Small Business Startup Loans

One of the biggest challenges a new small business must face is obtaining the finances necessary to support their initial growth. In order to proudly turn on your physical or metaphorical “open for business” sign, you’ll need to have access to a significant amount of capital in the form of a small business startup loan.

As one might assume from the title, a business start up loan is a loan meant to help with the financial needs of a new business. Small business start up loan proceeds can go towards things like working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of real estate.


Where Do I Get a Small Business Startup Loan?

If you’ve already started your hunt for a loan, you’re well aware that there is a seemingly infinite amount of lenders and financing options out there. Each one will come with their own set of pros and cons, and perhaps you’ve discovered that most of the low-cost options are not available to business owners without a couple years of business under their belts. To help you get started, here is a list of 5 viable options to secure a business startup loan.

Conventional Business Lending

  1. Banks are traditionally known for their lending opportunities, and if you have a good relationship with yours, this may be a perfect place to go. When it comes to bank financing for business startup loans and lending, but banks will not typically offer conventional loans to new businesses. Through your bank you may qualify for:
    • Equipment Financing: Specifically designed to pay for the purchase of equipment and machinery, this loan is similar in structure to a conventional loan. However, the proceeds must only be used to purchase equipment or machinery.
    • Decide Where to Get Your Small Business LoanDetermining where to get a small business loan can depend entirely upon your needs and credit history. For owners looking for small business loans, the following options should be considered:
      • Bank Loans: When it comes to loans, most people immediately think of bank loans. Banks are often your best bet when looking for loans because their access to checking and savings deposits often results in the best rates. However, banks are slow. You may not get your funding for months. With those two factors in mind, if you have a good working relationship with a community bank or credit union, it’s in your best interest to start there.
      • SBA Loans: The Small Business Administration offers government guaranteed loans through various lenders, like community banks or online through . SBA loan rates rival bank rates but also tend to be document intensive and the approval process make take awhile.
      • Credit Cards: If your business doesn’t crack the high standards of a bank or the SBA, but your financial needs easily fall into your approved credit limits, then a credit card can act as a feasible means for a small business loan.
      • Alternative Loans: Loan alternatives such as peer-to-peer lending, merchant advance loans, or loans from non-profit organizations can get you the money you need. However, be sure to thoroughly read through your term sheet and evaluate the true cost of the loan (APR) before accepting an offer.
      • Personal Sources: Of course, loans from your personal savings or from friends and family can also help you reach your business goals. However, we all know the adage about mixing business and family; for that reason, it’s always advised to tread lightly in this area and only do what you and the lender feel completely comfortable with.