Best Startup Business Loans

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Startup Business Loans

How to Find the Best Small Business Loan for Startups in May, 2024

You’ve got your big idea, you know who your target customer is and how you’ll market to them, and now you’ve got to do the hard bit – finance it.

Financing your new business is by far the biggest hurdle you have to overcome on your journey to becoming a successful entrepreneur, not only because you need to have the confidence that your idea will be a success, but you need to convince other people of that, too. If you’ve got the idea and the confidence, your next step is to look for a startup business loan.

Applying for a startup business loan is fast and easy:

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Receive funds from $5K - $1,000,000+ towards your business needs

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What is a startup business loan?

With your idea and a gap in the market identified, you’ll need cash to bring your business to life. Unless you have some savings or can start on a shoestring, you need investment and that usually means a loan. A startup business loan is a loan you can use to fund the early days of your business.

You’ll use it for inventory, machinery, furniture, premises – anything you need to get your business up and running and turning a profit.

Compare loan options for startups

FundBox Business Loans

Fundbox

Funding: Borrow $2,500 - $150,000
Minimum Credit Score: 600
Loan term: 12-24 months
Funding turnaround: as fast as next business day

Fundbox requires minimal documentation and access to a revolving line of credit without origination or maintenance fees. Borrowers are not required to have collateral (with exception of larger credit lines which are subject to a personal guarantee).

Kabbage Business Loan Review

Kabbage

Funding: Borrow $1,500 - $150,000
Minimum Credit Score: 640
Loan term: 6, 12 or 18 months
Funding turnaround: As soon as 1-3 business days

Kabbage offers borrowers a credit line up to $150,000 with monthly repayment options and no prepayment penalties. Approval as fast as same business day.

Funding Circle

Funding Circle

Funding: Borrow $25,000 to $200,000
Minimum Credit Score: 700
Loan term: 6-12 months
Funding turnaround: 24-48 hours

Funding Circle offers affordable business loans with interest rates lower than alternative lenders with monthly repayment schedules for borrowers with good to excellent credit scores.

SBA 7a

SBA 7(a) loan

Funding: Borrow up to $5,000,000
Minimum Credit Score: 650
Best For: SBA loans
Funding turnaround: Varies.

The SBA 7(a) program features lenders such as Wells Fargo in their network and provides capped interest rates and long repayment term flexibility. Term loans and lines of credit access available. Typically, collateral will be required with a personal guarantee. Funding times vary and may be longer than most other lenders.

OnDeck Business Loan Review

OnDeck

Funding: Borrow $5,000 - $250,000
Minimum Credit Score: 600
Loan term: up to 36 months
Funding turnaround: as soon as same business day

OnDeck offers fast business loan options such as term loans, business lines of credit, and SBA PPP loans and funding as fast as 24 hours. Minimum requirements include: at least 1 year in business, 600 credit score, $100,000 in gross annual revenue and a business checking account.

How does a startup business loan work?

As you begin your search for funding you will discover that there are many avenues to investigate. From bank loans and SBA loans to lines of credit and peer-to-peer lending, you have plenty of options to look into. You will also begin to realize that raising money for an idea with no history of entrepreneurship behind you is not easy.

Many banks and online lenders are willing to offer loans to entrepreneurs as long as they can show they have had previous success. Starting from nothing is a different story.

However, though it may be more difficult for someone putting their first toe in the water of entrepreneurship than someone with a good track record, it is not impossible. A good idea put across convincingly can attract investment. Just be aware that you will probably have to go the whole nine yards to secure funding.

How can a startup loan help my business?

A startup loan is a way of bridging the gap between ideation and running a profitable business. In order to reach profitability, you need product (or service) and product development, whether that’s a physical or virtual product. To have products to sell requires investment of time and money. You may have all the time in the world but without funding, bringing a product or service to the marketplace may prove impossible.

A startup loan will give you the resources to develop your idea and provide the backing you need until sales produce profits.

What are my startup financing options?

  • Personal business loans: It is possible to raise the capital you need to start your fledgling business with a personal loan from a bank, credit union, or online provider but only if you have a good credit score. This is a good option if you can start your business while still working a part- or full-time job.
  • Friends and family: If a member of your family or circle of friends is convinced that your idea is a good one they may be prepared to lend you the cash to get you started. While this seems like a good option, beware of the problems such an agreement might cause. Both sides need to be absolutely clear about what is being offered and the precise repayment terms. Any haziness in this area will cause big problems down the line.
  • SBA loans: The Small Business Association was set up to help small businesses. But while it does have loan programs – the 7(a) and 504 are probably the most popular – they require a few years of trading history. The SBA and some investment companies offer microloans to startup businesses. Non-profit organizations like Accion and Kiva will lend to small businesses with sums of up to $10,000. The SBA has a government-backed investment program that provides microloans usually via community development financial institutions. The average sum lent is around $13,000 but amounts up to $50,000 are on the table. Such loans are intended to help with working capital, fixtures, equipment, and inventory.
  • Business credit cards: Business credit cards are a way to generate cash in the short term. They are generally easier to get than a loan but carry high interest rates if you don't pay off the entire balance every month. They help with cash flow and if used responsibly will help your credit score. On the other hand, credit cards are more expensive than loans and often the user is personally responsible for the debt.
  • Crowdfunding: Crowdfunding, peer-to-peer lending, and angel investors are all over the media but it may not be easy to attract investment from these sources unless you have a history of success. Many platforms want a proven track record before they will okay your project for possible investment. Note that sites like Kickstarter want to fund projects with precise aims, not provide general finance for startups, so make sure you’ve got a strong idea and are ready to bring it to life.
  • Grants: Various non-profit and government organizations provide grants for small businesses some of which are designed for startups. This is a good option if your business will benefit the local community.
  • Lines of credit: A line of credit works much like a credit card. They set you a limit and you only pay interest on the amount you borrow. While a line of credit can be useful for small businesses, if you have not been operating for at least two years you may find it difficult to find a provider.

What are the pros and cons of startup business loans?

A startup business loan may be the only way to get your business venture started. While some entrepreneurial projects may be able to be self-financed, most need outside financing.

However, finding willing investors is often far from easy and may be expensive in terms of interest rates. Be prepared to put in the time to analyze what is available and what best suits your needs.

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What are the requirements to obtain a startup business loan?

Aside from a great initial idea that convinces others, many loan providers want to see a high credit rating. Few lenders are willing to lend money to untried businesses so they need evidence that their money is safe. For this same reason, you may need to put your property up for collateral on the loan. Produce a detailed and realistic business plan before you start seeking your funding.

Is it difficult to get a startup business loan?

In short, yes. Banks and lenders rarely like to take a risk on an unproven idea. Investors are looking for a return on their investment and so they’re looking for the right idea, or want to be involved in the company to ensure they can guide it to success. If you simply cannot move forward without external funding, you’re going to have to be prepared to try and try again until you secure it, or think outside the box and start your business on a small scale before seeking further funding.

How can I get a business loan for my startup?

The short answer is work hard and explore every path for investment. If you struggle, there are startup consultants that can match your needs with investors. This costs money but the saving in time and frustration may be worth it. Choosing the wrong loan or struggling to find a lender at all leads to business failure or an idea remaining just that – an idea.

Compare startup loan rates and apply

If you have the credit score to apply for a loan, be it a specialist startup loan or a personal loan, make sure you compare rates before applying. A key part of turning your loan into a successful business will be in minimizing costs, so make sure you seek out the lowest interest rate you can. Start looking for the right loan for your new business here today.

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