compare with other offers

Why we picked it

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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.

Note that payments are required daily or weekly, which might be a strain on your business budget. Also, the factor rate can make it hard to compare against other business loan offers.

Read our National Funding review.

How to qualify

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In order to qualify, you’ll need to meet National Funding’s criteria of:

  • Minimum credit score: 600
  • Minimum time in business: 6 months
  • Minimum annual revenue: $250,000

Bank of America: Best for building credit

Starting at $1,000; loan amount is equal to your cash deposit

Variable

12 months (with annual review)

Pros
  • Cash-secured line of credit can help establish business credit history
  • Rate discounts for Bank of America Preferred Rewards members
  • Offers multiple small business products and solutions
Cons
  • Doesn’t list minimum credit score requirements
  • Credit limit based on your security deposit
  • Annual fee of $150 (waived the first year)

Why we picked it

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Bank of America’s secured business line of credit can help budding entrepreneurs set aside money for expenses while building business credit. This cash-secured line of credit works a bit differently than other lines of credit. Here, you provide a cash deposit (starting at $1,000) and can then withdraw funds up to that amount as often as needed. After a year of making regular payments, you can get your security deposit back.

Once your business has been operating for at least two years and earns over $100,000 a year, you can upgrade to Bank of America’s unsecured line of credit, which is a more typical line of credit with funding starting at $10,000. Bank of America also offers rate discounts with its Preferred Rewards for Business program.

Read our Bank of America review.

How to qualify

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In order to qualify, you’ll need to meet Bank of America’s criteria of:

  • Minimum credit score: Not disclosed
  • Minimum time in business: 6 months
  • Minimum annual revenue: $50,000

Fundbox: Best for fast financing

Up to $150,000

12 or 24 weeks

4.66% for 12 weeks
8.99% for 24 weeks

Pros
  • Receive funds as soon as next business day after approval
  • Low minimum credit score requirement
  • Available in all U.S. states and many territories
Cons
  • High annual revenue requirement
  • Weekly repayments with short terms
  • Doesn’t fund all industries

Why we picked it

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A Fundbox business line of credit could fund up to $150,000 as soon as the next business day. Use what you need when you need it, only paying interest on the withdrawn amounts.

Your business must operate for at least six months with $100,000 or more in annual revenue to qualify. While Fundbox works with companies in all U.S. states and some territories, it doesn’t fund all types of industries.

Read our Fundbox review.

How to qualify

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In order to qualify, you’ll need to meet Fundbox’s criteria of:

  • Minimum credit score: 600
  • Minimum time in business: 6 months
  • Minimum annual revenue: $100,000

OnDeck: Best for short-term loans

$5,000 to $250,000

27.30% (for at least 5% of customers)*

18 to 24 months

*Minimum APR offered to at least 5% of customers (not the lowest rate offered).
Pros
  • Offers same-day funding
  • Fair to low credit accepted
  • No prepayment penalty
Cons
  • High starting interest rate
  • Loans not available in North Dakota
  • Doesn’t fund all industries

Why we picked it

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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 meet their one-year time in business requirement and have an annual revenue of $100,000. You’ll need to make payments daily or weekly, with an average interest rate of 55.8% for term loans.

Note that OnDeck doesn’t serve all industries, namely excluding adult entertainment, loan brokers, firearms vendors and more from eligibility.

Read our OnDeck review.

How to qualify

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In order to qualify, you’ll need to meet OnDeck’s criteria of:

  • Minimum credit score: 625
  • Minimum time in business: 12 months
  • Minimum annual revenue: $100,000

Headway Capital: Best for unsecured lines of credit

Up to $50,000

Not disclosed

12 to 24 months

Pros
  • No collateral required
  • No early payoff penalties
  • Can receive funds the next business day after approval
Cons
  • Not available in all states
  • Might be subject to a 2% draw fee
  • Doesn’t list minimum credit score requirements

Why we picked it

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An unsecured business line of credit with Headway Capital can provide new entrepreneurs up to $50,000 in revolving funds, helping cover day-to-day expenses or seasonal dips in income. Collateral isn’t required and you only pay interest on the amount you use, although some states require a 2% draw fee. Once approved, you can expect to receive funds as quickly as the next business day.

If you desire a higher funding limit and can provide collateral, Headway Capital also offers secured business financing up to $100,000. Note that Headway Capital’s business loans aren’t available in all U.S. states.

Read our Headway Capital review.

How to qualify

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In order to qualify, you’ll need to meet Headway Capital’s criteria of:

  • Minimum credit score: Not disclosed
  • Minimum time in business: 12 months
  • Minimum annual revenue: $50,000

Fora Financial: Best for borrowers with bad credit

$5,000 to $1,500,000

Up to 18 months

1.15 factor rate

Pros
  • Low minimum credit score requirement
  • Offers prepayment discounts
  • Quick funding times
Cons
  • Can’t have any open bankruptcies
  • High minimum annual revenue requirement
  • Doesn’t report payments to credit bureaus

Why we picked it

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Fora Financial is one of our top picks for a bad credit business loan since it has a low minimum credit score requirement of 570 with no collateral required. Thanks to Fora Financial’s streamlined application process, you could receive funds as quickly as 24 to 72 hours after approval.

While certain lenders charge prepayment penalties on business loans, Fora Financial rewards you for paying off your debt early. However, Fora Financial doesn’t report payment to the business credit bureaus, meaning this loan won’t help build your business credit.

Read our Fora Financial review.

How to qualify

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In order to qualify, you’ll need to meet Fora Financial’s criteria of:

  • Minimum credit score: 570
  • Minimum time in business: 6 months
  • Minimum annual revenue: $240,000

altLINE: Best for invoice factoring

$30,000 to $5,000,000

80% to 90%

1.5% to 4.5%

Pros
  • Works with startups and bad credit borrowers
  • Funds available within 24 to 48 hours
  • Collects outstanding customer invoices on your behalf
Cons
  • Includes origination and wire fees
  • Requires your customers to have good credit
  • Fees increase the longer an invoice is left unpaid

Why we picked it

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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.

Read more about altLINE.

How to qualify

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In order to qualify, you’ll need to meet altLINE’s criteria of:

  • Minimum credit score: Not required
  • Minimum time in business: Not required
  • Minimum annual revenue: Not required

Taycor Financial: Best for equipment financing

$500 to $5,000,000

7.90%

12 to 84 months

Pros
  • No specified time in business requirement
  • Can get approved within hours with minimal information required for application
  • High funding amounts
Cons
  • Personal guarantee might be required
  • Equipment refinance only available to businesses older than three years
  • Requires documentation fee for equipment loans

Why we picked it

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Taycor Financial offers financial solutions for entrepreneurs and brand-new companies with no minimum time in business requirement. You can borrow up to $5,000,000 with equipment financing or leasing, or explore other finance options like business lines of credit, commercial bridge loans and business term loans.

With a low minimum credit score requirement of only 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.

Read our Taycor Financial review.

How to qualify

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In order to qualify, you’ll need to meet Taycor Financial’s criteria of:

  • Minimum credit score: 550
  • Minimum time in business: Not required
  • Minimum annual revenue: No specific minimum

Accion Opportunity Fund: Best starter loans for minority entrepreneurs

$5,000 to $250,000

8.49%

12 to 60 months

Pros
  • Lends mostly to women, people of color and low-income entrepreneurs
  • Offers business coaching and mentorship
  • Flexible repayment terms
Cons
  • Not available in all states
  • Company must be based in the U.S.
  • Doesn’t list minimum credit score requirements

Why we picked it

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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.

To qualify, you must own at least 20% of the business and be located in an eligible state within the U.S.

Read more about the Accion Opportunity Fund (AOF).

How to qualify

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In order to qualify, you’ll need to meet AOF’s criteria of:

  • Minimum credit score: Not disclosed
  • Minimum time in business: 12 months
  • Minimum annual revenue: $50,000

What is a startup business loan?

A startup business loan can help new companies get the capital they need to cover startup costs and grow their business. Startup loans typically have more lenient eligibility requirements, but may come with higher fees and shorter repayment terms than traditional small business loans.

You can use startup financing to cover supplies, equipment, office spaces, marketing campaigns, website design, inventory, payroll and more.

Note that the term “startup” doesn’t apply to only brand-new companies. In the lending industry, a startup business typically refers to a company that has been operating for less than one to two years.

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 strict.

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 newer businesses and those without established business credit.

Time in business requirements

Out of all the qualification criteria that lenders consider when evaluating a small business loan application, the one that’s often trickiest for many startups to meet is the time in business requirement. As the name suggests, this requirement tracks how long your business has been up and running. Typically, even lenders willing to finance startups will require at least a six-month business history.

Due to this requirement, getting a startup business loan is not the same as getting a loan to start a business from scratch. Often, entrepreneurs who want funding to start a business will need to use alternative funding sources, such as a personal loan for business purposes or a home equity line of credit (HELOC) to get the financing they need.

Typically, when starting a business, it makes sense to start small and scale business operations only once you’ve proven success. For example, entrepreneurs with a new restaurant idea could start by using their own funding to rent a table at a local farmer’s market. Then, down the road, they could apply for startup funding to finance a more permanent space once they meet a few lenders’ time in business requirements and have built up a following in their community.

Other qualification criteria

While every lender has its own small business loan requirements, you’ll likely need to meet the following criteria to get a business loan for your new business:

 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 mid-600s is best for qualifying, although some startup lenders accept scores as low as 500. The higher your score, the more likely you’ll be approved for a competitive interest rate.

 Annual revenue: Lenders usually require a minimum annual revenue to qualify for financing, which can range from $36,000 to $250,000 or higher. However, startup-friendly lenders like altLine and Taycor Financial don’t have any revenue requirements. Small business accounting software can track your business income and expenses to help determine what types of funding your business might be able to get.

 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 ideal choice for brand-new companies.

 Business plan: Your lender will likely want to see a solid business plan outlining your company’s overall goals, mission and plan for future growth.

Types of startup business loans

Here are some common types of business financing to consider for your business needs.

Lines of credit

  • Minimum credit score: 600
  • Time to funding: One to 14 business days

A business line of credit allows you to access funds as often as needed up to a set limit, typically only paying interest on the amount withdrawn. However, some lenders also charge monthly or annual maintenance fees.

Some lenders offer business lines of credit for new businesses that have been operating for less than two years. Keep in mind that lenders usually require a minimum credit score between 600 and 680 to qualify for a business line of credit.

SBA loans

  • Credit score: 680 (recommended)
  • Time to funding: Two weeks to three months

The U.S. Small Business Administration (SBA) 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 $5,000,000 with repayment terms of up to 300 months. 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 generally have a better chance of approval if you have a personal FICO Score of 680 or higher, plus at least two years in operation. That said, eligibility requirements are typically lower for SBA microloans.

Microloans

  • Credit score: 300
  • Time to funding: Two weeks to three months

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.

SBA 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

  • Minimum credit score: 500
  • Time to funding: Same day to three business days

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 long-term business loans, often ranging from 7% to 50% or higher, depending on the loan.

Equipment financing

  • Minimum credit score: 570
  • Time to funding: Same day to two months

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

  • Minimum credit score: 500
  • Time to funding: Same day to six days

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

  • Minimum credit score: Typically not required
  • Time to funding: Same day to 48 hours

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 (also called discount rate).

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 new entrepreneurs and startups since they have yet to build a solid business history or demonstrate 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 what areas need improvement, such as if you have too many unpaid credit cards.

2. Focus on your debt-to-income (DTI) ratio.

Lenders look at your debt-to-income (DTI) ratio to see how you handle debt. It’s generally advised to aim to keep your score below 43%, although 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 loans that don’t require a credit check. 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

Every lender will have its own application process, which might be listed on their website. Here are some general 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 how much you need and what’s right for your startup business.

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2. Check your personal and business credit scores.

Poor credit is one of the main reasons business loan applications get rejected. If you’re still working on building your business credit, lenders may weigh your personal credit score more heavily — 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.

 Which banks offer startup business loans?Some traditional banks offer startup financing to companies after six months of operation (like Bank of America, mentioned above). However, many banks prefer to work with well-established businesses that have been successfully turning a profit for at least two years.

If your business is less than two years old, you might have better luck using an alternative lender to secure capital for your new company. Online lenders typically have less strict requirements about time in business. However, be prepared to pay higher rates than traditional or credit union business loans.

That said, it’s still worth reaching out to your current bank to see what you need to qualify for small business financing. Having an established relationship with a bank can often help strengthen your business loan application.

Leading banks that offer loans for small companies include:

  • Chase
  • Wells Fargo
  • U.S. Bank
  • Capital One
  • Bank of America
  • American Express

4. Gather required documents.

Business loan requirements vary by lender and loan type. Here are some standard documents you may need to provide when applying for a small business loan for your startup company:

5. Apply and review.

You can usually apply for a new business loan online with a quick and streamlined process, although some traditional banks might require a phone call or in-person visit. Read the fine print before signing your business loan agreement to ensure you understand the terms, rates and additional fees.

 How hard is it to get a startup business loan?Lenders often consider your time in business, annual revenue and credit score when providing a loan, so startups will often have a harder time securing small business financing compared to more established companies. That said, having collateral or applying for secured lines of credit can help improve your odds.

You can also consider adding a cosigner. Just make sure your cosigner understands the legal responsibility of cosigning a small business loan.

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 small business startup loan for your needs:

 Interest rate: Business loan interest rates vary by lender and loan type. Make sure to understand the difference between fixed versus variable interest rates. Shopping around can help you find the lowest rate on a loan that fits your needs. You typically have around 14 to 45 days to apply to multiple lenders without any further impact to your credit score (this is considered “rate shopping”).

 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. Fortunately, the best startup lenders typically don’t charge these extra fees.

 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: Some alternative lenders offer same-day business loans, while others typically approve and issue funds within one to three business days. In contrast, traditional lenders can take up to two weeks or longer to approve and process your loan, with SBA loans taking around 30 to 90 days.

 Collateral required: Collateral is anything of value you own and 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.

Consideration  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 your loan application is denied

If your startup business loan application was denied, follow these steps to figure out how to move forward:

  • Contact the lender to learn their reasoning: By law, you’ll also get an adverse action notice in the mail, explaining why your application was denied. But, you may get quicker answers if you contact the lender directly.
  • Evaluate your business’s needs: Take some time to decide whether you truly need the funding now or if it can wait while you take some time to improve your business’s financial health.
  • Explore other funding options: If you need funding now, research other lenders and alternative funding methods. Whichever route you decide to take, do your best to ensure that you meet or exceed any qualifying requirements before applying to improve your chances of being approved.
  • Improve your qualifications: If the funding can wait, do what it takes to improve your qualifications. For example, you could work on boosting your credit score, paying down debt, lengthening your total time in business or adding to your annual revenue.

Alternatives to loans for new businesses

If your business is under six months old and you’re unable to meet the time in business requirements imposed by most startup lenders, you’ll need to look into some alternative funding options. Here are a few to consider:

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. You can search for grants based on your business type, location or demographics, such as minority business grants and business grants for women.

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.

Bootstrapping and scaling up

Bootstrapping your startup — relying on your own funds to cover startup business costs — 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. If that’s the case, start small.

For example, you can start a catering business out of your home and set aside a portion of the profits until you have enough saved up to rent a commercial kitchen.

Personal loans and financing

In addition to using your own money, you can take on personal debt. But this can be a risky option, and it puts your personal assets and financial health at risk. Options include:

  • Personal loan. Personal loans can often 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 borrowing limits 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.

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 score.

Business credit cards often offer perks, points and other rewards. If you’re 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.

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 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. For example, they may want your product or service, formal recognition or another kind of reward if your business succeeds.

While you don’t have to pay upfront for a crowdfunding campaign, the platforms typically deduct a fee from your donations.

How we chose the best startup business loans

We reviewed over 20 small business lenders to determine the best 11 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 less than 24 months.
  • Loan amounts: Funding amounts from $500 to $5 million to help you tackle a range of business needs.
  • 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, business rewards and early payoff discounts.

Frequently asked questions

New businesses will need to rely on their personal finances when borrowing funds. As discussed above, you’ll likely need the following to qualify for startup financing:

  • A good credit score in the mid-600s (although some lenders accept scores as low as 500)
  • Reliable income of at least $36,000 a year
  • A solid debt-to-income ratio of 43% or lower

Some small business loans may also require a down payment, collateral or a personal guarantee.

Yes, it’s possible to get a startup business loan without revenue or collateral. However, you’ll likely end up paying higher fees with shorter repayment terms, which could be a financial burden for your new company.

Boosting your credit score and saving for a down payment before applying can help unlock more competitive rates and terms.

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 was $15,631 for fiscal year 2023.

Even if you get approved for a higher loan 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. 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.

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.

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.

However, equipment lenders often don’t require a down payment since the debt is secured by the equipment. For example, Taycor Financial provides 100% equipment funding for startups.