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Startup business loans can be one of the most difficult types of loans to obtain. It typically requires high levels of credit, a cash injection from the owner, collateral (which many business owners don't have when starting their first business), and can also involve a lot of paperwork. .
This is why online lenders and financial technology companies are rising to the top. These types of companies have tackled traditionally difficult challenges for lenders and borrowers and developed ways to reduce risk and inconvenience for both parties.
The best overall startup business loan, Finance Factory is an online lender that funds pre-revenue startups, publishes learning resources, and has transparent interest rates and fees.
Compare loan providers
| company | Reason for choosing | Best Features |
|---|---|---|
| finance factory | Best overall | Free Fund Range Report.Evaluate transparency |
| Naru.co | Perfect for e-commerce | Unique and integrated technology empowers lenders to fund your business. |
| on deck | Perfect for retail | SMART Box Capital Comparison Tool; Raise Funds in 3 Days |
| Midwest Business Credit | Ideal for high-growth startups | Consulting; no collateral requirements.low price |
| seek business capital | Ideal for long-term repayments | Low interest rates and up to 25 years of SBA loan options. |
| Upwise Capital | Perfect for unpaid invoices | Maximum clarity. You can finance up to 100% of your invoices and accounts receivable. You can raise funds in one day |
Guide to choosing a startup loan
What is start-up financing?
Start-up financing is a form of financing that can be used by new companies and companies that have been in business for 1 to 2 years or more. These companies have very limited or no credit history. Start-up loans provide companies with the capital they need to get started, pay operating costs, rent facilities, and purchase equipment.
Startups can apply for funding through the SBA, banks, and other financial institutions. Other options include venture capitalists, private investors, family, and friends. Eligibility requirements and lending standards may be lower than other types of business loans, but borrowers are typically charged higher fees and interest rates to compensate.
Startup business loan alternatives
You may find yourself in a situation where you need cash for your business but can't get a start-up loan from a traditional lender. So what do you do? There are alternatives. Consider the following:
- Family and friends: When in doubt, ask your friends for help and ask for help. You don't need an application or a credit check to borrow money from a loved one, but you may want to make an agreement and promise to pay to get the money back.
- Crowdfunding: Various crowdfunding sites like GoFundMe and Kickstarter allow you to raise money from strangers. Individuals donate small amounts until the goal is reached. Come up with a great pitch to post on your crowdfunding page.
- Equity financing: This requires giving up some ownership in the company in exchange for cash from outside investors. You can get your loved ones to invest in your company with an equity loan.
- Subsidy: You may be eligible to receive grants through donors, governments, or non-governmental organizations. Certain eligibility criteria may apply, including age, gender, income level, and ethnic background. There is no need to repay the subsidy.
- Venture Capitalist: Venture capital is a form of private equity. Loans can be obtained not only from financial institutions but also from individual investors. Venture capital often requires that a portion of the ownership of the company be transferred to investors.
Why you should trust us
We researched 15 lenders to find the best startup business loans on the market. We looked at banks, private loan companies, and online lending platforms to find our favorites in each category. The company's history, reputation for service and success, and customer review scores served as the foundation for delivering reliable winners. Favorable rates, terms, and qualifications that many thought were available helped propel candidates to the top of their categories. Whether it's innovation in technology, successful funding, or a wide range of services, we're inspired to bring our best to the world.
FAQ
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Startup business loans are designed to help new businesses get off the ground. This type of loan can be used to pay for everything a business owner needs to start their business, including equipment, furniture, office space, payroll, insurance, and inventory. In some cases, it can also be used to expand existing small businesses. Startup loans allow businesses to qualify for capital without applying for traditional business loans, which tend to be difficult for business owners just starting out. These loans can be funded through the SBA, certain banks and credit unions, and non-traditional lenders.
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To qualify for a startup business loan, most financial institutions' programs, including the SBA option, require that the startup already be profitable, have a customer base, and provide annual financial reports spanning six to 12 months. I strongly hope that you will.
There are several types of startup business loans, such as business credit cards, that can get you money ahead of your income if you have good personal credit. This means you must have a good credit history, cash, or collateral to qualify for a startup business loan.
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Start-up loans generally require at least two to three years of start-up, making them difficult to obtain. If you choose the business credit card route, you will need to have a good personal credit history to qualify. If you are two years into the start-up phase and apply for a start-up loan to fund the next level of growth, many financial institutions will require your business to show at least $100,000 in annual revenue. I request that. The SBA loan category also requires you to invest at least 20% of the loan amount as a down payment.
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It's up to the lender. Most lenders will look at your personal credit score, especially if your business is just starting out or in its early stages. Some lenders require a credit score of 700 or higher, while others may have more relaxed requirements. For example, the SBA requires a minimum score of 620 for its microloan program.
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Yes, banks provide loans to startups. Whether your startup is in its first week and hasn't made its first dollar yet, or your company is in its fifth year of borrowing for a new location or additional equipment, the bank has a program for you. Most banking programs require a large amount of documentation during the application process. Their programs range from business bank credit cards to business lines of credit to short-term or long-term loans.
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One way to get a business loan without a down payment is an equipment loan. Some lenders use the equipment itself as collateral, reducing risk and eliminating the need for a down payment. Other ways to obtain a business loan without a down payment include business credit cards, short-term loans, and lines of credit. Working capital bridge loans and merchant cash advances may also be options for obtaining financing without a down payment.
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The best way to fund your startup is to determine how much capital you need. Consider raising money from family, friends, venture capitalists, and other investors. You may be eligible for a loan through the Small Business Administration, which guarantees loans from traditional lenders. Online lenders and crowdfunding sites may also provide funding for your business.
