A friend of mine had a brilliant business idea that he had been sitting on for some time. His challenge was finding appropriate financing options to actualize his dream.
You all agree that entrepreneurs would love small business start-up grants to help them work through potential cashflow issues common to start-ups.
Starting and running a successful venture can be daunting without inadequate capital. So which start-up loans are ideal for helping grow your business?
My friend asked me to determine which institutions offer the best start-up loans for small businesses.
The type of small business loans you can go for also depends on your country or state. For instance, if you operate a start-up in Canada, you may not get loans from certain banks in the U.S.
So, here are my findings on the best start-up loans for your business.
You might also enjoy reading: 9 Things You Must Do To Succeed As An Entrepreneur.
Best Start-Up Loans For Small Business
Starting a business can be an exciting journey for entrepreneurs; however, getting people to believe in your ideas and finance your start-up is not easy.
Here are a few of the best start-up loans for small businesses you can turn to if facing financial hurdles.
1- Lendio
If you live in the U.S and need a small business loan, Lendio is a one-stop shop for all your business finances. This online lending marketplace has partnered with 75 lenders to match you with a suitable loan.
Once you have made an online loan application, Lendio will connect you with their funding specialist to understand your business better. This visit and communication will allow the platform to find a loan that suits your needs perfectly.
You will compare various loan offers tailor-made for your business. And after you have selected the correct capital amount and favorable interest rate, Lendio works with lenders to get your start-up funded.
Requirements To Qualify For Lendio Small Business Loans:
- You must have been running your business for six months.
- Your credit score should be at least 500.
These basic minimum requirements enhance your chances of getting some funding, considering that Lendio works with over 75 lenders.
If these requirements are too high, you can apply for a personal loan and use the money to finance your start-up. However, terms for personal loans may be slightly different.
The table below shows the pros and cons of Lendio.
| Pros | Cons |
| – Easy and fast application – A pool of lenders and funding options – Lendio offers expertise and personalized guidance | – Some loans have high-interest rates – Hard credit inquiries will adversely affect your credit score |
2- Bluevine
Are you a small business owner looking for quick cash to boost your working capital? Bluevine is an ideal option for you. Bluevine’s application process is seamless, allowing borrowers to connect their checking accounts and receive decisions in minutes.
Bluevine’s interest rates are relatively low, starting under 5% interest. This makes its products competitive with traditional and online lenders. You will receive funding from Bluevine at a cheaper cost than many lenders we will talk about in this list.
Nevertheless, this lending platform requires high annual revenue and credit score requirements to qualify for a small business loan. Additionally, the 4.8% interest rate is your starting rate- it will increase to higher rates with time.
Bluevine’s Loan Requirements:
The minimum eligibility requirements are:
- At least 625 credit score
- At least six months of business operations
- At least $120,000 annual revenue.
Who is suitable for Bluevine loans
- It is suitable for those who need immediate cash because it processes your loan in minutes. Funds are made available in hours; however, you will have to wait three business days for transfer.
- It is also ideal if you don’t meet other lenders’ eligibility requirements. For instance, you can qualify for a small business loan with bad credit, provide your FICO score is 625 and above and your business has been operating for the last six months.
- If you prefer a short repayment period of between six and 12 months.
Pros:
- Quick funding: It offers easy approval of start-up loans. Once your application and bank statements are approved, you could receive your start-up funding on the same day. Wire transfer will cost you $15 fees.
- Flexible eligibility requirements: Bluevine lending platform is more lenient with its qualification requirements than traditional or other online lenders. It offers start-up business loans to entrepreneurs who have been in business for only six months.
- It offers large credit lines with limited fees: Bluevine’s credit line ranges from $5,000 to $250,000, offering high limits than most of its closest competition. It does not have monthly maintenance fees, prepayment penalties, or account closure fees.
Cons:
- It can be expensive: With a 78% annual percentage rate, Bluevine is probably one of the most expensive business loan options.
- Regular repayments: Bluevine has short repayment terms of 12 months, resulting in higher payment amounts.
See also: What Makes a Good Company Name Good? (With tips for choosing the perfect name!)
3- Fundbox
Do you have poor credit scores and wonder if you get the best loan start-up loan for your small business? Worry no more; Fundbox accepts small business loan applications with a credit score as low as 600.
Unlike Bluevine loans, Fundbox’s credit line is sturdier and a safer loan choice if you have a poor credit score. However, its maximum loan amount is $150,000, which may not be enough for some borrowers.
Fundbox Loan Requirement:
- Your credit score should be at least 600
- Your business must have been operational for at least six months
- You generate at least $100,000 in revenue annually.
The table below contains the pros and cons of Fundbox
| Pros | Cons |
| – Low loan approval requirements – Automated application – Quick funding | – Low maximum loan amount of $150,000 – High APR |
Other Sources Of Small Business Start-Up Grants
Besides online lending platforms, you can also seek small business loans from other areas. Consider some options available to you:
4- Government Loans For Start-Up Businesses
Many governments give grants to small businesses, allowing entrepreneurs to create jobs for themselves and others. These grants often have zero or low-interest rates, enabling you to access financing easily.
For instance, the United States launched Small Business Administration with a microloan program to provide loans for start-ups. You can get up to $50,000 for those launching or expanding their business.
Since microloans from SBA are provided by a group of lenders operating as a non-profit community, you can easily qualify for them.
The US SBA also has a 7 (a) loan program that offers a higher loan limit to help you start your business. However, they require collateral, such as equipment, real estate, and a logbook to cover the loan if you cannot pay.
The qualifications are more stringent, and it can take months before you get funding.
If you don’t live in the United States, I am sure your government has a program or a body that supports start-ups. Take advantage of these programs because many entrepreneurs lack the patience and persistence to get the funds.
See also: Here’s How To Get Your Finances In Order Before Leaving Your Job.
5- Personal Business Loans
If your business does not qualify for loans from online lenders, you can finance it through personal business loans. Since they are based on your personal credit history, they are a good option for new start-ups with no credit record.
Unlike online lending, which requires your business to operate for at least six months, personal loans do not require such experience. This allows you to access financing for launching your start-up.
However, they have high APRs of up to 36% if you have a low credit score. Therefore, personal business loans suit entrepreneurs with solid incomes and stellar credit histories.
6- Friends And Family
Before banks and online lenders existed, people turned to family and friends for loans to finance their businesses. This method of financing small businesses is not outdated, so you can try it to help you realize your dreams.
Your friends and family know you– whether you are a bad or good credit record. Therefore, build a good credit history by returning the money as agreed; otherwise, you may have a bad reputation.
You will also need to convince them that your business idea is viable and that you will return the money as agreed. Target those who believe in your plans and ensure they are comfortable with the associated risk.
Remember that failure could cost you finances and your reputation. Count the costs before resorting to family and friends for a loan.
If you are looking for ways to finance your start-up, I encourage you to read this article.
7- Crowdfunding
Crowdfunding is not just a buzzword but a powerful alternative for raising money for your start-up. You can log in to sites such as Indiegogo and Kickstarter to start a crowdfunding campaign to solicit funds.
Crowdfunding may not give you a loan to repay as the banks do, but you will reward the donors with gifts for their contribution.
Alternatively, you can initiate equity crowdfunding, allowing you to get financing from various investors in exchange for equity ownership. If the investors love your business idea, they will likely want to own part of it.
Crowdfunding is ideal for entrepreneurs who want to test their products and services with a customer base without debt.
Final Thoughts
You can select a suitable online lender if looking for the best start-up loans for your small business. This requires deep research and comparison to establish what best suits your needs.
The beauty is that some online lending sites like Lendio research for you.
Alternatively, you can look for government loans for start-up businesses and apply. Although these loans are often small, they have favorable repayment terms to help you jumpstart your company.
Which start-up loan for small businesses do you think we left out?
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