How to get a startup business loan? A detailed guide for beginners

You have weighed all the pros and cons, assessed the risks and opportunities, and are ready to start a business. But it is not enough to prepare a business plan and draw up constituent documents. To start, you need a material base - office equipment, premises, raw materials, tools, and, most importantly - finances. Aspiring entrepreneurs with limited or no credit history can get business loans for startups. This article will discuss the application algorithm and available lending options for startup entrepreneurs in this article.

Opportunities for startup business loans

Getting loan to start a business is a great way to fill a financial gap, recoup startup expenses, and expand your business.

Borrowed funds can be used for different purposes. For example:

  • Purchase of equipment, supplies, and raw materials.

  • Search for distribution channels.

  • Acquisition and lease of premises.

  • Arrangement of office and industrial premises.

  • Realization of marketing programs.

  • Purchase of furniture and office equipment.

  • Coverage of operating expenses.

  • Hiring employees.

Beginning entrepreneurs, who do not have a cash flow, customers, or suppliers, can get a loan to start a business.

Criteria for choosing a startup loan

To get a loan to start a business, one should apply to a bank, a private lender, or another financial company.

However, before applying, it is necessary to take into account the following details:

  • Repayment terms. The duration of the loan agreement varies from a few months to 20 years. It all depends on the business's specifics and the loan amount.

  • Interest rate. The lender sets the amount and type of interest rate. The deal will be profitable if you get a loan with a minimum interest rate.

  • Repayment schedule. Typically, borrowers pay the principal and interest every month throughout the term of the loan agreement. Some lenders compromise and allow you to delay the repayment of the principal amount. This is especially important at the stage of starting a business.

  • Collateral. Real estate, vehicles, inventory, equipment, and other assets can act as collateral for a loan. If the borrower fails to fulfill the terms of the loan agreement, the lender has the right to withdraw the collateral.

Now you know how to get a startup business loan. Carefully study each clause of the loan agreement before signing it. So you can avoid problems and unpleasant incidents in the future.

Forms and available loan programs for startups

Business loans for startups are a popular area in the banking sector. However, not all creditors agree to cooperate with startup entrepreneurs. Some financial institutions allocate funds only to entrepreneurs who have made a large one-time payment or have a stable annual income. Consider the possible options for lending in detail.

Credit line

If you do not know how to get a loan to start a business, use a line of credit. Thus, you can spend funds on your needs up to a pre-set limit. This is much more convenient than applying for a one-time loan from a bank or a private lender. The limit on the credit line is renewed. This means that somehow you will repay the entire loan and be able to use these funds again. Startup owners can apply for a credit line. The primary condition is that the borrower's credit rating must meet the lender's requirements.

SBA 7(a) loans

Aspiring entrepreneurs can get small business loans for startups at the SBA. The Small Business Administration offers loans up to $5 million with a maturity of up to 25 years. Thus, the owners of a developing business can receive funds for purchasing of equipment, significant repairs, and repayment of receivables. The SBA does not issue loans directly. The funds are disbursed through approved lenders. Borrowers with a FICO credit score of 680 or higher have a high chance of getting approved.


You can apply for a microloan if you need a small amount (up to $50,000). Banks, private lenders, and non-profit organizations financially support small businesses. To be approved, you must prove your ability to pay. 

Short term loans

You can apply for a short-term loan if borrowed funds are needed to achieve a short-term goal. The main feature of such loans is short repayment periods (3-18 months). This way, the business owner can make up for a temporary shortfall in cash. The lender sets the loan limit. Short-term loans are an excellent option for those who want to get a loan to start business.

Purchase of equipment

Some loan programs are created specifically for the purchase of manufacturing equipment. Thus, aspiring entrepreneurs can buy everything they need for a business. These programs generally do not require collateral. They are available to everyone. The main condition is an adequate credit rating and a minimum annual income.

Cash loan

Technically, the cash advance is not a loan. Financial institutions give the borrower a lump sum in cash, after which they charge interest for each completed transaction. The fee is charged for both credit and debit cards. Due to high-interest rates, this type of lending is often unprofitable.


Factoring allows the business owner to receive the required amount immediately. The factoring company repays 70-90% of the face value of the invoice and collects the rest from your clients. Unfortunately, this format of lending is not available for all enterprises.

Business credit cards

The principle of operation of a business credit card is the same as that of a personal one. The owner of this card can pay with funds within the established limit. Some banks offer their customers preferential lending terms, bonus points, and other preferences.

Personal loans

Some startup entrepreneurs use their savings to cover operating expenses. They can help out if business loans are not available. However, before starting a business, ensure your savings are enough to realize your plans.

Friends and family

If you want to start your own business but don't want to deal with creditors, ask for a loan from friends or relatives. On the one hand, this is an easy way to get the required amount without commissions, but on the other hand, the funds received may not be enough. If you fail to repay the loan, you will ruin your relationships with loved ones.


Crowdsourcing involves bringing in others to help you solve your financial problems. In this case, it refers to donations, not investments or loans. You should be prepared for the fact that the company that has helped you will demand compensation in return. It could be an advertisement, a product, or a service.


The main difference between grants and loans is that it does not need to be repaid. State or local authorities usually issue grants for scientific research, design work, staff training, and the implementation of promising business projects. The person receiving the grant must report on the use of funds.

As you can see, there are many options for how to get a start up business loan. The choice of a lending program depends on the need for funds, current expenses, and the specifics of the business.

Advantages of a startup business loan

  • A startup business loan allows you to:

  • Save personal savings.

  • Get the right amount without delay.

  • Prevent the loss of business.

If you are an aspiring entrepreneur and your business has begun to develop, business loans are an excellent choice. The main thing is to choose suitable credit conditions.

Startup business loan procedure

If you don't know how to get a business loan for a new business, follow this algorithm:

  1. Prepare a business plan. The likelihood of an application being approved will depend on its quality.

  2. Decide on the type of loan. Choose the one that's perfect for your business.

  3. Check your credit score. If you have a bad credit history, you can try to improve it.

  1. Compare the terms and conditions of different loan programs, especially fees and interest rates.

  1. Prepare the necessary documents. The list of documents depends on the amount of the loan and the conditions of the lender.

  2. Apply for consideration.

Startup business loans are a powerful tool for financing, launching, and growing a business. With their help, you can support business operations, expand branches, invest in new equipment, or hire additional employees.