Startup Business Loan Options for Entrepreneurs

Financing a new business is often tricky. While some lenders may offer business loans for startups, you may require alternative solutions to finance your new business. Most small-business lenders require at least a year in business to qualify for financing. However, if you’re looking for a startup business loan, many alternative financing options can help get you going. Below are a few suggestions from where you may avail yourself of loans for running your startup venture.  

SBA loans  

The microloan program of the Small Business Administration in the United States is very friendly for startup ventures. The association offers loans up to $50,000 to small businesses seeking to launch or expand. However, the average microloan of the SBA is around $13,000. It is worth mentioning here that non-profit community lenders administer SBA microloans and, hence; usually, it is easier to avail themselves of money. The flagship SBA microloan is offered to people who can use the money to start their venture. On the other hand, it is tough to avail of SBA 7(a) loans, as they are usually given to established businesses that can provide collateral, which the lender can sell in case of default. Even if one qualifies for an SBA 7(a) loan, it may take several months to avail themselves of the money. 

Microloans 

Aside from the SBA microloan plan, you may also avail microloans from non-profits and other lenders. Availing microloans from these sources is relatively easier than seeking SBA microloans. Many of these lenders give money to minority or usually underserved small business owners. They also provide capital to small businesses that are struggling financially. Since mission-based organizations offer these loans for startups, they are better than borrowing from private lenders. Once your finance and establish your startup with money borrowed from these lenders, you can apply for loans from other financers, as your credit would be better by then. 

Loan through Grants 

Aside from availing of microloans, you may also seek grants from government agencies and private foundations for your startup small business. Money from these foundations or government agencies is not loans, and hence, it is relatively easier to get money from them. But some new businesses may find it challenging to avail free capital from them. For instance, if someone has served in the United States military, it may be easier for them to get small business grants for veterans. In addition, small business grants are also available for women. 

A loan from family and friends 

One of the easiest ways to avail of funds for your startup is by borrowing money from your family members and friends. However, if your credit history is wrong and your friends and family members know it, it may be challenging to convince them about your requirements and seek funds from them. You need to convince them that you will be able to repay the money you borrow from them. Your standing is most important when seeking personal loans from your family members and friends. Before you ask for a loan from your family and friends, scrutinize who is capable of providing you with funds and who will understand your plans. Ensure you make them comfortable about taking the risk. 

Loan through Crowdfunding

These days, crowdfunding is a smart way to raise money for launching your small business. Several websites like Kickstarter and Indiegogo allow you to seek funds via online campaigns. When you solicit funds through crowdfunding, you do not repay your donors but give gifts to them. This system is also known as rewards-based crowdfunding. You may also avail funds for your startup through equity crowdfunding. In this case, you solicit funds from a pool of investors who agree to fund your small business and get equity ownership in return. Undoubtedly, crowdfunding is an excellent means to fund a startup, as it is the best way to test out their product or service with a customer base and gauge the response without taking on debt. 

Personal business loans 

You may also get funds through personal business loans if you are a new startup owner. For instance, many are available from online lenders. All personal business loans are based on the borrower’s personal credit history. Hence, it is competitive to qualify for them, especially when the startup is new. Moreover, personal loans interest rates (APRs) can be very high. Some lenders charge up to 36% APS when the credit status of the borrowers is terrible. In other words, personal business loans are best suited for startup owners who have a strong credit history. 

Credit cards 

Many startup owners depend on business credit cards to fund their ventures. Credit cards can be a good option for short-term financing, but you need to quickly pay off your credit card debts. If you allow the balance and the interest charges to linger, the debt will grow fast, making your credit card an expensive small business loan. Like in personal business loans, in this case, the annual percentage rate on your business credit card is also primarily based on the borrower’s credit score.