Overview of Start Up Business Loans
There are a wide variety of start up business loans and funding options. Getting a traditional business loan can be difficult because a new business doesn’t have a track record. When launching a start up, it’s typically cheapest to rely on personal assets. However, if you’d prefer a business loan, there are options we can help you with to get the capital you need to grow.
Free Guide To
Small Business Financing
How Start Up Business Loans Work
Using Personal Assets To Fund a Start Up
We recommend that you first consider personal assets to finance your startup. This is usually cheaper than getting a business loan.
A popular way to use personal assets is with a Rollover for Business Startups (ROBS). A ROBS allows entrepreneurs to invest their retirement money into their business without having to pay any income taxes or early withdrawal penalties. If you have over $50k in retirement accounts, speak to a ROBS professional at Guidant Financial.
Other popular ways to use personal assets is with a home equity loan or a family and friend loan.
A lot of business owners hesitate to invest personal assets in a business, thinking that they will lose those assets if the business fails. However, even if you get a business loan, you will most likely have to provide a personal guarantee. In other words, whether you use personal funds or get a business loan, your personal assets are at stake. Therefore, it makes sense to first assess if you have any personal funds that you can use towards your startup.
Start Up Business Loans
If you have no personal assets to rely on, we can help you get a start up business loan. Here are some types of business loans we can arrange for your startup:
Businesses that are pre-revenue (brand new or still in the idea stage) will usually have the best chances of getting a loan by seeking a personal loan. Qualifying for a personal loan typically means having a credit score above 660 (check your's here for free) and having an income. Personal loans will typically have a max size of $50k and an average APR of 14-20%. Online personal loan providers, like Lending Club, offer same-day approval and can have funds in your account quickly.
Small Business Credit Cards
Another good financing option for small businesses that are pre-revenue are small business credit cards. Not only do they give you a flexible line of credit, but many have low introductory rates and generous rewards programs. Qualifying for a good business credit card requires a credit score above 660 (check your's here for free). Find the right small business credit card here.
SBA loans are typically given to existing businesses, but startups are eligible too. If you have an excellent credit score, a down payment of at least 20 %, and industry or business management experience, you may be able to get an SBA loan for your new business.
Line of Credit
Business owners with strong personal credit scores may be able to qualify for an unsecured line of credit of up to $150,000. Interest rates range from 8-24 %.
Brand new startups can get microloans to get their businesses off the ground, and businesses that have been operating for a few months with revenue can get larger amounts of capital.
Invoice factoring lets startups with unpaid invoices turn those invoices into capital. It’s a great way for new businesses to stabilize cash flow while waiting to get paid for goods and services. The amount you can borrow is limited by the value of your outstanding invoices.
We can help you buy equipment, inventory, or other essential goods and services for your startup. Purchase financing is available for startups that need to make a one-time purchase or need a continuous line of credit.
Merchant Cash Advances
With a merchant cash advance, startups can get money in exchange for a portion of their daily credit card sales. On days that your business does well, you pay more. On slow days, you pay less. There’s no deadline to pay back the loan. Many startup owners like the flexibility of a merchant cash advance, but they can be really expensive, so we’ll first consider you for lower cost options.
Will I Qualify for a Start Up Business Loan?
Requirements for start up business loans vary significantly, but you typically need a personal credit score of at least 600. SBA loans and non-profit loans may require a significant amount of paperwork. Other options, such as credit cards, require less paperwork. You can check your credit score for free by clicking here.
You will also need a good business plan to show lenders how you plan to manage and grow the business. Click here to learn more about how to write a business plan in just a few hours.
Cost of Start Up Business Loans
As with qualification requirements, the cost of a startup loan varies significantly based on the type of loan you get. We have options ranging from 6 % APR for applicants with great credit to much costlier merchant cash advances for applicants who don’t qualify for other types of financing.
Maximum Loan Amount
Typical Loan Term
Typical Interest Rates
Starts at 8 %
As fast as 1 business day
Typically not required.
Typically not required.
Have a question?
Many different types of financing are available.
Can get money quickly.
Not a lot of paperwork required for most types of start up business loans.
Interest rates can be high on start up business loans, with the exception of SBA loans, which have rate caps.
Typically, only small amounts of financing are available for startups.
Must have a personal credit score over 500 and even higher to qualify for the best rates.
Finding funding for a small business can be daunting. A Google search for “small business loan” brings up 180 million results! In part, this is because the last few years have seen a surge in business financing options. Nonetheless, some approaches stand the test of time. Here are 3 lessons you can learn from how […] Read More