Best Startup Business Loans in May 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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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.
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By Jill A. Chafin | Edited by Dawn Daniels | May 1, 2024

Startups lenders at a glance

Loan amountsUp to $50,000
Interest rate8.00% to 13.00%
Term lengthUp to 72 months
Minimum credit score620
Minimum time in businessNot specified
Minimum annual revenueNot specified

Wells Fargo: Best line of credit from a traditional bank

Loan amounts$5,000 to $50,000
Starting interest ratePrime + 4.50%
Term length60 months (no annual review)
Minimum credit score680
Minimum time in businessLess than 24 months
Minimum annual revenueNot disclosed
ProsCons

  Offers a range of small-business solutions

  No collateral or annual fee required

  Automatic enrollment in free rewards program

  May have a longer funding time than online lenders

  Low credit limit

  Personal guarantee required

National Funding: Best for unsecured loans

Loan amounts$5,000 to $500,000
Starting interest rate1.11 factor rate
Term length4 to 18 months
Minimum credit score600
Minimum time in business12 months
Minimum annual revenue$250,000
ProsCons

  Doesn’t require collateral or a down payment

  Next-day funding

  Early payoff discounts

  Requires daily or weekly payments

  High annual revenue requirement

  Factor rates make it hard to compare with other offers

Bank of America: Best for building credit

Loan amountsStarting at $1,000; Loan amount is equal to your cash deposit
Starting interest rateVariable
Term length12 months (with annual review)
Minimum credit scoreNot disclosed
Minimum time in businessSix months
Minimum annual revenue$50,000
ProsCons

  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

  Doesn’t list minimum credit score requirements

  Credit limit based on your security deposit

  Annual fee of $150 (waived the first year)

Fundbox: Best for fast financing

Loan amountsUp to $150,000
Starting interest rate12 or 24 weeks
Term length4.66% for 12 weeks
8.99% for 24 weeks
Minimum credit score600
Minimum time in business6 months
Minimum annual revenue$100,000
ProsCons

  Receive funds as soon as next business day after approval

  Low minimum credit score requirement

  Available in all U.S. states and many territories

  High annual revenue requirement

  Weekly repayments with short terms

  Doesn’t fund all industries

OnDeck: Best for short-term loans

Loan amounts$5,000 to $250,000
Starting interest rate27.30% (for at least 5% of customers)*
Term length18 to 24 months
Minimum credit score625
Minimum time in business12 months
Minimum annual revenue$100,000

*Minimum APR offered to at least 5% of customers (not the lowest rate offered).

ProsCons

  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

Loan amountsUp to $50,000
Starting interest rateNot disclosed
Term length12 to 24 months
Minimum credit scoreNot disclosed
Minimum time in business12 months
Minimum annual revenue$50,000
ProsCons

  No collateral required

  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

  Doesn’t list minimum credit score requirements

Fora Financial: Best for borrowers with bad credit

Loan amounts$5,000 to $1,500,000
Starting interest rateUp to 18 months
Term length1.10 factor rate
Minimum credit score570
Minimum time in business6 months
Minimum annual revenue$180,000
ProsCons

  Low minimum credit score requirement

  Offers prepayment discounts

  Quick funding times

  Can’t have any open bankruptcies

  High minimum annual revenue requirement

  Doesn’t report payments to credit bureaus

altLINE: Best for invoice factoring

Funding amounts$30,000 to $5,000,000
Advance rate75% to 90%
Invoice factoring fees0.75% to 3.50%
Minimum credit scoreNot required
Minimum time in businessNot required
Minimum annual revenueNot required
ProsCons

  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

Taycor Financial: Best for equipment financing

Loan amounts$500 to $2,000,000
Starting interest rate4.99%
Invoice factoring fees12 to 84 months
Minimum credit score550
Minimum time in businessNot required
Minimum annual revenueNo specific minimum
ProsCons

  No specified 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

Accion Opportunity Fund: Best starter loans for minority entrepreneurs

Loan amounts$5,000 to $250,000
Starting interest rate8.49%
Invoice factoring fees12 to 60 months
Minimum credit scoreNot disclosed
Minimum time in business12 months
Minimum annual revenue$50,000
ProsCons

  Lends mostly to women, people of color and low-income entrepreneurs

  Offers business coaching and mentorship

  Flexible repayment terms

  Not available in all states

  Company must be based in the U.S.

  Doesn’t list minimum credit score requirements

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.

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 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 score 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.

  How to get approved for a startup business loan

A good personal credit score can do wonders to help strengthen your business loan application. You can check and monitor your credit score for free with LendingTree Spring to see where you stand.

Here are some other ways to strengthen your new business loan application:

  • Boost your revenue.
  • Save for a down payment.
  • Find a lender that fits your specific criteria.
  • Create a strong business plan.

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 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 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: 500
  • 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 four 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.

  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 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 you’re struggling to figure out how to get a loan to start a business and can’t qualify for startup financing, here are some alternatives that could help fund your entrepreneurial projects:

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.

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 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 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 can help you 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.

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

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.

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 $15,629 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.