The 14 Best Crowdfunding Sites for Startups

Starting and growing a small business takes time, ingenuity, and, most importantly, capital. But while small business loans are a great option for many small business owners, not everybody meets the approval criteria for them. Whether your credit is less than stellar or you already have existing debt, banks turn down loan applications for a wide variety of reasons.

Fortunately, the bank isn’t your only option. Over the past few years, crowdfunding has emerged as a viable solution for small businesses to get the startup funding they need to open their doors, launch a new product, and more. You’ve put all the hard work into getting your business where it is—you don’t have to let traditional lenders and their models prevent you from obtaining the capital you need to succeed.  

Crowdfunding can be an effective way to quickly and easily raise money for just about any purpose, particularly when starting a business. But it’s important to know what kind of crowdfunding is right for your business and its present needs. These are the most common types of business crowdfunding sites:

  • Equity crowdfunding: The most traditional type of funding is when you sell a piece of your business to an investor or group of investors in exchange for the capital you need.
  • Donation crowdfunding: This form of funding is simply when you ask for donations to your business, with nothing in exchange.
  • Debt crowdfunding: Debt crowdfunding is when business owners borrow money from other individuals rather than a bank and structure unique repayment terms back to those individuals down the road. 
  • Rewards crowdfunding: This is the type of crowdfunding made popular by sites like Kickstarter and Indiegogo, in which funders are offered products, services, or other rewards in exchange for their monetary support.

Now that we know the most common types of crowdfunding, here are the best crowdfunding sites for startups and small businesses.

1. Kickstarter

Topping the list is the indisputably most well-known crowdfunding site: Kickstarter helps artists and filmmakers get projects off the ground, small businesses launch new products, and startups get the initial capital they need. Kickstarter projects have a lifetime success rate of 37.86%,[1] a number that is particularly impressive when you consider that nearly 500,000 projects have launched on the platform. The catch with Kickstarter is that if you don’t meet your funding goal in the allotted time, you don’t get any of the money.

Cost: Creating a project on Kickstarter is free. If it’s successfully funded, Kickstarter applies a 5% fee to collected funds and charges processing fees between 3% to 5%.

2. Indiegogo

Likely the most popular crowdfunding alternative to Kickstarter, Indiegogo is somewhat friendlier to entrepreneurs, priding themselves on their community of “early adopters” and innovative creators. On Indiegogo, you don’t have to stop raising money at a specific time and they let you apply for equity. They also offer securities and revenue sharing and even allow funding through cryptocurrency.

Cost: Indiegogo charges a 5% platform fee for all projects.

3. GoFundMe

Indiegogo’s sister platform is an internationally recognized platform that helps people put their money toward charities and causes that matter to them. While it’s not right for every startup, GoFundMe can be particularly useful if your business is dedicated to giving back. If you make an eco-friendly or crucial medical product or run a business that’s devoted to helping people or animals, for example, this platform may be perfect. GoFundMe’s most significant upsides are zero funding fees for personal causes based in the U.S. a lack of processing fees. On the flip side, GoFundMe has a lower success rate than other platforms, so it can take some extra work to get investment.

Cost: Listing on GoFundMe is free and you get to keep all of the funds you raise from a successful campaign.

4. iFundWomen

If the name didn’t make it clear, iFundWomen is a platform designed to support women-led startups and small businesses. Women-owned businesses often face unique and significant challenges to getting the capital they need. iFundWomen aims to provide at least some of those women with a solution. It also goes a step further by providing coaching, marketing, and other services for startup owners, and pumps 20% of all funding fees back into supporting campaigns and services for women-owned businesses. On the downside, access is limited to campaigners in just 23 countries.

Cost: iFundWomen charges a 5% funding fee while letting you keep the rest of the funds. They also charge a 2.9% + $0.30 processing fee per transaction.

5. Crowd Supply

The mission of Crowd Supply is to “bring original, useful, respectful hardware to life.” The platform focuses mostly on funding cutting-edge hardware and electronics projects and has a shocking success rate of 80%,[2] which is more than twice as successful as Kickstarter.

Cost: Crowd Supply offers a variety of plans depending on your business needs. The Standard plan charges 5% of gross campaign sales, not including payment processing fees. The Custom plan charges 6% to 15%. Features included in more custom plans include campaign management, media asset creation, and PR.

6. Crowdfunder

Think of Crowdfunder as the Shark Tank of crowdfunding sites. This community of 200,000 entrepreneurs and investors allows entrepreneurs to sell equity in their company to accredited investors. The network includes 12,000 VCs and angel investors who have funded startups at all levels, from Pre-Seed to Series A.

Cost: Crowdfunder’s plans are Free, Starter ($299 per month), and Premium ($499 per month). Each plan offers a variety of services from storage to personalized support.

7. Patreon

Primarily used by artists, musicians, writers, and other creatives to get paid for their work, Patreon users create membership plans, allowing fans—called patrons—to pay them a subscription in exchange for exclusive experiences and content. For instance, a popular cartoonist may offer personalized panels to their highest-level subscribers. Patrons typically pay a monthly fee that’s less than Spotify or Netflix, which can create a meaningful recurring revenue stream for individuals or small businesses. Unfortunately, Patreon hits creators with many fees.

Cost: Patreon takes 5% of successfully processed payments. They also charge a payment processing fee each time a payment is processed and charge additional fees for moving funds to your bank or PayPal account.

8. Fundable

Fundable allows small businesses to have a bit more control over their fundraising efforts. When you create a profile, you can choose to raise funds by selling products, taking pre-orders for upcoming products, selling merchandise, or by appealing directly to accredited investors. Whether you’re looking to raise $10,000 or $10 million, Fundable has unique options tailored to the size of your business and your capital needs.

Cost: Creating a company profile is free, but it’s $179 per month to start fundraising. There are no success fees but rewards-based raises come with a processing fee of 3.5% + $0.30 per transaction.

9. WeFunder

WeFunder is a community of 150,000 investors aimed at supporting higher-value equity investments. While people can invest as little as $100 in the causes they support, most companies are looking to raise between $50,000 and $50 million. Most campaigns take a few months to reach their goals but whether you’re starting a restaurant or building a tech startup, WeFunder may have a place for you.

Cost: Creating a WeFunder profile is free and there are no management or transaction fees. Instead, administrative fees are charged to investors.

10. SeedInvest

SeedInvest works with high-growth potential, early-stage companies to raise either preferred equity or convertible note funding. Because they are selective of the companies they accept onto the platform, you’ll need to apply and make it through the screening committee to join SeedInvest. Applications take a minimum of 60 days to complete. Once on the platform, however, you’ll have access to a community of 300,000 investors that have provided more than $200 million in funding to just over 200 startups.

Cost: SeedInvest charges a 7.5% placement fee on the total amount raised after the successful completion of your campaign, as well as a 5% equity fee. 

11. StartSomeGood

StartSomeGood is a cause-driven crowdfunding site. You can be a nonprofit, for-profit, unincorporated group, or any other status just so long as your organization aims to have a positive social impact. It’s a great way to get funding for an uplifting project or to launch a company dedicated to improving the community.

Cost: Submitting your project on StartSomeGood is free and you’ll only pay the 5% service fee if your project reaches its funding goal. There are payment processing fees, however.

12. Chuffed

Chuffed is another crowdfunding platform that supports social causes aimed at helping animals, your community, or the environment. It’s exclusively for not-for-profit and cause-based organizations, so it’s not right for every business.

Cost: Donors pay your 3% processing fees so every $100 donation would incur a $3 fee from the donor. Donors are also encouraged to donate to Chuffed itself.

13. Crowdcube

Crowdcube is an equity crowdfunding platform designed to turn your friends, family, customers, and everyone else in your network into investors. Crowdcube’s experts help you set realistic targets, a sensible valuation, an effective pitch, and a well-executed communication plan to attract investors. When your Crowdcube pitch reaches 20% of its goal (i.e. from the support of your existing network), it will launch publicly on the platform. From there, the average pitch reaches full funding in just 22 days. At 75% funding, Crowdcube’s legal team will help you complete your round. Crowdcube’s concierge experience makes it great for companies with existing customers or fanbases that need a little boost to reach their next stage.

Cost: Listing your business on Crowdcube is free but you’ll be charged a success fee of 7%. There are also payment processing fees.

14. CircleUp

Finally, if you’re a consumer company trying to get a new product on the market, CircleUp is a great option. This equity crowdfunding platform is purely focused on early-stage consumer products, giving you a platform to connect with accredited investors, insights from machine learning technology, and access to special lines of credit. In exchange for a stake in your product launches, investors on CircleUp could give you the financial boost you need to make it to market. They are, however, highly selective of companies that launch on the platform and work on an all-or-nothing funding model.

Cost: There are no funding or processing fees on CircleUp.

The Bottom Line

Crowdfunding is a suitable alternative for small businesses looking for capital to launch or scale. With so many platforms to choose from, it’s easier than ever for businesses and startups to bypass banks to get that capital. Whether you’re looking for a few thousand dollars or a few million, one of the above best crowdfunding platforms can be the right fit for your business.

Article Sources:

  1. Kickstarter. “Stats.”
  2. Crowd Supply. “Launch.”

Best Startup Business Loans for Bad Credit in 2020

Searching for startup funding is hard enough, but when you mix in bad credit, it’s even more of an uphill battle. A bad credit score is typically thought of as a score of 579 and below, which is not high enough to meet the lending requirements of most traditional banks. 

Of course, not all lenders will disqualify startups based on bad credit alone—you just have to be strategic about which lenders to apply to, your available financing options, and ways to potentially boost your credit score in the meantime. 

That said, here’s our guide to five of the best startup business loans for bad credit.

Top 5 Bad Credit Startup Business Loans

Lender Loan Type Interest Rates Time in Business Minimum Credit Score Best For
BlueVine Invoice factoring Starting at 0.25% per week Three months 530+ B2B businesses
Fundbox Business line of credit Starts at 4.66% of draw amount Three months 500+ Business line of credit; businesses with lower credit scores
Accion Term loans Starting at 7% APR No minimum requirement 550 to 575+ Microloans for startups
Fora Financial Short-term loans Factor rates range from 1.1. to 1.3 Six months No minimum requirement Businesses with little to no credit
Credibly Short-term loans Factor rates start at 1.15 Six months 500+ Working capital loans

As you can see based on this overview, although you might imagine a startup loan as a term loan—a lump sum loan paid back over a set period of time—startup business loans come in various forms.

In fact, when it comes to startup loans for bad credit, some of your best options will be other types of financing products, including lines of credit, invoice factoring, and even business credit cards.

Let’s break it down.

1. BlueVine

Best for B2B businesses.

If you’re a B2B business looking for a startup loan for bad credit, you might turn to BlueVine’s invoice factoring. Invoice factoring, also known as accounts receivables factoring, is a popular method of getting startup business financing because it primarily relies on the strength of your customers’ invoices for qualification and not so much on your credit score. 

Loan Details 

If you’re wondering what invoice factoring is, here’s the general rundown—if you have an outstanding invoice with a customer, you essentially “sell” your invoice to the factoring company, who will then issue you capital equal to a percentage of your invoice (this typically ranges from 70% to 95% of the invoice value). Once your customer pays the invoice, the factoring company issues you the remainder of the invoice minus their fee. 

Invoice factoring is typically exclusive to B2B startups and businesses, and we highly recommend it to startups that have outstanding receivables. BlueVine’s invoice factoring product is one of the best online factoring solutions on the market because they’ll factor invoices up to $5 million, with interest rates ranging from 0.25% to 1.7% per week. 

Eligibility Requirements

BlueVine’s invoice factoring eligibility requirements are great for startups with bad credit. To qualify for BlueVine invoice factoring, your business simply needs:

  • At least $120,000 in annual revenue
  • A 530 credit score 
  • At least three months of business history

2. Fundbox

Best for businesses with lower credit scores; best for a line of credit. 

Fundbox, like BlueVine, is an online lender that provides working capital loans to small businesses using an online platform. Fundbox is best known for their startup business line of credit, which is great for newer businesses that need funding for unexpected expenses or cash flow shortages. 

Loan Details 

Fundbox’s business line of credit ranges from $1,000 to $100,000. Interest rates start at 4.66% of the amount you draw from the credit line.

That said, Fundbox’s startup business line of credit can be paid back over 12 or 24 weekly installments. Fundbox’s line of credit is unsecured, which means it does not require any collateral. 

Eligibility Requirements

Fundbox’s eligibility requirements are great for startups with bad credit. To qualify for one of their business lines of credit, you’ll need to have: 

  • A credit score of at least 500
  • Annual revenue of $50,000
  • Three months of business history

You’ll also need a business bank account or online accounting software in order to prove your sales history.

3. Accion USA

Best for microloans.

Accion, the largest nonprofit microloan lender in the U.S., offers small business startup loans for bad credit. Accion lends to all sorts of small businesses and startups in various industries, and thousands of startups have used Accion to finance their business.

Loan Details 

Accion offers term loans between $300 to $300,000. Term loans are basically lump sums of cash paid back weekly or monthly, with interest, over a period of time. 

Accion’s loan rates start at 7% APR, which are some of the most affordable in the online loan marketplace—especially for startups. 

Eligibility Requirements

When you apply for a loan at Accion, the minimum eligibility requirements you need to meet will vary based on your location. However, you’ll also need to meet Accion’s general basic requirements, which include: 

  • The ability to show two most recent pay stubs 
  • At least a year of on-time mortgage payments
  • No declared bankruptcy over the past year
  • No more than 30 days late on any bills 
  • A credit score of 575 (550 in certain states)
  • Sufficient cash flow to repay the loan

As a startup, you’ll also have to meet these additional qualifications:

  • A business plan with a 12-month cash flow projection
  • An outside income source
  • A partner referral (e.g., SCORE or SBDC)
  • Less than $3,000 in debt

4. Fora Financial 

Best for businesses with little to no credit.

Fora Financial provides short-term small business loans and merchant cash advances to small businesses and startups. What differentiates Fora Financial is that they don’t have a hard credit score requirement. 

As long as you meet their basic requirements and have no bankruptcies, you might be able to qualify for one of their startup loans.

Loan Details 

Fora Financial’s small business loan ranges from $5,000 to $500,000, with loan terms ranging from six to 15 months. Factor rates on these short-term loans can range from 1.1 to 1.3.

Payments can be made daily or weekly and Fora Financial does not charge a prepayment penalty for making early payments on your loan. 

Eligibility Requirements

To be eligible for a bad credit startup loan from Fora Financial, your business must meet the following requirements: 

  • Have at least six months of business history
  • $12,000 per month in gross sales
  • No open bankruptcies

If you decide to apply to Fora Financial, keep in mind that they will do a soft credit pull to check your credit even though they don’t ask that you meet a minimum requirement.

5. Credibly

Best for working capital loans.

Credibly, another alternative business lender, offers working capital loans to startups. They also offer other forms of financing, such as business expansion loans and merchant cash advances, but these aren’t going to be suitable as financing products for startups with bad credit. 

Loan Details 

Credibly’s working capital loans are available in amounts up to $400,000. The loan terms vary between six to 18 months, and factor rates start as low as 1.15. They also charge a 2.5% origination fee.

Eligibility Requirements

To qualify for a working capital loan from Credibly, you will need to have:

  • A minimum FICO score of 500+
  • Average monthly bank deposits of $15,000+ 
  • Six months of business history 
  • A business bank account

It’s also worth noting that Credibly is willing to work with startup founders who have declared personal bankruptcy, but two years must have elapsed since discharge. 

Alternative Financing Options for Startups With Bad Credit

Finding and qualifying for a small business startup loan with bad credit is never easy. In addition to the options listed above, you may want to consider looking into these alternative ways to finance your startup as well.

Business Credit Cards

Business credit cards can be a flexible, scalable way to fund your startup. Just keep in mind that you don’t want to overly rely on them because you can quickly find yourself in a vicious debt cycle. 

Business credit cards are also not ideal if you’re looking for large amounts of funding. That said, if you decide to use a business credit card to finance your startup, we recommend trying to get a business credit card with a reasonably low APR so that you’re not accruing significant interest as you pay off your balance.

Use our guide to compare the best business credit cards for startups.

Grants 

Grants are another popular financing option for startups because they’re essentially free money. There are several grant programs or competitions for startups specifically—and if you have the time to write a compelling grant application, you might want to look into grant funding. The downside to grants is that oftentimes they come with strings attached, in that your progress may be monitored by the grant organization, and they’re highly competitive.  

With that in mind, when searching for startup grants, make sure to start locally, then continue searching by region. You’ll most likely be able to find a few grant programs for startups, and if not, you may want to consider broadening your search to national startup grant programs. 

Crowdfunding

Crowdfunding allows you to raise money from contributors who believe in your startup. 

There are many different types of crowdfunding, from donation- to equity-based, and all you really have to do is convince people why your startup is worth the investment using a crowdfunding platform like GoFundMe or Kickstarter. 

Crowdfunding is generally better for early-stage startups that need fast cash to fund their business idea. 

Investors

If you’re willing to give up a little equity for some funding, seeking outside investments from angel investors or venture capitalists might be worthwhile. 

Investors may be willing to overlook your credit history if you have a rock-solid business plan and they can see the commercial viability of your product. 

Frequently Asked Questions

Can I get a startup business loan with bad credit and no collateral?

Yes, it’s possible to get a startup business loan even if you have bad credit and no assets to offer as collateral. However, lenders that don’t require a good credit score or collateral generally ask for a personal guarantee. 

A personal guarantee means that you, as the business owner, will be held liable to make repayments on the loan in the event your business defaults and cannot repay. 

Is it hard to get a startup business loan with bad credit?

It can be hard to get a startup business loan with bad credit. Credit history is one of the most common requirements a lender will look at when evaluating a loan application.

That said, you may have an easier time getting a startup business loan with bad credit if you turn to online or alternative lenders. These lenders tend to have higher interest rates, but generally, their requirements aren’t as strict as traditional banks. 

The Bottom Line

We won’t sugar coat it—getting a startup business loan with bad credit will very likely be challenging. But, it’s not impossible to get financing as long as you’re open to the possibility of working with alternative lenders and not traditional banking institutions. 

You’ll also want to keep in mind that if you’re a newer startup, you may want to hold off on looking for financing until you’ve been in business for about three to six months, which is the cut-off for most alternative lenders. 

That said, if you’re facing difficulties getting financing from lenders, we suggest looking into alternative financing options such as grant programs, crowdfunding, friends and family, or equity financing—or, work on building your credit score until it’s strong enough to continue your funding search.

How to Get a Loan to Start a Business

Every new business venture is different, but there’s one thing they all have in common—they all require capital to get started. That’s why so many entrepreneurs look into how to get a loan to start a business. 

Lenders can help new businesses secure the financing that they need to take care of all sorts of startup costs—including building a space and buying equipment, stocking inventory, hiring staff, and more.

However, the process involved with getting this financing isn’t quite as simple as walking into a bank and walking out with a loan. Here, we’ll cover how to get a business loan to start a new business—explaining steps to follow, important information for your search, and alternative options for capital.

How to Get a Loan to Start a Business

The good news—there aren’t too many steps actually involved in learning how to get a loan to start a business. That said, there are nuances within each of those steps that are important to understand as you’re searching for your first startup business loan.

Here’s what you need to know.

1. Legally establish your new business.

Even if you don’t have the capital to fully launch your company, you still need to establish your business legally. 

In fact, you’ll need to take these official steps in order to obtain the financing you need to continue to launch your business. This means you’ll need to:

Choose a business name. 

Even if you’re not actually ready to launch, you will need a name for your business. You’ll use this name not only to distinguish yourself to your customers, but also on legal documents that will get your business going. 

Although it’s important to choose a business name carefully, you’ll be happy to know that you’re not stuck with your name forever—you can file what’s called a “DBA” (doing business as) in which you operate under a different name even if your legal documents still say the name you originally picked.

Establish your business as a legal entity. 

Your next step is to establish yourself as a business officially within your state. This is called choosing a business entity, and during this process, you’ll officially declare the structure of your business, as well as how you’re going to pay taxes on your earnings. 

Examples of business entities include sole proprietorships, LLCs and LLPs, S-corps, and C-corps. It’s also important to note that each state has a different process for establishing a business entity. For instance, if you’re going to start a business in California, the process you’ll go through is different than if you’re looking to start a business in Florida.

Get an EIN. 

Getting an EIN, or an “employer identification number,” is an important next step. This is sort of like your business’s social security number and you’ll use it on many important documents—both at the beginning of your business—as well as down the line. 

You can quickly get an EIN online through the IRS.

Open a small business bank account. 

Although opening a small business bank account isn’t technically a requirement to start your business, you might as well do so when you’re getting up and running. 

Obviously, you’ll need one to get a loan to start a business, but it’s also important to help you separate your personal and business finances—an essential part of correctly and intelligently establishing your new business.

2. Figure out how much capital you need.

Another step to complete before you apply for a loan is to understand how much money you need and what you plan to use it for.

When you’re applying for a loan to start your new business, you’ll need to request a specific amount of money. 

This number should be a precise figure that you derive from the following factors:

  • What you’re planning to spend the money on 
  • The costs associated with these expenses
  • How much your business can realistically afford to pay back with interest rates factored in

Business loans also have different structures—for instance, some offer lump sums, others are draw-as-you-need, and others specifically finance certain fixed assets. On top of knowing how much money you need, you should also know how you need to be able to access and deploy your capital.

3. Understand lender requirements.

Next, it’s crucial to understand how business loans work. 

To explain, lenders have certain requirements that they need borrowers to fulfill in order to qualify. And, some of these requirements can be tricky for new business owners to meet. 

Here are the most important things that lenders evaluate when granting capital to business owners.

Personal Credit Score

Your credit score is the most comprehensive indicator of your past responsibility with debt—how much credit you have available and how much you’re currently using, whether you’ve paid past loans and bills in full and on time, how long you’ve had credit in your name, and more. 

Your business will build up a business credit score, too, as you begin to do business, but lenders will take into account your personal credit history as they’re deciding whether or not to give you a loan on behalf of your business. 

Not only will your credit score determine whether or not you get a loan, but it can also dictate how much money you can borrow, the structure of your loan, and the terms under which you can borrow (including your business loan interest rate).

Time in Business

The amount of time you’ve been in business is important, too. It helps lenders evaluate the viability of your business, which, in turn, helps them determine whether or not you have a strong enough business to lend to. 

Although there are some loans that specifically cater to startups, many lenders require a year or two (in some cases, six months) of business history before they’ll even consider extending you a loan.

Revenue and Cash Flow 

Similarly, in order to properly assess whether or not you’ll be able to repay a business loan, lenders will consider how much revenue your business generates annually, as well as how much cash you have in the bank already. 

Some lenders require certain revenue numbers before they’ll consider a candidate for a loan, which can prove tricky for entrepreneurs looking for a business loan to start a business.

Assets 

Along with your cash assets, lenders will look at the type of assets your business has to put up as collateral. This could be physical equipment or property, or sellable inventory, for instance. 

As a startup, you may not have strong assets to back your loan. Often, you’ll be asked to sign a personal guarantee, which means your personal assets will secure the loan in case of default.

Industry Risk 

Some industries are riskier than others—some have higher failure rates and are more susceptible to economic fluctuations (such as restaurants). Lenders are generally more interested in providing loans to businesses in more stable industries. 

That’s not to say that you can’t get a business loan if you’re, say, looking into how to start a food truck, but if you’re approved, you may have a higher interest rate than someone in, for example, raw materials that are constantly in demand.

4. Research your best loan and lender options.

As you read through the above list, you’re probably realizing that, as a new small business, you won’t have things such as revenue, collateral, business history, and business credit for lenders to evaluate. 

This can make it especially challenging to find a loan to start a business, especially from traditional lenders (and even some alternative lenders, who generally have slightly less stringent requirements). 

There are, however, some lenders that are more likely to loan capital to new enterprises, and some types of loans that are better suited for startups. Here’s what to know as you’re researching your options for how to get a business loan to start a small business:

Types of Loans for New Businesses

The long and short of it is that new businesses are unlikely to be able to secure traditional business loans, such as term loans. There are, of course, exceptions—for instance, maybe you’ve run a successful business in the past and have some track record for lenders to look at—but it’s wise to look into alternatives to traditional loans just in case. 

Some forms of startup funding that you may be able to secure include:

  • Equipment financing: In which a lender finances a piece of equipment directly, and the equipment itself secures the loan
  • Inventory financing: Which is similar to equipment financing, and in which the inventory financed provides collateral for the loan
  • Business line of credit: In which a lender approves a credit line you can draw from, similar to a business credit card, but in much higher amounts
  • Business credit cards: Which are often available to new businesses to fund smaller expenses, and which can help build credit for business loans down the line 

Startup Lenders

Once you have a sense of the type of business loan you’d like to pursue to start your business, you can begin looking into lenders. You’ll find that not every lender will finance newer businesses, but some will have less time in business requirements than others. 

Additionally, if you’re able to offer up valuable collateral, or choose a loan like an equipment loan that is self-securing, you might have a better chance of securing a loan as a new business. 

That said, you’ll find that some lenders specialize in offering loans to new businesses, but many of these lenders charge very high interest rates to compensate for the risk, which could be difficult for your business to afford.

In other words, carefully understand what debt your business can take on—and at what cost—before proceeding.

5. Gather your business loan application materials.

Each business lender and type of business loan will have different application requirements. You’ll work with your specific lender to find out exactly what kind of information you’ll have to supply for your application. 

However, there are several documents and pieces of information you can gather in advance, which can help speed along the business loan process.

You’ll want to have the following ready:

  • Personal identification
  • Two years of personal tax returns
  • Business identification, including your EIN, ownership paperwork, and business license
  • Information on your business bank account, including your last three months of bank statements if you have them
  • Any other financial documentation that you may have on your business
  • Business plan

6. Familiarize yourself with alternative routes for startup capital.

It’s possible that you might not get approved for a loan to start a business right away. Because that’s the case, you’ll want to familiarize yourself with a few alternative routes for startup capital.

 Popular options include:

  • Personal loans for business: In which you take a loan out against your personal credit and finances and use the capital to build your business
  • Equity financing: In which you give away a percentage of ownership of your company in exchange for capital to build your business
  • Crowdfunding: Which is a popular route for many consumer-product companies to help finance inventory and production 

What to Do If You’re Rejected for a Loan to Start a Business

If you’re rejected for a business loan to start your business, it’s certainly not the case that you’ll never be able to secure capital. You may just be a little too early and may have to start generating some revenue and accruing some time in business—even if it’s just from bootstrapping your operations.

In the meantime, you might want to start by opening a business credit card. This can give you access to some capital to grease the wheels, and, most importantly, it’ll help you establish that business credit that’s essential for lenders to see when they’re evaluating your business loan application.

On the other hand, if you’re not in a position where you can wait to build up your business without capital, you can also reevaluate your collateral, redo your business plan, or look into different loan types that may be better suited for you as a business in the early days. 

Talk to your lender and see what they’re looking for in an applicant that you haven’t been able to provide yet, so you’re better primed to make the right decisions.

The Bottom Line

As you begin the process to get a loan to start your business, make sure that you keep your expectations realistic and are open to alternatives to traditional business loans, too. 

At the end of the day, securing a business loan as a startup isn’t the easiest process, so do your research about different types of loans and lenders, and you might be able to find a way to secure at least some of the capital you need to get going while you build up your time in business, credit, and revenue.

How to Get an SBA Loan for a Startup

Starting a business takes capital, and many entrepreneurs look to small business loans to cover these startup costs in nascent days. SBA loans are among the most sought-after types of business loans for both new and established businesses alike because they offer favorable terms and high capital amounts. 

The process to secure an SBA loan can be long and windy—especially for new businesses that don’t have the financial track record of other applicants. Here, we’ll walk you through how to get an SBA loan for a startup, including what types of SBA startup loans are available, how you can use them, how much they cost, and how to apply. 

We’ll also look at a few alternatives to SBA startup loans in case you’re not in the best position to apply right now.

What to Know About SBA Startup Loans

Generally considered the gold standard of business loans, SBA loans offer some of the highest capital amounts, lowest interest rates, and longest repayment periods among business loans. 

Because these loans are so favorable, many businesses are vying for them—which means the qualifying process is competitive. SBA lenders can be picky and approve only the most qualified, experienced candidates that pose the lowest risk for default.

Lenders look at things like your time in business, revenue and cash flow, credit history, and more to determine if you’re likely to pay back your loan. So, what does that mean for a startup that, by definition, doesn’t have the years of financial history to help prove that they’re not a risky candidate for an SBA loan?

In short: It’s harder for new businesses to get approved for SBA loans—but it’s not impossible.

How to Use an SBA Startup Loan

Another reason SBA loans are so desirable is because of how borrowers can use the capital. Here are some of the ways you might be able to use an SBA startup loan:

  • Flexible working capital
  • Real estate purchase
  • Purchase of large fixed assets
  • Building a new business location
  • Upgrading or expanding your business

Types of SBA Startup Loans

Based on how much funding you need and what you plan to use it for, there are different types of SBA loan programs to consider.

The first two programs we’ll discuss are the best options for true SBA startup loans. The latter two options, on the other hand, are best suited for businesses that have a little bit of operating history.

Here are the four SBA programs to look into as a new business:

SBA Microloans 

For very new businesses with low capital requirements, SBA microloans can be a strong option. 

They’re also some of the easiest SBA loans for startup businesses to qualify for, and, unlike other SBA loans that require two years in business, the SBA microloan program doesn’t require a specific time in business as long as you can prove that you can repay the loan. 

To apply, you’ll need to present a strong business plan and have good credit.

SBA Microloan Details

  • Loan amount: Up to $50,000
  • Terms: Maximum six years
  • Rates: ~8% to 13%
  • Uses: Flexible 

SBA Community Advantage Loans

Like SBA microloans, the SBA Community Advantage loan program is friendlier to startups than other types of SBA loans. 

The SBA Community Advantage program is meant to provide access to funds for business owners in disenfranchised communities that need larger amounts of capital—including startup businesses. You’ll want to have a strong business plan and a good financial track record as well as average credit to apply for this type of loan.

SBA Community Advantage Loan Details

  • Loan amount: Up to $250,000
  • Terms: Seven to 10 years
  • Rates: ~7% to 9%
  • Uses: Flexible

SBA 7(a) Loans

If your startup already has a couple of years in business, you may be able to qualify for an SBA 7(a) loan. This program is the most popular type of SBA loan due to its flexibility—you can use the money for nearly any type of business expense. 

To apply, you’ll need to provide records of strong annual revenue generation (about $100,000) as well as good credit. As a startup, the better your credit is, the more likely the SBA is to forgive the fact that you don’t have several years of business financial history.

SBA 7(a) Loan Details

  • Loan amount: Up to $5 million
  • Terms: Up to 25 years
  • Rates: ~8% to 13%
  • Uses: Flexible

SBA 504/CDC Loans

For businesses that want to finance a fixed asset, such as real estate or equipment, the SBA 504/CDC loan is ideal. 

Like the SBA 7(a) loan, this loan program isn’t a fit for brand-new businesses, but if you’ve been operational for a few years and have a track record of revenue generation, you might be able to secure this financing. 

SBA 504/CDC Loan Details

  • Loan amounts: Up to $5.5 million
  • Terms: Up to 25 years
  • Rates: ~5% to 6%
  • Uses: Fixed asset financing 

How to Apply for an SBA Startup Loan

The process for applying for an SBA loan—no matter how much business experience you have—is lengthy, especially compared to other types of business loans. The SBA requires a lot of documentation from entrepreneurs, regardless of how long applicants have been in business. 

That said, here are the basic steps you’ll follow:

1. Make sure you qualify.

In addition to some of the requirements we’ve mentioned thus far—credit score, annual revenue, time in business, strong business plan, etc.—the SBA has general requirements that businesses must meet in order to qualify for their loan programs.

Before starting an application, you’ll want to make sure that you meet these qualifications, on top of the qualifications of the specific program you want to apply to. Some of these SBA loan requirements include:

  • Be a for-profit business in an eligible industry operating in the U.S.
  • Meet the SBA definition of a small business
  • Have invested your own time and money into your business
  • Have exhausted other financing options

2. Find an SBA lender.

Next, you’ll want to find an SBA lender that offers the type of SBA startup loan you’re looking for. Most SBA lenders are traditional banks and credit unions, including big-name institutions like Chase, Bank of America, and Wells Fargo.

However, if you’re applying for an SBA microloan, you’ll look for a participating intermediary lender—many of whom are nonprofit, community organizations.

3. Gather your documentation and complete an application.

To submit an SBA loan application, you’ll need documentation including but not limited to:

  • Business bank account statements
  • Personal and business tax returns
  • Credit reports
  • Profit and loss statement
  • Balance sheet
  • Strong business plan
  • Specific forms for the SBA

Your SBA lender will be able to help you through the application process and work with you to make sure that you have any and all forms and documents that you need.

4. Submit your application and wait for a decision.

Although some business lenders can provide a decision on typical business loans in as little as a day or two, the timeline for SBA loan approval is significantly longer. Applicants should expect to wait a minimum of eight weeks to hear a decision—during which time you may be asked for more documentation to process your application.

For startups that need funding quickly, an SBA loan may not be the best option. That said, you can help speed up your approval timeline by gathering as much information as possible in advance and completing your application carefully and accurately.

What to Do If You Get Rejected for an SBA Startup Loan

Yes—it’s possible you might not get approved for an SBA loan for your startup. There are many reasons why this could happen, including a lack of sufficient financial history for your business, which is a common reason for startup loan rejections of many types.

You have a few different courses of action if this happens:

  • Pursue a different type of business loan: You might opt for other types of startup business loans—such as equipment financing or business lines of credit, which are more likely to approve younger businesses.
  • Wait until you’ve built up more history: If you aren’t in a rush to access financing, you can build up your time in business and revenue before reapplying.
  • Improve your credit score: Many SBA loan applicants are denied due to their credit history. If yours could use some work, take the time to improve your score before deciding to reapply or seek out other financing.

Ultimately, you shouldn’t hesitate to have a conversation with your SBA loan packaging team to find out what you can do to improve your candidacy down the line.

The Bottom Line

When it comes down to it, getting an SBA startup loan is often a difficult process, no matter the details of your approach. SBA loans are some of the most desired financing products available, and, as a result, they mostly go to established businesses with excellent credit and strong revenue figures.

Don’t get discouraged, however—it’s possible you still might be able to access an SBA loan as a startup—if not now, at a later time down the road. And remember that the more diligent you are with your finances, and the harder you work to build your credit, the better chance you’ll have of scoring SBA financing.

Your Quick Guide to Startup Business Loans

One of the biggest challenges associated with starting a small business is accessing the capital you need to cover your startup costs. Although you may have budgeted carefully and invested some of your personal resources into your new business, most startups will need to find external financing to help cover a range of expenses—from purchasing equipment to renovating storefronts.

This is where startup business loans come in. In this guide, we’ll walk you through some of the best options for startup loans, as well as important tips to keep in mind as you search for the right financing for your new business.

Fast Facts About Small Business Loans for Startups

Before we explore your options, let’s review some fast facts about startup business loans that will help guide you through your search and better inform you as you learn more about these different products:

  • There is no single or standard type of startup business loan. As you’ll see below, the term startup business loan can be used to describe a range of different products and sources of financing used by startup companies. In fact, in some cases, “startup business loan” is even used to refer to forms of financing that aren’t actually structured as a loan at all.
  • Startup business loans can originate from a variety of sources. These sources can include online, alternative lenders; equity financing; or other, more creative sources. Traditional banks, however, are much less likely to lend to startups. 
  • If you’re looking for a debt-based startup business loan, your personal credit will be a top qualification used to determine your eligibility. If you have bad credit, receiving a loan isn’t impossible, but will be more difficult (and expensive).
  • Not only are startup business loans harder to qualify for, but they’re also often more expensive. Banks and commercial lenders prefer to work with established companies. Even alternative lenders see newer businesses as riskier, which leads to higher interest rates. The better your other qualifications, however, (e.g. credit score, cash flow, etc.) the more flexibility you have in negotiating these rates with the lender.
  • It’s very possible that you’ll need to combine multiple startup business loans or multiple forms of funding to completely finance your startup. Startup loans are usually available in smaller amounts with shorter terms. You may have to consider how you can work with a few different funding sources to access the capital you need.

Best Startup Business Loans

Keeping these points in mind, let’s look at some of the top startup business loan options:

Microloans

Best for traditionally structured loan financing; business owners in underserved communities.

Structured like traditional term loans, microloans are issued by community organizations and nonprofit lenders that are designed to offer financing to startups and underserved business owners, including women, minorities, and veterans.

Compared to other business term loans, these products are available in smaller amounts—usually up to $50,000—but still offer low interest rates. In fact, the SBA offers a microloan program, which is one of the only SBA loan programs that’s accessible to startups.

Business Line of Credit

Best for flexible funding, especially for working capital needs.

Similar to a credit card, a business line of credit gives you access to a set amount of funds from which you can draw from at any time. Unlike a typical loan, you only pay interest on the funds you use—and in most cases, when you repay what you’ve borrowed, your credit line resets to the original amount.

Business lines of credit are available in a variety of types (e.g. short-term, long-term, etc.) from different lenders—but many online lenders offer options for startups with at least six months in business. 

Invoice Financing

Best for covering cash flow gaps due to unpaid invoices.

If your new business is already up and running—and you invoice customers—invoice financing is a way to cover cash flow gaps due to unpaid invoices. With invoice financing, you receive an advance of capital in exchange for a percentage of the value of your outstanding invoice.

When your customer pays the invoice, you receive the remaining percentage, minus the invoice financing company’s fees. Although invoice financing can be on the expensive side, it’s fast to fund and many financing companies will work with businesses with as few as three months in business.

Plus, invoice financing is a worthwhile startup business loan for bad credit. Although financing companies will look at your credit score, they’ll often weigh the payment history of your customers more heavily than your personal credit history.

Equipment Financing

Best for financing an equipment purchase.

Equipment can be one of the largest costs associated with opening a new business. Luckily, if you need to purchase a specific piece of equipment, equipment financing can be a great option for a startup business loan.

With an equipment loan, the equipment that you’re looking to buy serves as collateral on the loan itself—and therefore, if you default on the loan, the lender can seize the equipment to cover their losses. 

For this reason, lenders are much more willing to work with startups. Instead of using a time in business requirement to evaluate risk, the lenders are more concerned about the value of your equipment.

Business Credit Cards

Best for covering day-to-day financing needs.

Although a business credit card may not be what you typically think of as a startup business loan, this is a financing tool that all new businesses should have. In essence, a business credit card works just like a personal credit card, except it’s used exclusively for business purposes.

That said, a business credit card is particularly useful for startups that have been in business for less than six months and may not be able to qualify for other debt-based products. Business credit cards can be used for everyday business purchases—and many of them allow you to earn rewards and build business credit while doing so.

In particular, business credit cards with a 0% intro APR period will allow you to carry a balance interest-free (like an interest-free loan) during the promotional period, which is great if you plan on making large purchases when you first get the card. Of course, you’ll need to pay the balance off before the promotional period expires and a variable APR sets in.

Personal Loans for Business

Best for brand-new startups with strong personal finances.

Taking out a personal loan to use for business purposes can be a risky form of financing, but for certain business owners, it may be a startup business loan option worth considering.

In general, personal loans have lower interest rates, flexible payment schedules, and longer terms compared to many business loans—especially compared to most of the ones available to startups. While usually available in smaller loan amounts, they can be viable options for brand-new business owners who have solid personal finances and a strong relationship with their bank.

Of course, if your business fails, your personal finances are on the line for the loan—so that’s always something to keep in mind.

Crowdfunding

Best for testing a business idea or raising smaller amounts of capital.

Unlike some of the startup business loans we’ve listed so far, crowdfunding is a much more creative form of financing. With crowdfunding, you use a platform like Kickstarter or IndieGoGo to ask for a large number of individuals to help support your business through small investments.

Typically, you set a goal and then market your business with social media, promotions, and other campaigns to attract individuals to contribute. In some cases, you might offer a discount, gift, or early product access in exchange for contributions. 

Crowdfunding requires a significant amount of time and effort and usually only raises small amounts of capital. However, it’s a great way to test your business idea with a broad audience, especially if it’s product-based, particularly creative, or has some kind of incentive behind it.

Friends and family

Best for business owners with a network willing to invest.

If you have friends or family in your network that are willing and able to invest in your new business, then you might have access to one of the fastest and easiest startup business loans.

As you might expect, however, borrowing money from friends and family can be complicated, so if you do opt for this route, you’ll want to ensure that you set clear and agreed-upon terms from the beginning and draw up a loan agreement just like you would with a bank or other lender.

Grants

Best for startups in tech, science, research, or other specific industries.

When it comes to grants, these aren’t really startup business loans at all—instead, they’re awards of money for your business that you don’t have to repay. That said, grants are available from a variety of sources including the federal government, state and local governments, private companies, nonprofit organizations, and more.

Some of the most well-known grant programs are the Small Business Innovation Research and Technology Transfer programs offered by the federal government. In general, grants are an excellent option for businesses in the tech and science industries.

Keep in mind, though, grants are extremely competitive and require thorough qualification processes to apply.

Personal Savings

Best for businesses just getting started.

Finally, if you’re just launching your business, you may find turning to your personal savings is your only solution for a startup business loan. Although this may not be the most desirable option, if you’re confident in your business idea, it might give you the boost you need to get off the ground.

Of course, using your personal savings has a variety of risks and you’ll want to consider other small business loan options for your startup as soon as you can. But, if you need some extra funds here and there and have the means to support your business, your personal savings may be able to help in this regard.

How to Get a Startup Business Loan

Getting a startup business loan will largely depend on the type of loan that’s right for your business. After all, if you’re applying for an SBA microloan, the process will differ from launching a crowdfunding campaign. Nevertheless, there are a few steps you’ll want to take regardless of the type of startup business loan you plan on pursuing:

1. Evaluate your business’s qualifications.

First and foremost, you’ll want to look at your personal credit score—as this will be a significant requirement when you’re applying for financing as a new business. On the other hand, if you’re looking for a startup business loan for bad credit, you’ll want to place a greater focus on qualifications like your business’s cash flow and revenue. 

Your business plan will also be important if you haven’t actually started your business yet—in this case, you should be able to show financial projections, sales models, and thoroughly explain how your business will make money.

2. Gather the documentation and information you’ll need to apply. 

Whether you’re submitting a traditional loan application or pitching your business idea to a family member, preparation is key. 

If you plan on applying for a debt-based startup business loan (i.e. microloan, line of credit, equipment financing, etc.), you can expect to provide information and documents such as:

  • Business licenses and registrations
  • Business plan
  • Personal and business tax returns
  • Personal and business credit reports
  • Financial statements
  • Personal and business bank statements

Of course, the exact documents you’ll need to provide will vary based on the lender and the product.

3. Consider the financing you can afford.

Although this may be most applicable to debt-based forms of startup business loans, it’s a particularly important step to keep in mind. You never want to take on more debt than you can afford, especially if you’ve signed a personal guarantee, taken out a personal loan for business, or even borrowed money from friends or family.

The best startup business loan is usually the most affordable one. And if you find you can’t afford to take on debt financing right now, consider alternative forms of funding like crowdfunding or a simple business credit card.

If you’re having trouble figuring out how much financing you can afford, use an online loan calculator, talk to a business accountant, or consult with a loan specialist for advice. 

Bottom Line

As you begin looking for the right small business loan (or another form of financing) for your startup, we hope this guide has given you the necessary information to propel your search forward. 

Although established businesses often have an advantage when it comes to accessing financing, there are now more options than ever for startup business loans—and you have an opportunity to get creative, combine multiple solutions, and use the variety of available resources to fund your new business.

What Is Startup Funding? And How to Get It

When you think of startup funding, you probably think of angel investors and Silicon Valley. But every business needs startup funding—also commonly referred to as startup capital or, simply, business loans—not just big tech companies with billion-dollar dreams.

The whole point of startup funding is to provide the initial money needed to turn a business idea into a reality. Startup funding can come from a wide variety of sources depending on the business owner and purpose of the company. 

But even though there are many options for finding startup capital, it can also be the most challenging type of funding for any small business to secure. Nascent businesses don’t have a revenue history, customer growth, or a credit history, which makes it difficult to prove your business’s ROI potential to investors and lenders. 

Here, we’ll explore the most common forms of startup funding, as well as detail how to get it, so you can fund your startup costs and grow your business.

1. Personal Savings and Loans

Most businesses start from personal savings and loans, especially for new business owners. Between cash from a personal savings account, retirement rollovers as business startups (ROBS), getting personal loans, or selling off property to get startup capital, most people start businesses with their own money.

Part of this is convenience. If you use your own money, you don’t owe anybody anything later. Your personal credit and loan histories may help you get a lower rate on a personal loan.

The other part of it is necessity. Many programs like SBA loans or bank loans aren’t available to business owners who haven’t put any of their own money into their business. After all, if you don’t believe in your business venture enough to finance its early days yourself, why should anyone else?

How to get it:

Take a look at your personal assets. Does your retirement account qualify for a ROBS to fund your business? Are your personal savings in a healthy place?

Alternatively, if you’ve taken out and paid back loans in the past, banks may be more inclined to work with you on a good interest rate for a personal loan that you can use for your business.

2. Family and Friends

Family and friends can also be a great resource when it comes to starting a business. If you have the support of your loved ones, they may be inclined to give you a loan or invest in your business. Of course, mixing business with personal relationships can get complicated.

Don’t take a loan from family or friends if you know you can’t pay it back. If you do take a loan or investment, give them the same business documentation you would an ordinary lender and write up a legal agreement. If you value your friends and family and want to maintain those relationships, you should treat their business interests with respect.

How to get it:

Ask your friends and family, but be ready with a great pitch and an offer to repay them with interest or with a stake of the company. Also have a loan agreement ready to go, but also be willing to negotiate your terms so both parties are comfortable.

3. Vendor Credit From Suppliers

If your business is in need of supplies, raw materials, equipment, or business services to get started, you could be eligible for vendor credit. Many vendors are willing to work on “net 30” or longer terms. This means that you have 30 days after the invoice date to pay the vendor what you owe. Terms could also be “net 60,” “net 90,” and so on.

Vendor credits may come with a flat fee or an interest rate, or you may lose out on a discount that you would have gotten if you paid right away. But if you feel like you have a great product or business that will catch on quickly, a vendor credit is a great way to start your business with relatively little overhead.

Plus, since most major vendors report to business credit bureaus, vendor credits are a good way to start building credit for your business. However, be sure you have a plan to pay off your invoice by the deadline—otherwise, your business, credit, and relationship with that vendor will suffer.

How to get it:

Most major vendors in service industries have a process in place for applying for and receiving credit. When you’re researching vendors, explore that policy and make sure you apply with plenty of time to get approved, get your materials, and get your business up and running.

4. Business Credit Cards

Just like personal credit cards, business credit cards give you flexible purchasing power when you’re starting out so you can get what you need now and pay for it later. Many business credit cards offer great perks for new businesses too, from statement credits if you spend a certain amount to rewards for spending more.

But like personal credit cards, business credit cards vary widely in annual fee, APR, and perks. Make sure you do your research before you choose the right one for your business. And, as always, pay off the statement balance every month to avoid interest.

The exception to this rule, and an especially appealing business credit card for startup funding, is a 0% APR introductory offer credit card. These types of cards offer an introductory period—typically around nine to 12 months—where you can carry a balance without paying interest. If used correctly, this can help you fund your startup costs upfront and pay them off incrementally over your intro period. Just be sure you have a plan to pay off the balance before the introductory offer ends and a variable APR sets in. 

How to get it:

Spend some time researching the best business credit card options out there, as well as what you can actually qualify for, and then apply. Business credit card applications can be completed easily online and you’ll find out if you’re approved in minutes.

5. Business Lines of Credit

Like a more powerful business credit card, a business line of credit gives you the purchasing power you need now, in exchange for paying back what you spend—plus interest—later. Where a business line of credit is different, is that it operates like a traditional loan in that you can borrow cash. Like your personal credit limit, a business line of credit gives you a maximum amount that you can borrow against. Once repaid, most business lines of credit reset to their original limit and you’re able to borrow from it again. 

Another advantage of a business line of credit is that you only pay interest on the amount you borrow—not the total you’re approved for (unless you borrow the entire limit, of course).

Many banks offer business lines of credit to businesses that are already banking with them. Online lenders also offer business lines of credit if you don’t already have a bank relationship to leverage/

How to get it:

Speak with your current financial institution to see if they offer business lines of credit. If they don’t, explore online alternative lenders. Getting approved for a business line of credit will have more qualifying criteria than a business credit card. Expect to provide a good credit score, some time in business, and proof of business revenue. This can make business lines of credit out of reach for many startups, but if you have previous business success to draw on or a strong personal credit history, it may be possible. 

6. Microloans

Microloans are small short-term loans specifically designed for startups and other small businesses without the credentials to qualify for a more traditional business loan. 

The Small Business Administration (SBA) offers a microloan program that benefits newer businesses. The maximum loan amount is $50,000 and loans are geared toward disadvantaged businesses that may have trouble getting access to capital. Beneficiaries are often businesses owned by women, veterans, minorities, or those in rural communities.

While SBA microloans have a notoriously arduous application process and slow approval times, there are also other microloan sources, such as Kiva, Accion, LiftFund, Grameen America, and Opportunity Fund.

How to get it:

If you already have a checking or savings account with a bank, ask if they have a microloan program available to new businesses. If not, consider these above lenders, research their requirements and application process, and then submit your application. 

7. Business Term Loans

Business term loans are the most traditional type of startup funding. They come from traditional lenders like banks, credit unions, or online lenders.

Business term loans offer a specific loan amount with a set repayment period. That period may range from six months to longer than 10 years, depending on the lender, amount, type of loan, and your business credentials. While term loans are pretty uncommon for startups because they require a longer business history, short-term loans will be your best bet as a new business. Because you have to repay the loan more quickly, lenders are less at risk. 

How to get it:

Term loans will require significant documentation and, truthfully, are uncommon for businesses young than two years old. Some banks will make exceptions for experienced business owners launching a new venture, but new business owners are either unlikely to get approved or will get approved at a very high interest rate.

Talk to your local bank and research online lenders. If you have a relationship with a bank already, this could help you get approved. Otherwise, online lenders tend to have more lenient requirements—usually in exchange for higher interest rates. 

8. Small Business Grants

Small business grants differ from other forms of startup funding in that they don’t need to be paid back. In other words, grants are essentially free money for your business. So, what’s the catch? Grants are incredibly competitive. There’s only so much money to go around and competition for funds that don’t need to be repaid is understandably fierce. 

Grants typically have very stringent requirements. You may need to be in a specific industry or location, plan to hire a certain number of employees, improve a community, or reach an underserved market. Grants also exist to benefit women entrepreneurs, minorities, and veterans.

How to get it:

The thing to keep in mind about business grants is they’re highly competitive and often have very specific criteria to qualify. Do your research to find the grants that cater toward your type of business and then submit an attention-grabbing application. Sites like the SBA or aggregate sites can help you find the right opportunities. And keep in mind that new grants are always coming onto the scene, while others may be closing their applications. It can be helpful to keep a spreadsheet to track your grant applications and important dates.

9. Crowdfunding

Crowdfunding has emerged as a viable means of acquiring startup funding. Not only that, but it can also get customers and early adopters excited about your new business venture. There are four main types of crowdfunding platforms:

  • Rewards: Kickstarter and Indiegogo are the most popular crowdfunding platforms, in which you offer rewards to backers in exchange for their monetary support.
  • Debt/Loans: You borrow money from backers that must be repaid over time.
  • Donor: Raising money through donations. GoFundMe is the most popular example.
  • Equity: Platforms like Angelist and WeFunder allow you to raise money through private investment, giving backers an equity stake in your business.

Crowdfunding takes real work because there are so many businesses already active on these platforms. People—both consumers and investors—must be truly excited about your product or service. That kind of buzz isn’t always easy to generate.

How to get it:

Crowdfunding encompasses a variety of platforms, each of which comes with its own terms and conditions. Think about what kind of financial support you need before choosing your platforms. Then, spend time developing an eye-catching and compelling campaign that will entice people to donate. To start, you may want to check out campaigns that are already live to see what they do well and how you can achieve a similar effect.

10. Venture Capitalists and Angel Investors

While it’s not an option for many startups, if your business has enormous growth potential, you may be a prime candidate for equity investors. When it comes to equity investment, the primary characters are venture capitalists and angel investors.

Venture capitalists want to invest in high-growth startups, which makes them an unrealistic option for the vast majority of new small businesses. Their investments tend to be in the millions. Truthfully, venture capitalists rarely venture outside of tech, health care, energy, or media. 

In return for a venture capital investment, you will give up an equity stake in your business and you may also be required to create a board seat for that investor. While not taking on debt can be appealing for some business owners, the tradeoff is you will no longer be in complete control of your business or the decisions that are made.

While venture capitalists typically invest massive amounts of money at a pivotal stage for a startup, angel investors tend to be involved at the inception of a company and invest smaller amounts of money. Angel investors often act alone, rather than in large investment groups, as venture capitalists do.

Bear in mind that most businesses that seek angel or VC funding do not get their funding. Preparing your business to seek funding is a time-consuming process. If you put in an initial investment to develop your product and improve your startup’s growth and revenue in the short-term, it can also prove expensive. Be very sure you’ve carefully weighed the risks and rewards.

How to get it:

To start, you will need a killer business plan. Investors will likely expect significant returns within a few years and will want to hear how you plan to deliver. After connecting with potential investors (either through your business network or groups that cater to these types of transactions), you will pitch your business plan.

If you hook an investor, or multiple investors, they will invest in your business, typically through an initial round of “seed stage funding” or “seed funding.” Down the line, provided that your business is growing and still showing strong potential, you may raise subsequent rounds of funding, referred to as Series A, B, C, etc. funding.

11. Incubators and Accelerators

In the investment capital world, there are additional resources available to high-potential startups. Incubator programs are designed to match accepted, top-tier startups with mentors and tools to help them progress from ideation to operating as a real company. Incubators often provide a bit of seed money, as well. Accelerators are similar, in that they pair startups with investors and mentors who will help them reach the next stage of growth.

These are more formal approaches to getting funded and typically exist only in the tech, health care, or energy sectors. They are, however, an excellent way to get a foot in the door to the investment community.

How to get it:

Research your options and be prepared to show how your business is different from others in the industry, on track for significant growth, and what you’d be able to accomplish with the startup funding you’re seeking. While this won’t provide you with fast funding, this can be a great opportunity to make a name for your business.

The Bottom Line

Startups, like startup funding, come in many shapes and sizes. While most new business owners start their venture out of their own pocket or with the help of friends or family, there are a number of resources available to new business owners. 

Whether you’re ready to grow immediately or you need some time to fully develop your business model, there’s a funding solution for you. To start, make sure you’ve calculated your startup costs so you know what kind of funding you need to launch and grow your startup.