Best Startup Business Loans in April 2024

Fundbox: Best for fast financing

OnDeck: Best for short-term loans

Fora Financial: Best for borrowers with bad credit

National Funding: Best for unsecured loans

SBA Microloan: Best for SBA loans

Wells Fargo: Best for traditional bank loans

Bank of America: Best for secured loans

Headway Capital: Best line of credit

altLINE: Best for invoice factoring

Taycor Financial: Best for equipment financing

Accion Opportunity Fund: Best starter loans for minority entrepreneurs

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 business to help get your entrepreneurial ideas off the ground.

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

Lines 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line of credit allows you to access funds as needed up to a predetermined limit, only paying interest on the amount withdrawn.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 long-term business 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.

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 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 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 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.