Hispanolistic Getty Images; Illustration by Issiah Davis/Bankrate
Key takeaways
- Online lenders are more likely to have accessible loan requirements for startups than bank lenders
- SBA loans are an option, with the SBA approving thousands of startup business loans per year
- If you can’t get a business loan, try alternatives like a business credit card or personal loan
In December 2024, 457,544 new business applications were filed, according to the U.S. Census Bureau’s business formation data. While exciting to launch, securing funding for a startup can also be quite challenging.
One reason is that many traditional lenders, like banks and credit unions, might not want to work with your company if you don’t have a track record of business success. Fortunately, there are other options to consider, including online lenders, personal loans and crowdfunding, to ensure that your startup finds the right funding to be successful.
| Lender | Minimum time in business | Features |
| Taycor Financial | 3 months |
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| Fundible | 6 months |
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| Funderial | 2 months |
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| Accion Opportunity Fund | 12 months |
|
Applying for a small business startup loan is fairly straightforward and involves submitting an application online. Some online lenders will decide on your loan within a day; if approved, you’ll receive the money in a day or two. But prepare to deal with potentially higher interest rates or shorter repayment windows like 24 months or less in exchange for quick access to financing.
Pros
- Easier to qualify for than some other business loans
- Offers fast access to cash
- Simple to apply for and manage these loans online
Cons
- Interest rates may be higher than bank loans
- Short repayment periods can mean high payments
- Can’t discuss loan options in person at a physical branch
SBA startup business loans
The Small Business Administration (SBA) backs small business loans — known as SBA loans — to help companies cover large purchases and expand their operations. The loans are distributed by SBA-approved traditional and online lenders. Some lenders known for offering SBA loans include:
Qualifying for an SBA loan as a startup can be tricky because lenders often require you to have a minimum time in business. If you’re running a brand-new company, you might consider the SBA microloan program, which provides small businesses with up to $50,000 to get off the ground. SBA microlenders tend to be nonprofits that accept startups and business owners with high credit risk, helping these borrowers access funding and receive mentoring support.
These loans can take 30 to 90 days to get funding approved. But if you’re patient, you can secure competitive interest rates and repayment terms that you might not otherwise qualify for. The SBA caps interest rates lenders can charge and allows for long terms, like six years, for microloans.
Pros
- Lower, capped interest rates
- Fewer fees than other loan types
- Microloans can help young businesses launch and expand
Cons
- Many lenders require at least two years of business history
- Can take up to 90 days to receive funding
- Some SBA loans require a down payment
Bankrate insight
Startup businesses make up a significant part of SBA loans granted. According to the SBA 7(a) summary report for fiscal year 2024, SBA lenders approved 10,918 SBA 7(a) loans totaling $5.5 billion dollars in funding to startup businesses opening their doors. Another 11,766 SBA 7(a) loans totaling $4.4 billion was granted to businesses under two years old.
Crowdfunding for startups
If you don’t qualify for traditional financing or want to engage the community, you can try crowdfunding. Crowdfunding involves raising money from people interested in supporting your company. You’ll start by registering with a crowdfunding site like Kickstarter or Indiegogo. Then, you’ll set up a fundraising campaign, which should include a target dollar amount and a deadline for donations.
It’s also common to incentivize your supporters for their financial support — either with equity (a small stake in your company) or a specific reward like the product you sell or swag.
Alternatively, you can run a debt-based crowdfunding campaign, where you essentially get a startup business loan from individual investors. Microlender Kiva uses this approach, allowing you to get zero-interest loans up to $15,000 as long as you have a strong personal network to achieve funding.
Pros
- With equity-, donation- or reward-based crowdfunding, money doesn’t have to be repaid
- Gives you the opportunity to create early customers and fans of your brand
- No credit check or collateral required
- Open to any businesses, including startups
Cons
- Some crowdfunding websites charge high fees
- You need a strong network and community in order to raise the full funding
- Can take significant time and effort to raise funds this way
Personal loans to start a business
If you have strong personal credit, you could use it to your advantage and take out a personal loan to fund your business. Financial factors, including your income and debt-to-income ratio, will influence your lender’s decision.
You’ll usually need at least a fair personal credit score (above 580) to get a personal loan, a low requirement compared to many business loans. Personal loans may also offer a low loan amount, like $100,000 or less, and limited repayment terms between two and seven years.
One important caveat: Some lenders won’t let you use personal loans for starting a business or any other commercial purpose. Make sure to check the fine print on a loan’s conditions to see if there are any rules about using it for business. If you have questions or doubts, ask the lender directly.
Some personal loan lenders to consider include:
| Lender | Minimum credit score | Features |
| Lightstream | 695 |
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| LendingClub | 600 |
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| Best Egg | 600 |
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| SoFi | 300 |
|
Pros
- No business history required
- Many lenders make it quick and easy to apply online
- Money can be deposited into your bank account within days
Cons
- Small loan amounts
- Interest rates can be high if you have bad credit
- If you can’t repay the personal loan, you could face legal action and be held personally liable
Bankrate insight
Another viable option is to get a business credit card, which gives you available credit up to a preset limit. You won’t need any money initially, as you only pay for what you spend. Plus, as you spend on business expenses, the best business credit cards let you earn rewards that you can redeem later.
How to choose a startup business lender
Choosing the right startup lender will depend on a few factors, including how long you’ve been in business and how quickly you need money. Here’s how to decide on a lender that fits your needs.
- Decide how much money you need — and when. There’s a limit to how much you can borrow with each lender, so choose one that offers enough capital to cover your expenses. Use a business loan calculator to gauge the monthly payments that will fit your budget. Also, if you need money immediately, look for a loan that can be funded in days rather than weeks or months.
- Make sure you meet the lender’s minimum requirements. It’s common for lenders to set eligibility criteria around the length of time you’ve been in business, credit history and revenue. You might be able to find these requirements online, especially if you’re applying with an online lender.
- Consider what trade-offs you’re willing to make. Business loans for startups can be tough to find, so you may need to get creative when evaluating loan options. For example, a personal loan might work if you’re comfortable with putting your credit on the line. Or, if you’re happy to trade equity and rewards for funding, crowdfunding could be a good option.
- Compare your options. Create a pro-con list of each startup lender’s interest rates, repayment periods and fees before deciding on one. Compare multiple options to make sure you’re getting the best deal.
Bottom line
While getting approved for a startup business loan may be trickier than for more established businesses, it’s not impossible. You might have some success by exploring non-traditional options like online lenders and crowdfunding or considering startup-friendly programs like SBA microloans.
Once you’ve decided on a loan type, you can take the next steps to get a startup business loan, which includes comparing lenders, gathering documents and applying.
Frequently asked questions about where to get a startup business loan
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Startup businesses can get an unsecured business loan, meaning you won’t have to provide collateral for the loan. But since collateral helps you negotiate terms, you may not qualify for high loan amounts or favorable interest rates in exchange. Lenders will also look more closely at your business’s overall financial picture, making sure you can handle the repayments.
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It’s possible to find a startup business loan without money on hand, but it’s rare. You have a better chance of getting a business loan with no money if you can offer collateral to back the loan. You also have a better chance of approval if you get specific types of loans backed by assets. For example, equipment loans are secured with the equipment being purchased, and invoice financing is secured by unpaid invoices.
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Yes, you can get a startup business loan with bad credit, but your options for lenders may be limited. You may want to look into a business loan from an online or alternative lender since they tend to have more lenient application requirements. Be sure to research the lender’s qualifications before applying to confirm they’ll accept your credit score. Some online lenders will accept personal credit scores of 500 to 600.
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To get a business loan for a startup, you still need to meet the lender’s basic loan requirements. The lender will consider your time in business and any revenue you bring in. But establishing a banking relationship first or having a strong personal credit history or assets could give you a leg up in getting approved.
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