Options for Startup Business Loans

Many people dream of escaping the corporate world and having their own business. This dream comes at a cost, though — a huge one. On average, small business owners spend $40,000 their first year.

How do entrepreneurs access this money? For new business owners, a startup business loan can provide essential funding to launch operations. These loans can be used for working capital needs, such as inventory, payroll, utilities, and insurance. They can also be used to purchase assets like equipment, furniture, or real estate.

Generally, startups are defined as businesses with less than two years of operating history. Startup loans are most commonly offered by online or alternative lenders. These sources typically have more flexible eligibility requirements but often charge higher interest rates and offer shorter repayment terms compared to traditional lenders.

Need money to fund your venture? Here are some types of startup loans to consider.

SBA Loans

SBA microloans are offered through nonprofit lenders. They provide up to $50,000, with about 27% going to startups. They’re easier to qualify for but may not meet larger funding needs.

SBA 7(a) loans are larger loans that are harder to obtain for startups, as they typically require consistent revenue and collateral. However, 14.7% of 7(a) loans in FY 2025 have gone to businesses under two years old, and 13.7% were for startups launching their business.

Microloans (Non-SBA)
Microlenders and nonprofit organizations often serve underserved or minority-owned startups. They offer smaller loans with favorable terms and lower qualification barriers, helping new businesses build credit for future financing.

Online Loans
Online lenders may offer startup funding after just three months in business. Options include short-term loans and lines of credit. These loans are easier to qualify for but come with higher interest rates, shorter terms, and smaller amounts.

CDFI Loans
Community Development Financial Institutions provide affordable financing to startups in low-income or underserved communities. They offer flexible terms and lower rates than traditional banks and are available in all U.S. states and territories.

Equipment Financing
This loan is used to purchase essential equipment. The equipment itself serves as collateral, so no extra assets are needed. Rates and terms vary by lender and equipment type.

Invoice Factoring
Sell unpaid invoices to a factoring company for quick cash without taking on new debt. This option is faster than traditional loans but can be costly due to fees and customer payment delays.

Merchant Cash Advances (MCAs)
MCAs provide fast funding based on future card sales. They are easy to qualify for, but one of the most expensive options. Consider only if other funding sources aren’t available.

Learn More About Business Startups

New companies have a lot to learn and a lot to pay for. As an entrepreneur, you need to figure out how to make things work financially if you want your company to stay afloat.

An Orlando business startup lawyer B.F. Godfrey from Godfrey Legal can help you put your ideas into motion. We can answer many of your questions and help you effectively plan for the future. To schedule a consultation, call (407) 890-0023 or fill out the online form.

Source:

nerdwallet.com/article/small-business/startup-business-loans