Small Business Loans for Startups
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What Is a Small Business Loan for a Startup?
How Can You Get a Business Loan for a Startup?
Bank statements (both personal and business) Tax returns (both personal and business) Legal business documents, like your business license and articles of incorporation Financial statements
What Are the Requirements for a Small Business Startup Loan?
Credit Scores: Lenders typically look at both business and personal credit scores. And you may not have a business credit score if your startup is less than a year old. Your personal credit score should be at least 650 in order to help you qualify for business financing—and some lenders may require a higher number. Business Age: Many lenders require that your business be open for at least two years before they will consider extending any credit to you. As a startup, you may need to bootstrap your expenses in the beginning, and then use a loan to scale your growth once you’re more established. Revenue and Cash Flow: Lenders want to know that you’ll be able to repay the business loan, so they’ll typically look at your revenue and cash flow as part of the application. There may be a minimum monthly or annual revenue requirement depending on the lender.
Where Can You Get a Startup Business Loan?
Online Lenders: Typically, faster approval and funding times Traditional banks: Wider variety of financing options Credit Unions: Competitive interest rates with a focus on local businesses P2P Lenders: More flexible application criteria
Small Business Startup Loan Type Options
Pros and Cons of Small Business Loans for Startups
Faster Growth: One of the biggest advantages of using a small business loan to launch your startup is that you can grow much faster with that injection of capital. Ordering inventory in larger quantities, for instance, can save you money and help you jump on new opportunities. Working Capital. A loan can give your startup funds to work with before you start making enough money to support the business. Company Control: You also get to retain ownership in your company rather than opening up the doors to equity investors.
Costly. Qualifying for a small business loan as a startup can be tough, not to mention expensive. Puts You in Debt. Getting a loan means that your startup already has an ongoing financial obligation. Risk of Losing Collateral. You also usually need to provide a personal guarantee and/or collateral, which brings in some personal risk.
Our Top Picks for Small Business Startup Lenders
Our Methodology for Determining Top Picks
Minimum credit score required is 650 or below Minimum time in business required is one year or less Minimum annual revenue required is $100,000 or less No collateral is required Interest rates start at 20% or below Maximum loan term is 25 years or longer Maximum loan amount is $500,000 or higher Simple application (online, no mailing or going into the bank required) Time to funds is less than a week Whether it offers 24/7 support (online or phone) Special benefits/terms for the interest group startups
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