Startup Business Loans: Everything You Need To Know!

Startup Business Loans

You’ve got a new business idea and you just know it would be a success.  But if you don’t have the funds to get it going it might be a good idea to look into getting a startup business loan. 

If you stick around, we can show you how to do that. 

What Are Startup Business Loans?

Startup loans help new business owners (like yourself) by providing startup funding that will cover the cost of the expenses required to establish your business.

These expenses could be major investments that would result in the growth of your business.  If you don’t have the money to make those investments, your business growth will be hindered.

That’s where a startup business loan comes in to save the day. The funds secured from these loans allow you to make large purchases or investments that benefit your company.

A startup business loan provides quick cash that is necessary to begin or expand operations, making it the perfect solution for a new or small business that needs a little extra support.

You could use the money to invest in:

  • Large equipment
  • Fancy machinery
  • Specialized supplies
  • More inventory
  • Building projects
  • More employees    

Although startup business loans are great, there are some cons to keep in mind:

  • An excellent credit score is required to obtain business financing;
  • The loan may not be a large amount;
  • If you use the funds to acquire new equipment, that equipment might be outdated when you finally repay the entire loan amount.

Do You Qualify for a Startup Business Loan?

Are you still interested in loans for startups?  If so, we are going to help you figure out if you qualify.

  • Business History – Those with more experience are more likely to be approved for a business loan.
  • Credit Score – Obviously, an excellent credit score increases the odds of convincing lenders to finance your business.
  • Industry – Venturing into a risky industry makes it more difficult to secure a loan because potential lenders are leery of the risks involved.
  • Business Plan – How can you expect lenders to take you seriously if you don’t have a plan in place?  Get this done before applying for a loan.
  • Business Age – If your business is new (less than 6 months) it’s a prime candidate for a startup business loan.  Older businesses are better suited for other loan options that are available. 

Loan Application Process

If you are ready to apply for a startup business loan, follow the steps we’ve listed below.

Check Your Business Credit Score

Your business credit score indicates how creditworthy your company is. Check it out at Equifax. 

Knowing where you currently stand will give you an idea of the next steps to take. Those steps should involve doing whatever is necessary to improve your credit score. 

Remember, the better your credit score is, the better your odds are of securing a loan.

Business Credit For Startups

Get Your Finances In Order

Lenders will trust you with a loan if they see that your business is under control. You need to:

  • Get a handle on your cash flow;
  • Create a thorough business plan;
  • Incorporate monthly payments for a loan into your budget;
  • Make sure you can put up collateral.

Find The Right Lender

There are many choices out there so be sure to do your research. Visit Lendio to find and compare potential lenders.   

Gather The Correct Paperwork

Once you know where to apply for a loan you will know the documents that are required. Here are some examples of what you might need: 

  • Business plan
  • Credit report
  • Prediction of future expenses and cash flow
  • Tax returns
  • Other IRS documents
  • Business license
  • Bank statements
  • Business contracts
  • Proof of business insurance


Now comes the moment when you finally get to apply. You’ve worked hard to get everything ready and give yourself the best chance of being approved.

But wait!  Before you apply, ask the lender how long it will take to hear back. 

You want to make sure you will receive the funds before they are needed. Otherwise, you might find yourself in a sticky situation.    

Corporate Grants

What is an SBA Loan?

The Small Business Administration (SBA) is an indirect source for a startup business loan. If you are interested in an SBA loan, you will need to find an institution that works with the SBA.

These institutions receive the funds from the SBA and are responsible for determining the businesses that qualify for a loan. 

These types of loans are guaranteed by the SBA, which may result in the following benefits:

  • Relatively low-interest rates;
  • Longer repayment terms;
  • Lower monthly payments;
  • Assurance that if you default on the loan the SBA will pay it back up to a certain amount.   

Despite its pros, the disadvantage of an SBA loan is that it’s hard to get one. Plus, SBA loans require a personal guarantee from you and any partners who run your business with you.

So before going through the trouble, evaluate the likeliness of your business getting an SBA loan. 

  • Assess how your business is performing.  If it’s going through a rough stretch the odds of getting a loan from the SBA aren’t too good.
  • There are also certain types of businesses that are not eligible to receive an SBA loan.  Go to the SBA 7(A) loans website to check out what these ineligible categories are.
  • If you are super busy running your business, you might not have time for the application process for an SBA loan.     

If you think you have a shot at getting an SBA loan and feel comfortable making a personal guarantee, you will need to find SBA authorized lenders. 

Your SBA district office can point you in the right direction.  You can also use the lending match tool that is provided by the SBA.

Our Final Thoughts On Loans For Startups

As an entrepreneur, you’ve got to have grit and determination. This toughness is necessary when applying for startup business loans because it can be very challenging to get those loans.

But if you really do need business funding, please don’t give up! Those who are willing to put in the effort and take the required steps will be rewarded with a startup business loan.

And don’t forget about startup funding alternatives, such as startup grants, credit cards, and crowdfunding. If you keep all your options open, you can get the money you need to make your business succeed.

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