See multiple small business start up loans & financing offers with no impact to your credit.
Business Loan Lending Products
What is a Start Up Business Loan?
Small business startup loans come in a variety of products, such as asset-based loans, business credit cards, and microloans, which provide funding to startup businesses or less experienced business owners. This funding can be used for many things including: equipment, furniture, inventory, machinery, supplies, and many others. Outlined below are 5 of the best ways to finance a business startup, depending on your needs and whether you are able to qualify.
What is the first step to starting a business?The first step is to find your idea, know who you will serve (your customers), and why you stand out against your competitors (your USP / unique selling point). Next, you need to find out what it's going to cost to start your business and find your early business funding.
How are startup businesses financed?Startups can be financed in several different ways, such as:
- From savings
- From money borrowed from friends and family
- Investor financing
- Personal loans
- Small business loans
- Specialist startup business financing
MicroloansMicroloans are small, short-term loans that are offered to startup businesses, as well as self-employed individuals and small businesses with few employees. This type of financing is typically only available to entrepreneurs who are not eligible for other types of financing or to business owners in underserved communities, minorities, and women. Microloans are offered in amounts up to $50,000, typically by non-profit organizations, and this money can be used to start a new business, purchase inventory, cover payroll or training expenses, cover seasonal expenses, or to fund a new marketing strategy.
Asset-Based FinancingAsset-based financing simply refers to any financing that uses an asset as collateral and is a good option if you need funding for a specific purpose. The most common types of asset-based financing are equipment financing and invoice financing. As this type of financing uses collateral, it is typically easier for startup businesses to qualify.
Equipment FinancingThis is where a lender supplies you with the capital you need to buy new equipment, sometimes as much as 100%. You are then required to make repayments to the lender with interest, as you would with a traditional loan, and only once these repayments have been made for the full amount will you own the equipment. The equipment itself will act as collateral throughout the term of the loan so that if you default on payments, the equipment financing company will simply seize the equipment and liquidate it to get their money back.
Invoice FinancingThis works for B2B businesses that use invoices to receive money from their customers. An invoice financing company will give you an advance of up to 85% in exchange for your unpaid invoices. When your customer pays the invoice financing company, you receive the remaining 15% with their fees taken out.
Business Credit CardIf you are a very new business, i.e. less than 6 months in operation, a business credit card may be the best option for you. This gives you access to a line of credit that can be used for both large and small, daily expenses. It is best to start with a credit card that offers a 0% APR promotion, typically for 12 to 18 months. This means that you will be able to make purchases for at least one year interest free, making repayments more affordable for this time. Just make sure that you will be able to afford the APR after the promotional period, should you still decide to use the credit card. This is a great place to start if your business is too new to qualify for other financing options and it can help you to build up your credit score, assuming you make your payments on time.
Personal Loan for BusinessAnother financing option for very new businesses is a personal loan for business. This is a loan that can be obtained by an individual based on their personal finances but used for business financing. One benefit of this type of financing is that it is generally more affordable than an actual business loan and is easier to qualify for, as long as your personal finances are strong. However, you should be confident that your business will be successful because if your business fails and you are unable to make your loan repayments, it will affect your personal credit and financial history, making it harder for you to qualify for financial products in the future. Many businesses have started using a personal loan as financing.
Small Business GrantsThe most affordable type of startup business financing is a small business grant. If you are able to qualify for this type of funding it means that you will receive free capital to start a new business or grow an existing one. Small business grants are offered by the federal, state, and local governments, and corporate organizations. The majority of small business grants are open to specific businesses and business owners, for instance, businesses in underserved communities, businesses owned by minorities, women, veterans, or immigrants, and mission-oriented businesses.
How can I get a loan to start up a business?There are a few steps that you should take in order to get start-up business finance. Firstly, make sure that you do your best to determine what your startup costs are, or will be, and any ongoing expenses that will have to be covered. This will provide you with the most accurate figure for how much funding you will need. Then, take the time to create a solid business plan, with financial projections, and get any registrations in place. Look at your qualifications to see which financial products you are most likely to qualify for, including your credit score, time in business, annual revenue, and cash flow.
Who qualifies for startup business loans?There are a large number of new businesses that qualify for startup business loans, but you will find it easier to qualify if you have been in business for 6 months or more than if you have just started operating. That being said, some lenders may still offer you a loan even with a short time in business if you have a strong cash-flow. You will also stand out to lenders if you already have a positive business history or excellent personal credit score. Just be aware that most lenders will consider the industry your business is in, as some pose a higher risk than others, such as real estate or the food industry.
What are the requirements for a startup business loan?The requirements for a startup business loan depends on the type of loan and the lender. However, there are a few things you should consider as a startup business owner:
- ensure the lender accepts new or young businesses
- consider loans with collateral these will be easier to qualify for and there is less risk to the lender
- it is best if you have a good or excellent personal credit score this will increase your chances of qualifying with the best rates and terms
- it is possible to get start up loans with bad credit, but your options will be limited and you may find the terms and rates offered to you are less desirable
Can I use an SBA loan to start a business?The Small Business Administration offers microloans of up to $50,000 that can be used as working capital, to purchase inventory, to purchase equipment or machinery, or to cover the costs of fixtures and furniture. SBA microloans offer terms of up to 6 years with interest rates ranging from 8% to 13%. Since this type of loan is very desirable, they have much stricter requirements, with a minimum of 2 years in business, a strong credit score, and positive business financials. However, because there are many different microlenders, this is generally flexible and you may find that you can get approval with an average credit score, or less than 2 years in business.
Is it hard to get a small business loan?That really depends on your personal circumstances and the success of your business. It is generally far more difficult to get a business loan for a startup, especially if you haven't started trading yet. Getting a small business startup loan tends to be easier if you work with online lenders, offering short-term loans or lines of credit, but you are likely to find that these financing options will offer small amounts and be particularly expensive with the added high interest rates. With a strong credit history and positive financials or the right collateral, you will find it much easier to get a small business loan.
How to Apply for a Start-Up Business LoanAs with loan requirements, the way in which you apply for a startup business loan varies depending on the loan type and the lender. If applying for a microloan you are likely to need to provide your basic personal and business information as well as business bank account statements, business financial statements, your employer identification number (EIN), a financial business plan, and your personal credit report. For asset-based financing, you will also need to provide documentation regarding the collateral. Business credit card applications simply require a Social Security number or federal tax ID. A personal loan will require you to provide personal financial statements, income statements, credit history, and information for any existing debt. If you are looking to start a new business, and need capital to do so, there are many start-up business financing options available to you. Whichever financial product you choose to go with, you should ensure that you do your due diligence into each lender and make sure that you can afford to take on the loan with interest and any additional fees.
Are You A Contractor?
Stop Thinking & Start Doing with Acorn Finance.
Close more sales with easy, affordable financing options for your customers
“The first bank we applied with was disappointing. Your process is easier because of the soft credit inquiry, then you get offers, find the best one, and take it.”
Illinois | HVAC
“I was pleasantly surprised how easy this process was. It couldn’t have been a better experience. Got just what I need for my home project and would do it again should the need arise.”
Virginia | Deck and Roofing
“Your website was really easy to navigate. It was very clear and very simple to use. It was nice to be able to see all the different offers up front.”
Virginia | Roofing
“I like the easy online and 100% paperless experience of Acorn Finance. I received my money two days after completing my application.”
“It was important to me that I could review my offers without any impact to my credit score, before deciding on the best loan option.”
“The process couldn’t have been any easier. I filled out a short form that took me less than 2 minutes and within seconds I got multiple offers from lenders.”
One home, endless possibilities