Best startup business loans of May 2024
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Updated 4:20 a.m. UTC April 1, 2024
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Startup business loans generally have less stringent approval requirements when it comes to your credit history, time in operation and annual revenue compared to other types of business financing. Additionally, the best startup business loans of 2024 generally offer a wide range of loan amounts, reasonably long repayment terms and fast funding, with some also providing discounts to reduce your overall costs.
Best loans to fund a startup business
- Credibly business loan: Best startup business loan.
- OnDeck business loan: Best for customer experience.
- Fora Financial business loan: Best for poor credit.
- National Funding business loan: Best for fair credit.
- OnDeck business line of credit: Best for fast funding.
- Balboa Capital business loan: Best for short-term loans.
- American Express® Business Line of Credit: Best for startups with low revenues.
OnDeck business line of credit
Compare the best startup business loans
| LENDER | PRODUCT TYPE | LOAN AMOUNTS | REPAYMENT TERMS | MIN. CREDIT SCORE | REQUIRED TIME IN BUSINESS | REQUIRED ANNUAL REVENUE |
|---|---|---|---|---|---|---|
Credibly
| Loan
| $5,000 to $600,000
| 3 months to 2 years
| 501 | 6 months
| $180,000
|
OnDeck
| Loan
| $5,000 to $250,000
| 18 months to 2 years
| 625 | 1 year
| $100,000
|
Fora Financial
| Loan
| $5,000 to $1.5 million
| 4 to 15 months
| 500 | 6 months
| $180,000
|
National Funding
| Loan
| $10,000 to $500,000
| 4 months to 5 years (depending on loan type)
| 600 | 6 months
| $250,000
|
OnDeck
| Line of credit
| $6,000 to $100,000
| 12, 18 and 24 months
| 625 | 1 year
| $100,000
|
Balboa Capital
| Loan
| $20,000 to $250,000
| 3 months to 2 years
| 620 | 1 year
| $300,000
|
American Express
| Line of credit
| $2,000 to $250,000
| 6, 12, 18 and 24 months
| 660*
| 1 year
| Avg. monthly revenue: At least $3,000
|
Methodology
Our expert writers and editors have reviewed and researched multiple lenders to help you find the best startup business loan. Out of all the lenders considered, the six that made our list excelled in areas across the following categories (with weightings): loan details (20%), loan cost (20%), eligibility and accessibility (35%), customer service (15%) and application process (10%).
Within each major category, we considered several characteristics, including APR ranges, late fees and prepayment penalties, loan amounts, maximum loan terms and funding time. We also evaluated each provider’s requirements for credit score, time in operation and annual revenue as well as customer support options and customer reviews.
Why some lenders didn’t make the cut
Of the business loan lenders that we reviewed, only a fraction made the cut. The reasons for this varied by lender, with several not receiving high enough scores due to not publicly disclosing their rates or eligibility information like minimum credit score while others scored lower based on fees and a lack of discounts.
What is a startup business loan?
A startup business loan is a type of financing designed specifically to help newer businesses get off the ground.
“Obtaining financing is challenging for new startups because traditional banks require borrowers to show an established business history and have collateral or a valuable asset to place a lien against in case you don’t pay back the loan,” says Jeff Saling, executive director at StartUpNV, a nonprofit startup incubator and accelerator.
As a result, startup business loans often have less stringent eligibility criteria compared to more traditional business financing options. However, keep in mind that because these loans can be riskier to lenders, they could also come with higher interest rates and additional fees. Additionally, they might not help you establish your business credit history, depending on the lender.
Types of startup business loans
There are a few types of startup business loans that might be available to you, depending on your business and personal circumstances, including:
Private startup business loans
These loans are offered by private financial institutions, usually online lenders. Eligibility criteria and loan terms can vary depending on which lender you choose. Additionally, while private business loans might provide higher loan amounts and faster funding, they can also come with higher overall costs based on interest rates and fees.
Government startup business loans
The Small Business Administration (SBA) provides several types of business financing. Specific SBA loans available for startups include microloans and Community Advantage loans, which can help eligible business owners to build their businesses. The SBA microloan program offers smaller loans of up to $50,000 while the Community Advantage program provides loans of up to $350,000.
These loans can be less expensive in terms of interest and fees compared to private loans. However, funding can take several weeks or even months.
Nonprofit startup business loans
Nonprofit organizations like Kiva offer microloans to startup business owners with little or no interest charges and possibly also no credit check.
The catch is that loan amounts are relatively low — Kiva, for instance, maxes out at $10,000 — and there might be other requirements you’ll need to meet. For example, Kiva crowdfunds loans from individual contributors, and you’ll need to start by recruiting people from your community to fund your loan.
What you need to qualify for a startup business loan
The eligibility requirements can vary depending on the type of loan and the lender you choose. Some of the factors lenders consider include:
Personal and business credit history
You’ll typically need to undergo a personal credit check when you apply for a startup loan. While some lenders specialize in working with business owners with bad credit, many others require you to have good credit (usually meaning a credit score of at least 670).
Lenders might also consider your business credit history to determine your creditworthiness. It generally takes six months to a year to establish business credit, so your business might not have a credit score if you’ve only recently begun operating. Because of this, lenders that work with startup business owners might have more lenient requirements regarding your business’s credit history.
Minimum time in business
How much time your business must be in operation will depend on the individual lender. Some accept shorter minimums of six months while others require at least one year or more.
Minimum annual revenue
You’ll also need to show that your business generates a certain amount of annual revenue. Many lenders require an annual revenue of at least $100,000. However, some accept lower revenues than this — for example, the average monthly revenue for an American Express business line of credit is at least $3,000.
Collateral
Depending on the lender and the type of loan you apply for, you might need to provide collateral. Generally, securing a loan with collateral lowers the lender’s risk, which can result in better terms. However, it also means you could lose your property if you don’t keep up with your payments.
Collateral for business loans will typically be business assets, such as inventory or equipment. A personal guarantee is also typically required, which is your promise as a borrower that you’ll repay the loan from your personal assets even if your business defaults.
Credibly business loan
Secured vs. unsecured startup business loans
Many startup business loans are unsecured, which means you don’t have to provide collateral to get approved. However, the lender might still require a lien on your general business assets or a personal guarantee. Additionally, because an unsecured loan is riskier for a lender, you might end up with a higher interest rate or additional fees.
Most kinds of business loans, on the other hand, are secured — regardless of which stage you’re at in the business life cycle. Requiring collateral can also extend to startup loans, depending on the lender and type of loan you choose. Collateral for a business loan will typically be business assets, such as inventory or equipment.
A secured loan is less risky for the lender, which means you might be able to take advantage of better loan terms. However, if you default on your payments, the lender can seize your collateral and sell it to recoup the remaining loan amount.
What is a personal guarantee?
A personal guarantee is your agreement to repay your loan from your personal assets if your business fails. Ultimately, this gives permission to the lender to pursue you for repayment if your business defaults on the loan.
Personal guarantees are required by most business lenders. This includes lenders that offer financing to startups.
“New startups have few, if any, valuable assets and no financial history,” says Saling. “This is why banks (and other types of lenders) require a personal guarantee when a business is new.”
How to get a startup business loan
If you need financing for your new business, follow these steps to apply for a startup business loan:
1. Review your credit
When you apply for a startup business loan, the lender will review your credit to determine your creditworthiness as well as your interest rate. Because of this, it’s a good idea to check your credit before you apply to see where you stand.
In many cases, eligibility for startup business loans will depend on your personal credit score rather since startups might not yet have established business credit. You’ll typically need a good credit score (usually considered to be 670 or higher) to qualify. There are also several lenders that offer loans for poor and fair credit, but these generally come with higher interest rates.
You can use a site like AnnualCreditReport.com to review your credit reports from the three credit bureaus — Experian, Equifax and TransUnion — for free. Additionally, you can check your FICO credit score for free through Experian, a credit-monitoring service or even your bank or credit card company.
If your startup has operated long enough to have established business credit, make sure to review that, too. You can do so through a third-party company like Dun & Bradstreet or through the credit bureaus Experian or Equifax. Be sure to report any errors you find in your personal or business credit reports to the appropriate credit bureaus to potentially boost your credit scores.
2. Determine your capital needs
Before you apply, it’s important to consider what type of financing would best suit the needs of your startup. For example, do you need money for working capital or long-term growth? Additionally, do you prefer a lump-sum disbursement with an installment loan or the ability to repeatedly borrow from a revolving line of credit?
3. Compare lenders and pick your loan option
Take some time to shop around and compare your options with as many startup business loan lenders as possible. This way, you can find the right loan for your needs. Consider not only interest rates but also loan amounts, fees, repayment terms and eligibility requirements. You might also want to check if the loan will help establish your business credit.
After comparing lenders, choose the loan option that you like best.
4. Gather your documentation and apply
You’ll need to submit both personal and business documentation when you apply. This will likely include tax returns, financial statements, business licenses, debt schedules (if any) and information for collateral if it’s a secured loan. Lenders might also ask to see a business plan or proposal to verify how you plan to use the loan and if you can reasonably afford to repay it.
After you’ve gathered your documentation, you’ll have to complete a full loan application. This can often be done online — though you might have to discuss your options with a loan specialist to proceed, depending on the lender.
5. Get your funds
If you’re approved, the lender will have you sign for the loan so the funds can be disbursed to you. Note that while several online lenders provide funding as soon as the same or next business day, traditional banks and credit unions can take weeks or even months to process and fund business loans.
Alternatives to startup business loans
If a startup business loan doesn’t seem right for you or you’re struggling to qualify, here are some alternatives to consider:
Personal loans
A personal loan can come with a lower interest rate and longer repayment term compared to a startup business loan. However, you’ll generally need good to excellent credit to qualify. Additionally, because the loan won’t be tied to your business, it won’t help to build your business credit.
Also keep in mind while some personal loan lenders allow their loans to be used for business purposes — such as Discover and Upstart — many do not. So be sure to read the restrictions before you apply.
Business credit cards
This could be a good option if you’re looking to cover small, routine expenses, such as paying for travel or purchasing small pieces of equipment. Business credit cards can also come with rewards and other perks as well as help you build business credit.
However, you’ll typically need good or excellent credit to qualify for a good one, and depending on your situation, a credit card might not provide enough capital for your needs. Additionally, some business expenses can’t be charged, such as inventory and payroll.
Invoice factoring
If your business is paid through invoices, this type of funding could help you get faster access to the cash you need. With this option, you’ll assign responsibility for collecting invoices to a third-party company in return for a fee. In return, you’ll get 70% to 90% of the invoice amount from that company within a few days — faster than the typical 30 to 90 days you spend waiting for invoices to be paid.
Just keep in mind that you’ll lose some of your funds to interest and fees, which will vary by company. This can make this option more expensive compared to other kinds of business financing.
Crowdfunding
If you have a product you want to sell, you could use a website like Kickstarter or Indiegogo to crowdfund the money you need. Instead of repaying the funds like a loan, you’ll provide your backers with early access to your product and possibly extra incentives.
That said, it can take a lot of creativity, time and connections to mount a successful crowdfunding campaign.
Help from friends and family
Your friends or family might also be willing to help fund your business goals. However, you also run the risk of straining your relationships if you fail to repay what you’ve borrowed. Be sure to document any loans or equity investments you receive and follow through on the repayment agreements you make.
Your personal savings
If you can afford it, you might consider self-funding your business with your own income or savings.
“When the business matures, you can pay yourself back,” Saling says. “You should [document this as] a formal loan if you intend to raise money from others later so it’s properly on the books.”
Frequently asked questions (FAQs)
It can be hard to get approved for a business loan if you’ve just launched your startup. Most private lenders, for example, require businesses to have been in operation for at least one year — though some, such as Credibly and Fora Financial, accept a minimum of six months.
If you haven’t been in operation for enough time, there are other options you might consider to help your business in its earliest stage. For example, you could look into SBA microloans, personal loans or even crowdfunding.
There’s no single best way to finance your startup. Ultimately, the right option for financing your startup will depend on your business’s needs as well as your personal financial situation.
Make sure to weigh all of your options carefully and determine the best course of action based on what you find. Some points to keep in mind include how much money you need, how fast you need the funds and how much you can reasonably afford to repay (including interest and fees).
Typically no — most lenders require you to have a minimum amount of annual revenue to get approved for a loan. However, you might qualify for different financing options even if you have no revenue.
For example, business credit card eligibility is often based on your personal income and personal credit score. This means you might be able to get a business credit card even if your startup has no revenue yet.
Yes, several lenders offer startup business loans for bad credit. For example, Fora Financial accepts credit scores as low as 500 and Credibly accepts scores as low as 501. Keep in mind, though, that bad credit loans typically come with higher interest rates and fees compared to good credit loans — which can make it harder to repay what you owe.
Getting approved for a business loan with no credit, on the other hand, will likely be much more difficult as most lenders require a minimum credit score. If you don’t have enough credit history to generate a credit score (often referred to as having thin credit), you’ll likely need to consider other financing options.
For example, invoice factoring often relies on checking the credit of your customers rather than a review of your personal credit. There are also some lenders that offer personal loans for thin credit, such as Upstart.
Depending on the lender and your situation, you may be able to borrow as little as $1,000 or as much as $1 million or more. Make sure to carefully consider your startup’s needs and your ability to repay a loan before applying, and only borrow what you actually need to keep your costs as low as possible.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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