9 Best Startup Business Loans of April 2024
Updated March 29, 2024 at 4:58 pm
A wide range of startup business loans from top lenders are available to help you get the capital your new business needs to grow successfully.
The best startup business loan can provide your new venture with the funds it needs to get up and running. Startup funds can help you purchase new equipment, cover operating expenses or expand into additional markets.
Still, benefits, terms and qualifying criteria vary among lenders, so it’s wise to compare the best loans available. Start by reviewing our best business startup loan choices to find the best fit for your company.
Our Methodology The Newsweek content team chooses the best business startup loans based on their consumer ratings and ability to meet the specific needs of various types of businesses. Lenders are evaluated based on several factors, including loan amounts, costs, fees and repayment terms. Lending criteria, such as minimum credit score, operational timeline and earnings requirements, also factor heavily.
Our Picks - Best Overall: SBA Microloan
- Best for Short-Term Loans: OnDeck
- Best for Fast Loans: Fundbox
- Best for Traditional Bank Business Loans: Wells Fargo Small Business Advantage Line of Credit
- Best for Bad Credit: Fora Financial
- Best for Lines of Credit: American Express Business Line of Credit
- Best for Customer Satisfaction: Credibly
- Best for Loan Comparisons: Lendio
- Best for Equipment Purchases: SBA 7(a) Loan
Best Startup Business Loans of 2024
Best Overall
SBA Microloan
Why We Chose It
The Small Business Association (SBA) microloans are specifically designed to help new businesses get off the ground. The agency says they’re “easier and faster” to get than a traditional business loan. The SBA doesn’t offer these loans directly; they work through designated intermediary lenders who may have their own lending criteria, but follow SBA guidelines. Compared to other types of SBA loans, the microloan is more accessible to startups and business owners with bad credit.
Pros
- Government-backed business loan
- Low interest rates
- Nonprofit lenders available
Cons
- Low maximum loan amount
- May require personal guarantee
- Longer processing time than many business loans
Additional Info
Fees
- Packaging fees up to 3% of microloan amount. Closing fees vary by lender
APR
- Vary by lender, but usually range from 8% to 13%
Loan Availability
- Available in all 50 states
Best Short-Term Loans
OnDeck
Why We Chose It
OnDeck offers short-term business loans with repayment terms ranging from a few months to two years. New businesses in operation for at least a year with $100,000 in revenue may qualify for term loans of up to $250,000.
Pros
- Fast funding
- Low minimum credit score requirement
- Offers loan comparison tool for increased transparency.
Cons
- High interest rates
- May require a $1,000 minimum draw at origination
- May require daily or weekly payments
Additional Info
Fees
- Origination fee 0% to 4%
APR
- 60.9% average APR
Loan Availability
- Not disclosed
Best for Fast Loans
Fundbox
Why We Chose It
Businesses needing fast capital can turn to a Fundbox business line of credit of up to $150,000. Lines of credit may help your business by allowing you to draw on funds as needed—up to your limit—and only pay interest on the amount you withdraw.
Pros
- Fast approval
- Next-day funding
- Time-in-business requirement of only six months.
Cons
- Doesn’t offer long-term repayment periods
- Maximum loan amount is less than many competitors
- Higher annual earnings requirement ($100,000)
Additional Info
Fees
- Not disclosed
APR
- Fee rate starts at 4.66%
Loan Availability
- Available in all 50 states and many U.S. territories.
Best Traditional Bank Business Loans
Wells Fargo Small Business Advantage® Line of Credit
Why We Chose It
Wells Fargo offers three business lines of credit. The Wells Fargo Small Business Advantage® line of credit is backed by the SBA and may be a good fit for startups with less than two years of operational history. This line of credit offers competitive interest rates and longer repayment terms than many other lenders..
Pros
- Government-backed line of credit
- Low time-in-business requirement
- No collateral required
Cons
- Must meet SBA requirements to qualify
- Low credit line limit ($50,000)
- May require a personal guarantee
Additional Info
Fees
- No annual fee
APR
- From Prime rate +4.50%
Loan Availability
- Available in all 50 states
Best for Bad Credit
Fora Financial
Why We Chose It
New businesses with minimal or poor credit may benefit from Fora Financial’s less stringent minimum FICO Score requirement of 500. Loan amounts of up to $1.5 million can help startups purchase inventory, equipment and other essential expenses.
Pros
- Low minimum credit score requirement
- May increase loan size once you repay 60% of original loan
- Offers prepayment discount
Cons
- High minimum annual revenue of $180,000
- No long-term repayment periods
- Rates not disclosed before obtaining a quote
Additional Info
Fees
- Undisclosed
APR
- Not disclosed
Loan Availability
- Available in all 50 states
Best Lines of Credit
American Express® Business Line of Credit
Why We Chose It
This line of credit offers flexibility with line amounts ranging from $2,000 to $250,000 with several term options. Lending qualifications are relatively easy to meet for people who started their business at least a year ago and have an average monthly revenue of at least $3,000. All businesses are unique and are subject to approval and review. Read our American Express Business Line of Credit 2024 Review.
Pros
- Streamlined application process
- Offers small and large lines of credit
- No application, origination, prepayment or maintenance fees
Cons
- Unique pricing structure makes it difficult to compare against competition
- Monthly fee may be costly depending on your loan term and balance
- Personal guarantee required
*Additional Info
*The required FICO score may be higher based on your relationship with American Express, credit history and other factors.
Fees
Total monthly fee amount based on loan term:
6-month loans: 3.00% to 9.00%
12-month loans: 6.00% to 18.00%
18-month loans: 9.00% to 27.00%
24-month loans: 12.00% to 18.00%
Loan fee applies only in months when there’s an outstanding balance.
Late fees range from $10 to $100, depending on loan amount.
No origination or maintenance fee
No prepayment penalty
APR
- N/A
Loan Availability
- Available in all 50 states and in U.S. territories
Best Customer Satisfaction
Credibly Working Capital Loan
Why We Chose It
Credibly boasts a 4.8-star overall customer rating on Trustpilot, with 88% of the over 1,700 customer reviews earning five stars. The lender also holds an A+ rating from the Better Business Bureau (BBB). You may be approved in as few as four hours and receive funds directly into your account the same day. Read our Credibly business loans review.
Pros
- High customer satisfaction ratings
- Quick application process and fast funding
- May qualify after 6 months of operation
Cons
- Factor rates are difficult to compare against traditional APR loans
- High monthly revenue requirement
- Daily or weekly payment schedule
Additional Info
Fees
- 2.50 origination fee
Factor rate (no APR)
- Starts at 1.11
Loan Availability
- Working Capital Loans available in all states except: CO, DE, GA, Ml, MT, NV, NJ, ND, OK, OR, SD, TX, and VT.
Best Loan Comparisons
Lendio
Why We Chose It
Lendio eliminates hours of loan comparison research done over the phone or online. Instead of contacting multiple sites for quotes, you submit one application to view and compare your options side-by-side.
Pros
- Shop and compare multiple lenders side-by-side
- Offers 11 types of business loans
- Several partner lenders offer same-day funding
Cons
- Doesn’t work with all lenders
- May receive unwanted phone calls and emails
- Not a direct lender
Additional Info
Fees
- Varies by lender
APR
- Varies
Loan Availability
- Available in all 50 states
Best Equipment Purchases
SBA 7(a) Loan
Why We Chose It
These government-backed loans remove much of the risk for lenders, allowing them to offer SBA loans to startups with more favorable terms. Depending on your business size and needs, you may choose between seven types of SBA 7(a) loans with varying terms and conditions. Learn more about SBA loans.
Pros
- Capped interest rates
- Government-backed
- Large loans available
Cons
- Not available for nonprofits
- May require collateral or personal guarantee
- Approval process is longer than many online lenders
Additional Info
Fees
- Varies depending on loan size
APR
- Capped at prime rate +2.75% for loans over $50,000
Loan Availability
- Available in all 50 states
Types of Business Loans for Startups
Startup loans are designed for newer businesses with little operational or credit history. Thankfully, several types of startup loans with varying features and benefits are available through traditional banks, credit unions and online lenders to address your needs.
SBA Loans
The U.S. Small Business Administration (SBA) doesn’t directly issue business loans. Rather, the agency backs them by guaranteeing a portion of the loans approved by its partner lenders. This guarantee lowers lenders’ risk, which often leads to more favorable terms.
SBA 7(a) loans are the most common SBA loan. They offer up to $5 million in funding and is repayable over a 25-year term for real estate purchases or 10 years for working capital and other expenses. SBA 504 loans can provide up to $5.5 million in funds for purchasing real estate, equipment or other fixed assets.
Business Term Loans
Traditional and online banks offer short-term loans with repayment terms of two years or less and long-term loans that typically last five to seven years but can go much higher. These business loans are available as secured or unsecured loans. Typically, loans secured by collateral come with lower interest rates than unsecured loans.
Business Lines of Credit
Business lines of credit work similarly to a credit card, allowing you to draw only what you need, up to your credit limit. Interest is incurred only on the amount you borrow. As you repay funds, money becomes available to borrow again. Many online lenders offer business lines of credit for companies in operation for at least six months and have little or no credit history, but they may come with higher interest rates.
Equipment Loans
Most lenders offering startup business loans offer equipment financing to help purchase the equipment your company needs to operate. Many equipment manufacturers also provide loans directly to their customers. Whether you need a restaurant oven or a commercial vehicle, virtually any type of business equipment can be financed. But you’ll likely need to put down a down payment as most equipment loans cover 80% to 90% of the equipment value.
Microloans
Microloans are smaller loans, typically $50,000 or less. Lending requirements vary by lender, but microloans can be easier to get approved for compared to other types of loans. Examples of microloans include SBA microloans and Kiva business loans.
How To Qualify for a Startup Business Loan
Most startup lenders offer loans to new entrepreneurs and startups so long as you can demonstrate an ability to repay them. When your business is newer—generally less than two years old—you likely don’t have sufficient business credit and repayment history. As such, lenders will rely on your personal credit history and score to make an approval decision.
You may improve your approval odds through the following means:
- Improve your credit score. Although many lenders have minimum credit score requirements as low as 500, those loans tend to have higher interest rates. Taking steps to improve your credit score may boost your approval odds with more favorable terms.
- Reduce your debt balances. Paying off high-interest credit cards and reducing your overall debt load can improve your debt-to-income ratio (DTI). This measurement reveals how much of your total monthly income goes toward your monthly debt payments. Since financial institutions give considerable weight to DTI ratios when making lending decisions, aim for a DTI ratio of 36% or less, although some lenders may consider higher ratios.
- Increase your earnings. The other way to improve your DTI ratio is to increase your earnings. Additionally, most lenders have minimum annual earnings requirements, but they’re usually less for startup loans than other types of business loans. For example, the American Express Business Line of Credit requires your business to earn at least $3,000 per month. As a general rule, the more you earn, the higher your likelihood of being approved for a business startup loan.
- Secure loan with collateral. Whether you’re applying for a secured or unsecured loan, offering collateral may mitigate the lender’s risk and improve your odds of loan approval and landing competitive terms.
Why Would You Need a Startup Business Loan?
Starting a business requires money: Money to hire employees, advertise your services and a variety of other reasons. Here are some of the most common reasons why your business might need a business startup loan:
- To get your business up and running. Startup loans help businesses lease office space, hire staff and cover other expenses necessary to open their doors. While many lenders approve startup loans for companies with minimal operational history, it may make sense to wait and apply once your company is operational with steady monthly earnings.
- To purchase inventory or equipment. New equipment is necessary for many startups but can also be expensive. Taking out one of the best business startup loans may help spread out the price tag over a longer period with monthly payments rather than potentially hamstring your budget with a pricey new purchase. The same goes for new inventory, which your company may need before opening your doors or before an upcoming peak season.
- To help stabilize cash flow. Startup capital can provide a buffer for your working capital if your business has sporadic or irregular cash flow. The goal is to keep cash flow steady to help you cover your ongoing operational expenses and reinvest in your business—even when your earnings and cash flow are low.
- To launch a marketing campaign. Every startup needs to increase exposure to its ideal customers and clients, but marketing campaigns can be costly. Whether you use advertising, public relations or social marketing, a startup loan for businesses can give you the funds you need to get the word out.
- To take advantage of growth opportunities. Despite the best-laid plans, small businesses need to be able to quickly pivot and adjust when growth opportunities present themselves. For example, a business startup loan may help you seize the opportunity to acquire a nearby competitor or expand into a new city to access a new customer base.
How To Choose the Best Business Loans for Your Startup
Choosing the best business startup loan involves finding the best balance of interest rate, fees and other crucial factors. Consider the following factors as you shop and compare your startup loan options:
Interest Rates
Interest rates are the primary cost of lending, and they can be pretty high for newer businesses with little credit or a lower credit score. Still, business loan rates can vary significantly from lender to lender, so compare several loan offers to find the best available rate.
Loan Amount
Loan amounts on business startup loans can range from $2,000 to $10 million. It’s wise practice to prequalify for a loan—which typically doesn’t affect your credit—to determine how much you qualify for before proceeding.
Repayment Term
Like interest rates, a startup loan’s repayment term plays a significant role in your loan’s affordability. Longer terms typically have lower payments but higher overall interest charges. Conversely, shorter-term loans usually come with higher payments but potentially lower overall costs. Lenders offering short-term loans, especially those providing bad credit loans, often require daily or weekly payments, while others like the Small Business Association, offer terms of up to 10 or 25 years.
Loan Fees
Keep an eye out for loan fees and penalties that add to your overall loan costs. For example, many financial institutions charge an origination fee to process business loans, which usually averages around 3% to 5% of the loan amount. Prepayment penalties for paying off a loan early are another common cost. The best startup business loans offer a competitive combination of the lowest rates and fees.
Eligibility Criteria
Another top consideration for startups looking for financing is their ability to qualify for a new loan. Every lender sets their own eligibility requirements and most publish key criteria on their website so you can gauge whether your business will be approved. For example, lenders typically want you to meet minimum requirements for credit score (can range from 500 to 680 or higher), annual revenue (often over $100,000) and operational history (starting at six months).
Business Loans vs. Other Business Financing
As you shop and compare the best startup business loans, you’ll notice a range of other business financing solutions to consider. Here’s how business loans for startups compare to other types of business loans.
Business Loans vs. Merchant Cash Advances
Business term loans provide a lump sum of money you repay over time with interest. But merchant cash advances (MCAs) offer a cash advance on future sales revenue. Most business loans are repaid in predictable monthly installments, while MCA lenders typically collect a percentage of your credit card transactions daily or weekly. While merchant cash advances can be helpful in certain situations, such as for those with poor credit or no collateral, they often carry higher interest rates, so consider other options first.
Business Loans vs. Business Credit Cards
As a revolving line of credit, you can draw from a business credit card as needed, up to your limit and make minimum monthly payments. Unlike many business loans, you usually don’t need collateral to open a business credit card, and you won’t pay interest as long as you repay the balance each month. You may even earn rewards on the purchases your business makes with the business credit card. But business credit cards may have higher interest rates and lower credit limits than a business term loan.
Frequently Asked Questions
Is It Difficult To Get a Business Startup Loan?
Qualifying for a business startup loan can be difficult if your business is newer and has little credit history. Many lenders approve startup loans for companies in operation for at least six months and with credit scores as low as 500. But businesses with at least two years under their belts and stronger credit scores may qualify for higher borrowing amounts, longer repayment periods and lower rates.
Can I Get an SBA Loan With No Money Down?
The U.S. Small Business Association (SBA) offers several types of business loans, some of which require down payments and others that don’t. SBA 7(a) loans, the agency’s most popular loan, requires a down payment starting at 10% of the loan amount. Meanwhile, a down payment is usually not needed for SBA microloans.
How Much Can You Borrow With a Startup Business Loan?
The loan amount the lender approves for your business depends on how long you’ve been in business, your company’s revenue and credit history. For example, an online lender may approve a brand-new business with a lower credit score of $5,000. Conversely, a more established company with solid revenue and business credit may qualify for up to $5 million with a SBA 7(a) loan. The average SBA microloan amount is $13,000, while SBA 7(a) loan amounts averaged $538,903 in 2022.
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