Startup Business Loans

If you’re just getting started with your business and don’t have much capital to draw from, then a startup business loan will probably be your best bet.

Startup Business Loans

If you’re just getting started with your business and don’t have much capital to draw from, then a startup business loan will probably be your best bet. There are several different kinds of startup business loans, ranging from official options like SBA microloans, business credit cards, and business grants.

There are also more informal options such as asking friends, family, and crowdfunding. Since there are so many options, at least one will likely be tailored to your circumstances. The startup costs for your new business can get out of hand quickly. Luckily for you, there are quite a few funding options for new business owners today.

An SBA loan or credit card might the best choice for you if you have a decent credit score. However, as you are getting started, taking on new debt might not be the best option for you and your new business. If this is the case, you might want to choose an alternative form of business financing such as applying for grants or crowdfunding.

Who Can Get a Startup Business Loan?

The cutoff to qualify as a startup business is six months. If your business is younger than six months old, then a startup business loan is a good choice. If your business is older than that, then more traditional loans might be necessary.

Not only is an older business ineligible for certain startup loans, but some loans only become available for businesses that are older than six months or a year. So it is important to know what your business qualifies for as you get started applying for small business loans.

However, just having a young business isn’t enough to guarantee eligibility. Your personal credit score will also be extremely important. With a higher score you are a better prospect for business credit cards, SBA microloans, and personal loans for business.

If your credit score isn’t great or if your business is a little too old, then there are still plenty of ways to secure funding. Informal loans from friends and family, crowdfunding, and grants can also give you the necessary capital to proceed. In those cases, how well you can sell your business to future prospects is more important than credit score and the age of your business.

What Are the Different Kinds of Business Startup Loans?

If you’re just getting started, the idea of financing your business can be pretty overwhelming. This is especially true since there are so many different loan options. Thankfully, they’re all pretty simple once you get down to it. Here are five of our favorite ways to look for funding for your startup business:

  1. SBA microloans
  2. Business credit cards
  3. Small business grants
  4. Friends and family
  5. Crowdfunding

How Does One Apply for Startup Business Loans?

The process completely depends on what type of financing you’re pursuing.

  • SBA microloans have fairly strict requirements, so you will need to provide quite a bit of documentation and wait several weeks to get an answer.
  • Business credit cards, on the other hand, are very easy to apply for. All you need is a federal tax ID or Social Security number.
  • Small business grants aren’t heavily standardized, so you will need to follow the specific guidelines of the grant you’re shooting for.
  • Crowdfunding will require adherence to the rules of whatever site or other services you use as an intermediary.

Let's take a closer look at each of the five ways we suggest looking for funding for your start-up business.

SBA Microloans

As the name would suggest, SBA microloans are relatively small loans on the scale of running a business. The loan amount can range from $500 to $50,000, allowing you to get as much or as little as you need to get started. On average, SBA microloans give around $13,000 to businesses.

The way SBA microloans work is that the Small Business Administration loans money to intermediary lenders. And these financial institutions then decide which new businesses to lend to. Therefore, you aren’t actually asking the Small Business Administration for money, you’re asking the intermediaries.

The biggest benefit of SBA microloans is that the intermediaries tend to be local organizations with a good grasp of the community. You’re not asking a distant and detached organization for funding, you’re asking someone who understands local issues. Many such microloan programs focus on minority-owned businesses, businesses in disadvantaged areas, and businesses that are aiming to better the community.

However, the upper limit of $50,000 might be insufficient for your needs. In that case, you can get a microloan to cover part of your costs, then pursue additional avenues of funding to cover the rest. Small business loans are a great option for you as you are growing your new startup.

Business Credit Cards

A business credit card is one of the best ways to cover the early costs associated with starting a business. They are also a useful tool for any business owner in general. Getting one around the time you start your business allows you to take advantage of many introductory offers. This can be very beneficial during one of the hardest parts of getting your project off the ground.

One of the biggest advantages of business credit cards is the ease of applying. If you need access to funding quickly, there are few better options. On top of that, you don’t need to provide collateral, or personal assets, as do some of the other funding options.

However, depending on your personal finances, you might not qualify for a very high credit limit. If you don't have a decent credit score you will likely get a low credit line as well as a high interest rate.

Traditionally, the big downside of credit cards is that the interest can quickly accumulate, especially if you don't qualify for low interest rates. But as long as you keep your balance low and consistently make your monthly payments, you won’t have to worry about interest at all.

Small Business Grants

Grants can be the hardest form of financing to get, but also the one with the fewest drawbacks. After all, grants are free money that you never have to pay back as opposed to other financing options. With grants, there are two major obstacles that you need to keep in mind.

First, you’ll have a lot of competition. Because the money is effectively free, lots of businesses will want to get in on it. Only a certain amount of money is going to be given out, so you will need to beat your competitors to secure that funding. For grants more than anything else, the quality of your application is critical.

Second, most grants are extremely limited in whom they’re given to. Most grants are meant to effect change in communities, so while some are designed to help small business owners in general, most are meant to help specific causes. Some of these might include non-profits, businesses with missions, and businesses that cater to underprivileged groups and communities.

In most cases, a small business grant won’t cover all of your costs even if you do win, but they can make things a lot easier. Check out our list of the top small business grants available here.

Friends and Family

One of the oldest and most tested methods of funding new businesses is to ask friends and family for help, either in the form of loans or gifts. Of course, this method will depend almost entirely on who you know, how much they like you, and how much they believe in your business. Not only do you need to succeed in all three areas, but if your business ultimately fails, it may sour your relationships.

If you are intent on using friends and family for your business financing, then you’ll want to get legal documentation regarding the exchange of money. The last thing you want is for a tenuous verbal agreement to be contested in the future, jeopardizing not only the funding of your business but your relationships as well.


One of the most modern solutions to the timeless problem of starting a business is crowdfunding. The premise is fairly simple: that you advertise your business on a specialized platform and people pitch in to make it happen. Unlike investors, these people don’t get paid back and they don’t get any sort of stake in the business.

This makes crowdfunding a pretty advantageous deal for the business owner. If you are going to attempt crowdfunding to raise money, then you need to appeal to potential donors and there are two main ways of doing that.

The first thing you will need is to have an appealing business plan. If the specific goal of your business can generate a lot of public goodwill, then that can incentivize people to donate because they want your business to become a reality. This can also include tackling old problems in new ways, such as selling products that only use recycled materials.

The second thing you will need to appeal to potential donors is to provide rewards to them. Since they aren’t getting paid back for their donations, you often need to provide an incentive for donations. One of the most effective ways of doing so is to use a tier system where donations over a certain amount are rewarded with larger and larger rewards.

More than likely, most of your donors will be people who believe in the product you will be selling. So, if the donations you are offering are vouchers or coupons for your business, then not only are you rewarding donors, but you don’t have to pay much at all. On top of that, you’re greatly increasing the chances of said donors becoming customers in the future.

One of the biggest and most popular platforms for crowdfunding is Kickstarter. This is an online platform that connects budding entrepreneurs and creatives with people willing to help fund their new ventures.

Crowdfunding isn’t the best option for most businesses. But if your business is either tackling a noble cause or using praiseworthy methods to tackle an old problem in a new way, then crowdfunding can be a surprisingly lucrative form of cash flow for your new startup.


You've been dreaming of building your own startup for years. Now, you are finally taking the steps necessary to start your own business. However, it is hard to build a successful business without some working capital. You will need to buy equipment and supplies, to do so you will need to look into some options for small business startup loans.

Use the ideas in this article to find the best business financing options for you and your unique business. Be sure to do your research and know the loan terms for any new debt you take on for your new business.

From SBA loans to a business line of credit or credit cards, there are many business loan options available. Not everyone has a good credit history, if this is the case for you then crowdfunding or small business grants might be the best option for you.

Finding the best startup financing doesn't have to be stressful. When armed with the right information, such as that provided in this article, you will be one step closer to realizing your entrepreneurial dreams.

About the Author

Mark Andrew

Mark is a freelance content writer specializing in topics such as Internet marketing for small businesses. His goal is to help small businesses owners understand what types of services and products truely bring in more business.

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