Best Loan Options for Startups and New Businesses

Best Loan Options for Startups and New Businesses

Reading Time: 5 minutes(Last Updated On: August 22, 2021)

The single biggest problem that small businesses face lies in getting their hands on capital. Being a young sapling in the business world means it can be tough finding a lender to trust in your small business or idea. It’s not uncommon to find many traditional lenders who are unsurprisingly nervous and unwilling to fund risky startups but there are options! Here you’ll learn all about the best small business loans for startups.

Rejected. It’s the word that can shatter a thousand dreams. With the big banks leaving a whopping 58% of small-medium businesses with no access to funding, if you’ve heard this word one too many times and you don’t want to freely hand away your equity and control to investors or even friends and family, then a startup loan could be just what you need to get your business off the ground. There IS hope.

What are startup loans?

Loans to start a business come in many shapes and sizes and are aimed at those with little to no business history. There are a variety of sources of small business funding which you can find in this guide to business lending if you want to double check all of your options. But for those specifically in the startup stage, it’s small business startup loans that have your name on…

A startup loan allows for business owners to keep their stake and full control of the company, as opposed to using crowdfunding or investors – where you’d need to give away your equity. And while it can be useful to get funding from friends and family, or going down the traditional bank-route, not every entrepreneur has the resources to do so, nor can they qualify. Add on the time-frame it takes to get a bank loan (3 months plus) and the effort that goes into it and it’s enough to turn anyone away who needs to fund their business now!

Startups are obviously very young and therefore lack the business history, credit and experience of their older business counterparts, giving them another huge disadvantage at the banks.

Now the term ‘startup’ loan can be used to describe a number of funding methods that can provide essential funds for businesses is at the very beginning of their venture. They can even help those who haven’t set up shop at all but merely have a business plan.

What loan options are available for startups and new businesses?

Here we’ll take you through the best small business loans for startups:

Start up loans

Looking for loans to start a business? For those who don’t yet own a business, start up loans are your best bet. If you have an idea and plan of action, but don’t yet have a business to your name, then you’ll need one of these. Keep in mind that for this specific type of loan, those who do not yet own a business will have to prove to lenders that you’re a trustworthy borrower. For this reason, you‘ll need a relatively high credit score to secure one – makes sense.

Who is eligible for startup loans?
– Those with high credit scores (680+ for FICO)

For business owners who have already established a business but are still very young- say younger than 6 months, there
are alternative options for startup loans including:

Credit cards

This is one of the best alternative ways to get your business to really take off. Though business credit cards aren’t typically small business startup loans, they are a great funding method for startups. Just like an unsecured line of credit, credit cards can be used as you please, providing the perfect means for covering your initial setup costs. You simply draw the funds, pay them back, and continue the cycle as you need. As long as you continue to pay off your balance each month, you won’t incur high-interest rates on the balances carried over.

One of the big bonuses of using a business credit card for business start up funding, is that not only will you better be able to track your initial setup costs by keeping your personal and business expenses separate, but some cards will even provide you with 0% interest for the first year (did someone say free loan?). Then there are all the other perks that come along with it including air miles, reward programs, discounts etc. – who doesn’t love a good bargain!  

Word of warning – getting a 0% business credit card will only last for the first year. Make sure you can pay off that balance before the year is up and the rate increases.

Why choose a business credit card?

  • Fast to apply for (you can compare and get one via Become!)
  • No collateral
  • A great business loan for new business!
  • You can take as much money as you need to cover setup costs each month

Personal loans for business

For small businesses lacking an established business history, a personal loan can be a lifesaver! If you’re a startup then a personal loan for your business may have lower interest rates than many other business loans that you’d typically qualify for, however, keep in mind that the lender will be giving a loan to you – the business owner. Whether you use that loan for business or personal reasons is up to you!

It’s not the best idea to mix your personal and business finances, so if you’re thinking of getting a personal loan for your business we suggest you keep it that way – for your business.

Pros and cons of credit cards:

Pros Cons
For those with a limited business history Will report to your personal credit history
Can be repaid monthly (rather than daily or weekly) Personal and business expenses will be mixed
Can have better rates than a business loan Rates depend on your creditworthiness
(credit score)
No collateral needed Lenders limit how much you borrow

Who is eligible for personal loans?

  • Age 25+
  • 500 minimum credit score (of course the higher, the better the rates)
  • Minimum income of $40k a year

How to apply for start up loans

Business startup funding is a newby business owners best bet for getting ahold of the funding needed while retaining full rights to their company. If you’ve come to the conclusion that a startup loan is a good option then Become can help you get there.

Become is the portal between you (the startup owner) and your funding solution. With over 30 reputable lending partners in its marketplace, filling out one quick and simple application form will be able to show you with which of its partners you can qualify for business loans and credit cards with.

If you cannot qualify for business loans, you’ll be directed to personal loan options. And with so many options available through our marketplace, the odds of finding something to suit your needs are in your favor.

Simply follow these steps to apply for a startup loan:

  1. Apply online – one simple application form
  2. Connect your business online bank account (if you haven’t got one yet, you can use your personal account), you can also use an accounting software such as QuickBooks
  3. Receive and accept loan offers from multiple online lenders (if you qualify)

Did we mention, if you qualify for funding, you can get your funds in as little as 3 hours!  

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Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.