Here are 11 of the best startup business loans
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
Headway Capital - Line of credit with Fundera by NerdWallet | 4.7/5 Best for Best overall startup business loan | $100,000 | 625 | with Fundera by NerdWallet |
SBA Microloan with Fundera by NerdWallet | Best for SBA loans | $50,000 | 620 | with Fundera by NerdWallet |
Wells Fargo Small Business Advantage® Line of Credit | 4.7/5 Best for Bank loans | $50,000 | 680 | Read Review |
OnDeck - Online term loan with Fundera by NerdWallet | 4.7/5 Best for Short-term loans | $250,000 | 625 | with Fundera by NerdWallet |
Fundbox - Line of credit | 4.9/5 Best for Unsecured loans | $150,000 | 600 | Read Review |
Bank of America Cash Secured Line of credit | 4.6/5 Best for Secured loans | Undisclosed | 670 | Read Review |
Fora Financial - Online term loan with Fundera by NerdWallet | 4.5/5 Best for Bad credit | $1,500,000 | 570 | with Fundera by NerdWallet |
National Funding - Equipment Financing with Fundera by NerdWallet | 4.2/5 Best for Equipment loans | $150,000 | 600 | with Fundera by NerdWallet |
AltLINE - Invoice Factoring | 4.4/5 Best for Invoice factoring | $10,000,000 | 300 | Read Review |
Accion Opportunity Fund - Small Business Working Capital Loan | 4.6/5 Best for Low-income entrepreneurs | $250,000 | 570 | Read Review |
Huntington National Bank - Lift Local Business Program | Best for Veterans, women or minority entrepreneurs | $150,000 | Undisclosed | Read Review |
Here are 11 of the best startup business loans
Best for Best overall startup business loan
Best for SBA loans
Best for Bank loans
Best for Short-term loans
Best for Unsecured loans
Best for Secured loans
Best for Bad credit
Best for Equipment loans
Best for Invoice factoring
Best for Low-income entrepreneurs
Best for Veterans, women or minority entrepreneurs
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Our pick for
Best overall startup business loan
You can apply for a line of credit from Headway Capital with a simple online application, and if approved, receive funding as quickly as the next business day. You may be able to qualify with a minimum of six months in business and an annual revenue of at least $50,000.
Headway Capital - Line of credit
Max loan amount
$100,000
Min. credit score
625
Est. APR
35.00-80.00%
Pros
- Flexible qualification requirements.
- No prepayment penalties.
- Funds available by next business day after approval.
Cons
- Most borrowers are subject to a 2% draw fee.
- Not available in all U.S. states.
Headway Capital - Line of credit
Max loan amount
$100,000
Min. credit score
625
Est. APR
35.00-80.00%
You can apply for a line of credit from Headway Capital with a simple online application, and if approved, receive funding as quickly as the next business day. You may be able to qualify with a minimum of six months in business and an annual revenue of at least $50,000.
Headway Capital offers a fast and flexible line of credit for borrowers who may not qualify for more traditional options.
Pros
- Flexible qualification requirements.
- No prepayment penalties.
- Funds available by next business day after approval.
Cons
- Most borrowers are subject to a 2% draw fee.
- Not available in all U.S. states.
Qualifications:
- Minimum credit score: 625.
- Minimum time in business: Six months.
- Minimum annual revenue: $50,000.
Our pick for
SBA loans
The SBA microloan program is designed to offer small loans to new and traditionally underserved businesses. Qualification requirements vary based on lender. In the current 2024 fiscal year, approximately 25% of SBA microloans have been issued to startups (businesses in operation for two years or fewer).
SBA Microloan
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
SBA Microloan
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
The SBA microloan program is designed to offer small loans to new and traditionally underserved businesses. Qualification requirements vary based on lender. In the current 2024 fiscal year, approximately 25% of SBA microloans have been issued to startups (businesses in operation for two years or fewer).
SBA microloans are small-sized loans funded by the U.S. Small Business Administration and issued through approved intermediaries, typically nonprofit and community lenders.
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
Qualifications:
- Be a U.S. business.
- Show your ability to repay the loan.
- Personal guarantee and collateral likely required.
- Specific financial qualifications determined by individual lender.
Our pick for
Bank loans
This SBA-backed business line of credit offers up to $50,000 for startups with less than two years in operation.
Wells Fargo Small Business Advantage® Line of Credit
Max loan amount
$50,000
Min. credit score
680
Est. APR
12.50-13.50%
Pros
- Bank line of credit (backed by the SBA) with competitive interest rates.
- No annual fee or prepayment penalties.
- Available to borrowers with less than two years in business.
Cons
- May take longer to fund than online lenders.
- Credit lines only available up to $50,000.
- Need a Wells Fargo checking account to access online bill pay.
Wells Fargo Small Business Advantage® Line of Credit
Max loan amount
$50,000
Min. credit score
680
Est. APR
12.50-13.50%
This SBA-backed business line of credit offers up to $50,000 for startups with less than two years in operation.
Wells Fargo offers an unsecured line of credit that’s designed for borrowers with less than two years in business.
Pros
- Bank line of credit (backed by the SBA) with competitive interest rates.
- No annual fee or prepayment penalties.
- Available to borrowers with less than two years in business.
Cons
- May take longer to fund than online lenders.
- Credit lines only available up to $50,000.
- Need a Wells Fargo checking account to access online bill pay.
Qualifications:
- Minimum credit score: 680.
- Available to borrowers with less than two years in business.
- Household personal liquid assets must be less than $500,000.
- Must meet standard SBA loan requirements.
Our pick for
Short-term loans
OnDeck offers loans for businesses that have been in operation for at least one year, with terms up to 24 months. These loans can be approved within the same day.
OnDeck - Online term loan
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
Pros
- Cash can be available within the same business day.
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Not available in Nevada, North Dakota or South Dakota.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Requires business lien and personal guarantee.
May fund quickly
OnDeck - Online term loan
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
OnDeck offers loans for businesses that have been in operation for at least one year, with terms up to 24 months. These loans can be approved within the same day.
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
Pros
- Cash can be available within the same business day.
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Not available in Nevada, North Dakota or South Dakota.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Requires business lien and personal guarantee.
Qualifications:
- Minimum credit score: 625.
- Minimum time in business: One year.
- Minimum annual revenue: $100,000.
- Business bank account.
May fund quickly
Our pick for
Unsecured loans
Fundbox offers business lines of credit up to $150,000 and does not require physical collateral. You may qualify with a minimum of six months in business.
Fundbox - Line of credit
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly — accepts borrowers with a minimum of six months in business.
- Low minimum credit score requirement.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
May fund quickly
Fundbox - Line of credit
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers business lines of credit up to $150,000 and does not require physical collateral. You may qualify with a minimum of six months in business.
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly — accepts borrowers with a minimum of six months in business.
- Low minimum credit score requirement.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: Six months.
- Minimum annual revenue: $100,000.
May fund quickly
Our pick for
Secured loans
Businesses with at least six months in operation may qualify for Bank of America’s Cash Secured Line of Credit. You can use this credit line to establish a positive account history and build business credit.
Bank of America Cash Secured Line of credit
Max loan amount
Undisclosed
Min. credit score
670
Pros
- Available to borrowers with at least six months in business.
- No origination fee.
- Responsible spending can help you graduate to an unsecured credit line.
Cons
- Credit limit is based on the security deposit you provide.
- Must have a Bank of America checking or savings account to apply.
Bank of America Cash Secured Line of credit
Max loan amount
Undisclosed
Min. credit score
670
Businesses with at least six months in operation may qualify for Bank of America’s Cash Secured Line of Credit. You can use this credit line to establish a positive account history and build business credit.
Bank of America’s Cash Secured line of credit can help startups cover working capital needs and establish business credit.
Pros
- Available to borrowers with at least six months in business.
- No origination fee.
- Responsible spending can help you graduate to an unsecured credit line.
Cons
- Credit limit is based on the security deposit you provide.
- Must have a Bank of America checking or savings account to apply.
Qualifications:
- Minimum time in business: Six months.
- Minimum annual revenue: $50,000 per year.
- Bank of America checking or savings account required.
- Minimum deposit of $1,000.
Our pick for
Bad credit
Fora Financial provides working capital loans for a variety of startup needs, such as buying supplies, inventory or equipment. You may be able to qualify with at least six months in business and a minimum credit score of 570.
Fora Financial - Online term loan
Max loan amount
$1,500,000
Min. credit score
570
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
Fora Financial - Online term loan
Max loan amount
$1,500,000
Min. credit score
570
Fora Financial provides working capital loans for a variety of startup needs, such as buying supplies, inventory or equipment. You may be able to qualify with at least six months in business and a minimum credit score of 570.
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
Qualifications:
- In business for at least six months.
- At least $20,000 per month in revenue.
- No open bankruptcies or dismissed bankruptcies within the past year.
Our pick for
Equipment loans
National Funding offers equipment loans of up to $150,000. You may be able to qualify with six or more months in business.
National Funding - Equipment Financing
Max loan amount
$150,000
Min. credit score
600
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing.
National Funding - Equipment Financing
Max loan amount
$150,000
Min. credit score
600
National Funding offers equipment loans of up to $150,000. You may be able to qualify with six or more months in business.
Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: Six months.
- Minimum annual revenue: $250,000.
Our pick for
Invoice factoring
AltLINE provides invoice factoring with competitive factoring rates. The lender does not have a minimum time in business requirement for approval.
AltLINE - Invoice Factoring
Max loan amount
$10,000,000
Min. credit score
300
Pros
- Capital available within 24 to 48 hours.
- No collateral required.
- Manages payment collection from your customers.
- Accepts startups and businesses with bad credit.
Cons
- Fees can become expensive the longer it takes your customers to pay.
- Difficult to compare factoring costs to other types of business loans.
AltLINE - Invoice Factoring
Max loan amount
$10,000,000
Min. credit score
300
AltLINE provides invoice factoring with competitive factoring rates. The lender does not have a minimum time in business requirement for approval.
AltLINE offers fast invoice factoring with competitive factoring rates.
Pros
- Capital available within 24 to 48 hours.
- No collateral required.
- Manages payment collection from your customers.
- Accepts startups and businesses with bad credit.
Cons
- Fees can become expensive the longer it takes your customers to pay.
- Difficult to compare factoring costs to other types of business loans.
Qualifications:
- All credit scores may be accepted (ranging from 300 to 850).
- No minimum time in business requirement.
- No minimum annual revenue requirement.
- Must be a B2B business.
Our pick for
Low-income entrepreneurs
Accion is a nonprofit lender that specifically targets low-to-moderate income entrepreneurs, as well as women and minority business owners. It offers funding up to $250,000 for businesses that have been operating for at least 12 months.
Accion Opportunity Fund - Small Business Working Capital Loan
Max loan amount
$250,000
Min. credit score
570
Est. APR
8.49-24.99%
Pros
- Loan amounts from $5,000 to $250,000.
- Customized loan terms.
- No prepayment penalty.
Cons
- Slower processing speed compared to online lenders.
- Not available in all U.S. states.
Accion Opportunity Fund - Small Business Working Capital Loan
Max loan amount
$250,000
Min. credit score
570
Est. APR
8.49-24.99%
Accion is a nonprofit lender that specifically targets low-to-moderate income entrepreneurs, as well as women and minority business owners. It offers funding up to $250,000 for businesses that have been operating for at least 12 months.
Accion is a good option for businesses that haven't been able to secure traditional financing. The lender targets its funding efforts toward minority, women and low-to-moderate-income entrepreneurs.
Pros
- Loan amounts from $5,000 to $250,000.
- Customized loan terms.
- No prepayment penalty.
Cons
- Slower processing speed compared to online lenders.
- Not available in all U.S. states.
Qualifications:
- Minimum credit score: 570.
- Minimum time in business: 12 months.
- Minimum annual revenue: $50,000.
Our pick for
Veterans, women or minority entrepreneurs
With reduced fees and free entrepreneurial courses, Huntington National Bank’s Lift Local Business loan program can be a source of startup funding for veteran-, women- and minority-owned businesses.
Huntington National Bank - Lift Local Business Program
Max loan amount
$150,000
Min. credit score
Undisclosed
Pros
- Loans starting as low as $1,000.
- No origination fees.
- SBA loans offered with SBA fees paid by Huntington.
- Free financial entrepreneurial courses.
Cons
- Low maximum loan amounts.
- Program only available in certain U.S. states.
- Limited information on terms and fees available online.
Huntington National Bank - Lift Local Business Program
Max loan amount
$150,000
Min. credit score
Undisclosed
With reduced fees and free entrepreneurial courses, Huntington National Bank’s Lift Local Business loan program can be a source of startup funding for veteran-, women- and minority-owned businesses.
Huntington National’s Lift Local Business loan program is designed to support minority-, woman- and veteran-owned small businesses from startup and on.
Pros
- Loans starting as low as $1,000.
- No origination fees.
- SBA loans offered with SBA fees paid by Huntington.
- Free financial entrepreneurial courses.
Cons
- Low maximum loan amounts.
- Program only available in certain U.S. states.
- Limited information on terms and fees available online.
Qualifications:
- No bankruptcies in the last 4 years.
- Requirements for credit score, time in business and business revenue not disclosed.
Types of startup business loans
Startup business loans can be used to cover working capital expenses such as inventory, payroll, utilities and insurance, or to purchase fixed assets such as furniture, equipment, machinery and real estate. Here are some of the most common types of startup loans.
SBA loans
The U.S. Small Business Administration's microloan program is startup-friendly, offering loans of up to $50,000 for small businesses looking to start or expand. The average SBA microloan is $16,400 in the 2024 fiscal year, so far — with approximately 25% of microloans going to startups (businesses in operation for two years or less).
SBA microloans are administered by nonprofit community lenders and are typically easier to qualify for than larger-dollar loans. The downside: Funding may not be sufficient for all borrowers.
The SBA’s flagship 7(a) loan program also offers financing that borrowers can use to start businesses. But SBA 7(a) loans are tougher to get. Nearly 60% of 7(a) loans issued so far in the 2024 fiscal year have gone to businesses with more than two years in operation. These loans typically go to established businesses because they have proof of consistent revenue and can provide collateral that a lender can sell if you default. The qualifications are strict, and even if you qualify, applying for an SBA loan can take several months.
» MORE: How to get an SBA startup loan
Microloans
Microloans are also available outside of the SBA program, and microlenders and nonprofit lenders can be a less difficult route to access startup business loans, especially if you have weak finances. Many of these lenders focus on minority or traditionally underserved borrowers, as well as small businesses in communities that are struggling economically.
Because these startup loans often come from mission-based organizations, the terms will likely be better than you would receive from a private lender, making it possible for you to grow your business and establish better credit. That can help you qualify for other types of financing in the future.
Online loans
Many online lenders offer business loans for startups with one year or less in operation. You'll typically need a minimum of six months in business to qualify. Depending on the lender, you may be able to access different types of financing, such as short-term loans and startup business lines of credit. Compared to more-established businesses, however, you'll generally receive smaller loan amounts, shorter terms and higher interest rates.
CDFI loans
Community development financial institutions (CDFIs) are another provider of startup business loans. These banks, credit unions, and other capital lenders provide financial products and services to local residents and businesses in low-income communities. CDFI loans typically offer competitive interest rates and more flexible qualification requirements than traditional commercial bank loans.
CDFI lenders can be found in all U.S. states, the District of Columbia, Guam and Puerto Rico.
Equipment financing
When securing equipment is necessary for your startup business, an equipment loan can help you finance the purchase. Unlike some other loans, you typically won’t need to put up additional collateral because the equipment you purchase serves that purpose.
Interest rates and repayment terms of equipment loans vary depending on the lender, your business qualifications, the value of the equipment and its useful life.
Invoice financing
Invoice factoring is a type of business financing that involves selling your unpaid invoices for cash. A third-party factoring company purchases your outstanding invoices at a discount.
Invoice factoring is often faster and easier to access than a traditional bank loan — and it doesn’t require you to take on additional debt. This type of financing can be expensive, however, based on the factoring company’s fees and the time it takes your customers to pay their invoices.
Revenue-based financing
Revenue-based financing is a type of funding that allows you to trade an agreed-upon percentage of your future revenue for upfront cash. Depending on your business model, this type of financing can work well because your monthly payment is dependent on how much you make that month.
This means that if you have a month with lower revenue, your required debt payment will be lower too. Revenue-based loans are typically best for high-growth startups that don’t have a lot of other monthly expenses.
Pros and cons of startup business loans
Pros
Provides funds to get a business off the ground or grow a young one.
May build business credit history.
Can be helpful in obtaining future funding.
Cons
Can be challenging to obtain.
Higher interest rates and shorter terms, typically.
Increases business debt and monthly expenses.
May require personal guarantee and/or collateral.
How to get a startup business loan
Without an established history of success, it can be difficult to access a startup business loan. While the process for getting a business loan will vary based on the type of funding you choose, as well as the lender or financial institution, there are some general steps you can take to best prepare yourself.
1. Determine what kind of financing you need
As a startup, it may be more difficult to get more traditional forms of business financing, so you’ll want to think carefully about what option is right for your needs.
You’ll want to consider how much capital you need and how you’re going to use it. You should also calculate how much debt you can afford, making sure you can cover potential payments without decimating your cash flow.
2. Evaluate your credentials
Next, you’ll want to review common business loan requirements, so you have a sense of where you stand before applying. Although requirements for startup business loans vary, it’s helpful to consider the following minimum criteria:
- Personal credit score: Although some online lenders offer startup business loans for bad-credit borrowers (those with a personal credit score below 630), be wary of any lender that offers startup loans with no credit check or guaranteed approval. It could be an expensive option — or a scam. You’ll typically need a personal credit score of 500 or higher; otherwise, you may need to build your credit before applying.
- Personal finances. Your personal finances will likely weigh heavily into your startup business loan application. A lower debt-to-income ratio and higher personal credit score are ideal to qualify for the best rates.
- Available collateral. It can be helpful to offer substantial collateral on your loan application, even when it’s not required. In general, anything you can use to show your creditworthiness and ability to repay the financing will help you qualify for a startup business loan — as well as help you access more competitive rates and terms.
- Business data. If you’ve been in business for at least six months, putting in the time and effort to create financial projections not only gives a lender an idea of your business’s potential, but it also demonstrates that you are serious about your growth and success. If you’ve already started your business, you’ll need to provide financial and bank statements as well.
- Consider a cosigner. A cosigner on a business loan acts as a second guarantor and can help improve your chances of approval with a lender. If you know a trustworthy person with good personal credit and assets, it may be worth asking them if they’d consider cosigning your startup loan, if needed. However, keep in mind that if you default on the loan, the cosigner’s credit will be adversely affected in addition to your own.
3. Research and compare lenders
You should research several lenders in order to find the right fit for your startup business. As you compare different options, think about factors such as loan types, interest rates, repayment terms, fees, the application process, funding speed and lender reputation.
4. Create a comprehensive business plan with a funding request
A business plan can help you get a loan when it includes a funding request in addition to a market analysis, marketing plan, financial statements and other important information on your business.
A well-thought-out and comprehensive business plan will support your loan application and can help persuade lenders of the potential of your business. The funding request section of your plan can be used to explain how much funding you need, what loan terms you’re looking for and how the money will be used.
5. Gather documents and submit your application
Your business loan application process will vary based on the lender and type of loan you choose. Typically, however, you’ll need to provide some, if not all, of the following:
- Basic information about you and your business, such as an employer identification number or EIN.
- Business licenses or formation documents.
- Personal and business bank statements.
- Personal and business tax returns.
- Financial statements, such as balance sheets and profit and loss statements (if your business is already operating).
- Cash flow projections.
- A business plan for funding.
- Collateral information.
Your lender will also likely ask you to sign a personal guarantee and/or take out a UCC lien on your assets.
6. Review your options
You’ll want to compare multiple loan offers to make sure you’re getting the best deal for your new business. Once you’ve made a decision, you should thoroughly review your business loan agreement and ensure that you understand the rates, terms, fees and repayment schedule.
If you have any questions or concerns about the document, you should contact your lender for clarification before signing.
Steps you can take if you are denied a startup business loan
If you’re denied a startup business loan, there are steps you can take that may allow you to still move your business forward.
- Ask the lender what influenced the decision. You may be able to address the lender’s concerns and then reapply. For example, if the decision was due to a poor credit score, you may be able to take steps to improve your score. Or, if the lender felt a loan was above its risk tolerance, you might offer collateral or a cosigner to lower the risk for the lender.
- Try a different type of loan. If you’ve been denied a bank or SBA loan, you may want to look for loans with more flexible qualification requirements. Consider online loans, microloans or CDFI loans, but be aware that these loans often have higher rates and shorter terms.
- Start a scaled-back version of your business. If you can’t get funding to start your business, consider launching a smaller version of your business that you can finance on your own. This may involve offering fewer products, running the operation yourself instead of hiring staff and delaying the lease of a commercial property.
- Strengthen your business plan. Financial statements and projections will be of key interest to lenders. Providing projected profit and loss statements, balance sheets and cash flow statements for a minimum of three years can demonstrate how you plan to generate enough profit to repay loans. There are companies that specialize in writing business plans for a fee, or you could take advantage of the free or low-cost services offered by SBA resource partners like your local Small Business Development Center or SCORE office.
Alternatives to startup business loans
A startup loan may not always be the best option to finance your new business. If you’re just trying to get your business off the ground, for example, it may be difficult to qualify for a loan.
If you’re having trouble qualifying, or are wary of taking on debt, consider other startup funding.
Some entrepreneurs use personal funds to start up their businesses — bootstrapping, as it’s often called. This may include dipping into personal savings or retirement accounts to access cash for startup costs. Withdrawals of money from retirement accounts for business uses are commonly called Rollovers as Business Startups (ROBS) transactions. While self-funding can be a quick path to getting funding for your businesses, it could also result in the loss of money you’ve set aside for retirement, if your business fails.
Startup business grants from private foundations, government agencies or small-business incubator programs can provide free access to capital. Grant applications are often competitive and require a significant time investment, but may be worth it if you can get funding. Plus, with an incubator or accelerator program, you can advance your business skills and network with other small-business owners and stakeholders.
Grants may be a particularly good option for startups in specific industries or demographics. Businesses in the tech sector, for example, may be able to qualify for funding through the Small Business Innovation Research or Small Business Technology Transfer programs. If you served in the U.S. military, you can apply for business grants for veterans. There are also business grants for women, grants for minority entrepreneurs and business grants for people who have previously been convicted of a felony.
One of the most common ways of financing a new business is to borrow money from friends or family. Of course, like with a lender, you ’ll have to convince them that you’ll be able to pay them back. Also, to avoid misunderstandings, it’s recommended that you put the loan terms in writing so everyone involved has a clear understanding of what’s involved.
Plus, the potential cost of failure isn't just financial; it's personal. Trim your list of friends and family to those who understand your plans, and do your best to make certain they're comfortable with the risks involved.
Many entrepreneurs rely on business credit cards as funding. You can use this option as short-term financing for business purchases that you can pay off quickly. Startup business credit cards also typically come with rewards programs that offer cash back, points or miles — so you can earn more for your spending.
Carrying a balance allows interest charges to accumulate, however, so you’ll want to make sure you can pay off anything you purchase.
It’s also important to keep in mind that business credit card providers will use your personal credit history to evaluate your application and set interest rates. As a result, it may be difficult to qualify with bad credit.
Last updated on September 11, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
To come up with our list of the best startup business loans, we selected lenders with a minimum time in business requirement of less than two years.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
See Your Loan Options
Frequently Asked Questions
To get a startup business loan, you may need:
- A personal credit score of 500 or higher.
- Annual revenue of $50,000 or more.
- Six or more months in business.
- Physical collateral.
- A business plan.
- Business and personal tax returns.
- Business and personal bank statements.
- Financial statements.
Yes. It’s more challenging for a startup to get a business loan compared to an established company, but it’s not impossible. Good personal credit, strong finances and available collateral can all help you qualify for a startup loan.
In some instances, banks will offer loans to startups. Although most banks require that you have two or more years in business to qualify for a loan, others may lend to startups that can show excellent credit, strong finances and sufficient collateral — usually valued at or above the amount of the loan request.
Bank of America, Wells Fargo, U.S. Bank and Huntington Bank, for example, all offer certain loan options for startups.
Maximum funding amounts for startup business loans can range from $50,000 to upward of $1 million, although it will be more difficult to qualify for larger loan amounts. Typically, startups receive smaller loans than more established businesses because they pose a greater risk of default to lenders.
To get a startup business loan, you’ll need a personal credit score of at least 500, although a higher score is preferable and requirements vary by lenders. Online lenders typically accept lower credit scores than traditional banks, but online loans have higher interest rates and shorter terms.
Because many lenders prefer established businesses with performance histories, you may find it easier to qualify for a business loan after you’ve been in operation for at least six months. Developing a comprehensive business plan and offering collateral can be helpful in convincing a lender to consider your business loan request. If you’re just starting out (less than six months in business), you can consider alternatives like business credit cards or personal loans.