Startup Business Loans: Learn Financing Options (2026)

A startup business loan funds a new company before it has the revenue or credit history many lenders use to underwrite an established business.

The US Small Business Administration (SBA) approved 8,900 loans worth $5.6 billion to small business startups between January and September 2025. The agency delivered a record amount of capital across fiscal year 2025, including 84,400 SBA 7(a) and 504 loans worth $44.8 billion total.

This guide covers the top startup business loans and other financing options for funding your new business.

What are startup business loans?

A startup business loan is any loan a new business owner uses to launch or grow their company. Entrepreneurs use the funds to:

• Develop products or services
• Hire employees
• Lease space or equipment
• Fund marketing
• Buy inventory

Startup loans are different from loans for established businesses because they’re designed for borrowers with limited or nonexistent business credit. Instead, lenders weigh the owner’s personal credit score, business plan, and other factors to determine whether they’re eligible.

Startup financing options include:

• SBA loans. Government-backed loans through banks and credit unions, with lower interest rates and longer terms than many alternatives.
• Online term loans. Lump-sum financing from online lenders, often featuring with fast approvals and little paperwork.
• Business credit cards. Revolving credit for smaller or ongoing expenses, can come with startup-friendly approval requirements.
• Microloans. Smaller loans, under $50,000, commonly from nonprofit and community lenders.

When should you get a loan for your business?

The Federal Reserve Banks’ 2025 Small Business Credit Survey found that small employers who applied for financing in the previous 12 months most often sought to meet operating expenses (56%) or pursue an expansion or new opportunity (46%). But when to get a business loan comes down to what you need the money for and whether the business can afford to pay it back.

Borrow now if you know exactly where the money should go

A loan works best when you have a clear objective. A few examples:

• Inventory. Stock up on bestsellers and get better prices by buying in bulk.
• Marketing. Pay for SEO, ads, influencer partnerships, or a referral program.
• Product development. Cover prototypes, research, or a new collection.
• Talent. Bring on contractors or offer stronger pay to win better candidates.

Wait if your cash flow isn’t steady yet

In a 2025 Shopify survey, 34% of store owners cited ensuring stable cash flow as their second business goal. Even so, 20% of store owners said they wished they’d waited until their cash flow was steady before scaling up. 

A loan can mean a new bill every month. If income isn’t predictable, that bill can turn a short-term cash crunch into a longer one.

Try another option if a loan isn’t the right fit

If the business can’t live up to terms of a loan, other options can help bridge the gap: personal savings, a credit card for smaller costs, or financing that scales with sales instead of charging a fixed amount.

Startup business loan requirements

• Credit requirements
• Time-in-business benchmarks
• Document requirements

Before you apply for a startup business loan, it’s helpful to understand how lenders evaluate new businesses. While loan requirements vary by lender and loan type, many look for a similar set of signals to assess risk, readiness, and your ability to repay. 

Here’s what lenders typically review when considering a startup loan application.

Credit requirements

Startups applying for financing may not have a business credit score yet, so lenders will review personal credit scores instead. Your credit profile shows how you’ve handled debt in the past. Lenders use it to assess risk.

Requirements vary by lender and loan type. SBA-backed and traditional bank loans expect stronger credit in exchange for lower rates and longer terms.

Alternative lenders may accept lower business credit scores if you can offset the risk another way, such as:

• More documentation. Bank statements, tax returns, or a business plan that shows you can repay the loan.
• Collateral. Equipment, inventory, or other assets the lender can claim if you default.
• A strong repayment plan. A clear picture of incoming revenue or how the loan will generate the return to repay it.

That flexibility comes at a cost: alternative lenders can charge higher interest rates than SBA-backed or bank loans.

Before you apply, check your credit report. Use it when comparing lender requirements so you can focus on options you’re more likely to qualify for.

Time-in-business benchmarks

How long your business has existed can play a role in which financing options are available.

• Zero to six months. Options are limited. Many founders rely on personal credit, startup loans, or alternative financing.
• Six to 12 months. Some online and alternative lenders may consider applications, especially with steady revenue.
• One to two years. More loan types open up, including select bank loans and SBA-backed options.
• Two or more years. Established operating history may improve access to traditional bank loans and larger financing amounts.

These benchmarks vary by lender, but they’re a useful baseline for understanding what funding you can access at each stage.

Document requirements

When applying for a startup business loan, lenders may ask for a mix of personal and business documents, such as:

• Personal and business identification
• Personal tax returns
• Business tax returns (if available)
• Bank statements
• Profit and loss statements
• Balance sheets
• Business plan or pitch deck
• Revenue projections or cash flow forecasts

Exact requirements vary by lender and loan type, but having these documents ready can speed up the application process and improve your chances of approval.

Startup business loans with no revenue

In a 2025 Shopify survey, 62% of store owners reported using additional funding on top of self-funding. These business financing options may be available to entrepreneurs starting with little or no business income:

• Self-financing
• Financing from friends and family
• Crowdfunding
• Small business grants
• Microloans

Self-financing

If you’re having trouble qualifying for a small business loan, alternatives may include an unsecured loan (borrowing without collateral), a second mortgage, or borrowing against retirement accounts.

These options can be helpful if you want to be the sole owner of your business rather than sell part of it to an investor. 

“I just risked my own capital because, one, I believed in the product, and two, I wanted people to know that I had skin in the game,” Marcus Milione, founder of athletic apparel brand Minted New York, says on an episode of the Shopify Masters podcast. 

However, going this route means you may also risk personal savings and assets since you, not your business, will be liable for the loan.

Financing from friends and family

When starting a business, you can get money from friends and family. In return, you can give them part ownership or shares in your company. Friends and family likely won’t ask to check your credit score and might offer you better loan terms than banks or other lenders.

However, these types of loans typically won’t help you build business credit. You should also think carefully about what might happen to your personal relationships if your business fails and you can’t pay them back.

Crowdfunding

You can use online crowdfunding websites to get money for your business. For example, Vicky Pasche used Kickstarter to raise money for gender-neutral clothing brand Dapper Boi. 

Pasche credits being able to connect with audiences and “solving a problem” to the campaign’s success. The cofounder initially aimed to raise $18,000 but ended up with $26,000. 

There are different types of crowdfunding, including:

• Donation crowdfunding. This type of fundraising, facilitated by sites like GoFundMe, doesn’t require you to offer financial rewards or incentives for backers. Refunds are also voluntary. 
• Rewards-based crowdfunding. In this model, popularized by Kickstarter, funders can set rewards, like a thank you note, special merch, or discounts, in exchange for helping to fund your business. Apps like Crowdfunder combine the rewards-based model with preorder functionality, giving crowdfunders early access to new products.
• Equity crowdfunding. With this option, you give people a stake in your company in exchange for their money. Registered equity platforms include Fundable, StartEngine, and Crowdcube.

Crowdfunding is also a powerful way to test demand before fully launching a product, and you can see how people respond in real time. Strong backing signals market interest and can help validate your business idea early and determine product-market fit. Even smaller campaigns can provide useful feedback, early customers, and proof of traction.

Small business grants

You can get small business grants from both private and government programs, and you don’t have to pay the money back.

Getting a grant can be competitive. You’ll need to apply and potentially align with a specific mission or goal. For example, a business might award grants to entrepreneurs who can show how their company is innovating in its field. The amount of money you can receive from grants varies widely.

When searching for grants, focus on programs aligned with your business type, location, or founder profile. Start with federal opportunities on Grants.gov, followed by state and city programs. 

Your local Small Business Development Center (SBDC) may be able to help identify grants and guide you through the application process.

Microloans 

Microloans are small loans, often ranging from a few hundred dollars up to $50,000. They’re designed for early-stage businesses that may not qualify for traditional financing.

Many microloans are offered through nonprofit or mission-driven lenders. These organizations help connect capital with founders who are just getting started or who may be underserved by banks. Along with funding, some also provide education, mentoring, or flexible repayment terms.

Because of that structure, microloans are often more accessible than other loan types. They can be a practical option for covering startup costs, purchasing equipment, or funding an initial product run.

Some microloan providers include Accion Opportunity Fund, LiftFund, Kiva, and Grameen America.

Easy-approval startup loans

Some startup loans move faster than others. These options may rely less on a lengthy credit review and more on factors like cash flow, projected revenue, or a personal guarantee.

Faster approval doesn’t mean guaranteed approval. Lenders still assess risk before providing funds, but use of nontraditional standards can come with tradeoffs, such as higher interest rates, fees, and shorter repayment terms.

An unsecured startup loan doesn’t require specific collateral, like equipment or real estate. Lenders may still review your personal credit score, business revenue, and bank activity, and many require a personal guarantee, making you personally responsible for the debt if the business can’t repay it.

These funding sources are an option for startups that need financing right away:

• Merchant cash advances
• Equipment loans
• Invoice financing
• Asset-based financing

Merchant cash advances

A merchant cash advance (MCA) is a type of unsecured funding that gives you a lump sum of money upfront for expenses like salaries, rent, and inventory costs. In return, you agree to pay back the advance and fees by giving the provider a portion of future sales.

The Federal Reserve classifies MCAs and similar products as “revenue-based” or “sales-based” financing: funding repaid as a percentage of sales or revenue, rather than in fixed payment amounts. Unlike a traditional loan with a set monthly payment, an MCA adjusts to your sales volume. When business is slow, you pay less. When sales are strong, you pay more.

MCA providers typically charge a “factor rate” instead of an interest rate or annual percentage rate (APR). The Federal Reserve warns that factor rates don’t aren’t comparable to interest rates and APRs, and cites one case where a factor rate of 1.15 worked out to an undisclosed APR of about 70%. Compare offers by calculating the total repayment amount and effective APR, not just the factor rate.

Some options to secure a merchant cash advance are Shopify Capital and Rapid Finance.

Equipment loans

Equipment financing is a loan that helps businesses acquire equipment or machinery. The lender provides funds to purchase equipment outright, which then serves as collateral for the loan. If the borrower defaults, the lender can seize the equipment to recoup its losses.

Because the equipment itself secures the loan, equipment financing can be more accessible to newer businesses than unsecured financing.

There are equipment finance companies like Taycor Financial, but you can also use banks for equipment loans.

Invoice financing

Invoice financing, or accounts receivable financing, advances businesses a portion of the value of their unpaid customer invoices. When the customer pays, the lender releases the remaining balance, minus fees.

Repayment timing can depend on when customers pay, though terms vary by lender.

Asset-based financing

Asset-based financing uses business assets, like property, unpaid invoices, or inventory, as collateral for a loan. It can work for businesses with valuable assets but limited financial history.

The loan amount is a percentage of what those assets are worth. A lender might offer 70% of your equipment’s value, for example.

SBA loans for startups

The US Small Business Administration partially guarantees SBA loans from participating lenders. Loan types vary depending on your business and how you plan to use the funds. 

The application and approval process can be long, and you’ll need to meet SBA loan requirements, but the SBA guarantee can make it easier to secure a substantial loan on favorable terms. 

The SBA also offers a lender matching tool you can use to find participating lenders and compare loan offers.

Here are a few different types of SBA loans to consider:

• SBA 7(a) loans
• SBA 504 loans
• SBA microloans

SBA 7(a) loans

The SBA 7(a) loan program offers up to $5 million in funding for things like real estate, working capital, equipment, supplies, and refinancing debt.

To qualify, your business must operate for profit, be located in the US, and be creditworthy enough to show a reasonable ability to repay the loan. Applicants also need to show they can’t get comparable financing on reasonable terms from a private lender. Since SBA loans are issued through approved lenders rather than the SBA directly, individual lenders can add their own credit and revenue requirements on top of these baseline rules.

SBA 504 loans

The SBA 504 loan helps businesses purchase or expand fixed assets, such as buildings or land. The maximum loan amount is $5.5 million. The loan cannot be used for working capital or inventory purposes.

Eligibility requires the company to operate for-profit in the US, have a tangible net worth of less than $20 million, and have an average net income of less than $6.5 million after federal income taxes over the two previous years. 

SBA microloans

SBA microloans go up to $50,000, with an average loan size of about $13,000. You can use the funds for working capital, inventory, supplies, furniture, fixtures, and equipment. You can’t use a microloan to pay off existing debt or buy real estate.

Repayment terms run up to seven years. Interest rates typically fall between 8% and 13%, though the exact rate depends on the intermediary lender.

You don’t apply to the SBA directly for a microloan. The SBA funds intermediary lenders who set all terms for the loan. 

Business lines of credit

A business line of credit provides ongoing funding for your startup. Similar to a business credit card, you use money from your credit line (up to a maximum limit) whenever you need it. Unlike a small business loan, you don’t get all the money at once. This also gives you more flexibility than a loan because you pay interest only on the amount you actually use, not on the total amount available to you. 

“If you’re bootstrapped, get a line of credit from your bank and work off of that working capital rather than seeking investment from the beginning,” Hillary Markenson, president of hair care brand Reverie, says on an episode of the Shopify Masters podcast. 

You can access a business line of credit through online lenders, banks and credit unions, and the SBA’s CAPLines program. 

Loans for established startups

These options can help more mature startups grow or cover day-to-day needs: 

• Local business financing
• Term loans
• Business credit card
• Peer-to-peer lending

Local business financing

Local credit unions, community banks, and nonprofit lenders often take a more relationship-based approach than large banks or online lenders, spending more time on your background, experience, and business plans instead of relying only on automated criteria.

Rates, terms, and requirements vary by lender, but smaller institutions are often more willing to weigh industry experience or a local track record. Some also participate in local or statewide loan guarantee programs, similar to SBA-backed loans, which can improve your odds of getting approved.

Term loans

A term loan is a one-time lump sum you repay with interest over a set period, similar to a mortgage. Established businesses use them to expand, buy inventory, or improve operations.

Terms generally fall into three ranges: short-term (about a year), intermediate-term (one to three years), and long-term (three to 25 years).

Banks and fintech or online lenders both offer term loans. Banks tend to have lower interest rates but stricter requirements, like a high credit score and sometimes collateral. Fintech and online lenders approve faster but may charge higher rates and fees with shorter repayment terms.

Business credit card

The main difference between personal and business credit cards is that business credit cards are for business use. Businesses can use pay-in-full cards, which require that you pay off your balance completely on or before the statement due date, to make purchases, track expenses, and cover cash flow gaps. Shopify Credit’s pay-in-full Visa also offers 3% cash back on eligible purchases. 

Peer-to-peer lending

Peer-to-peer (P2P) lending platforms connect you directly with individuals or companies who want to invest their money. This type of lending can be faster than getting a bank loan if the P2P platform uses automated systems to check your creditworthiness, financial statements, and business projections.

After you’re approved, multiple investors can each fund a portion of your loan until you get the full amount you need.

If you have good credit, P2P loans might offer competitive interest rates. However, if your business is very new or has an unstable financial history, you might face higher interest rates and lower maximum loan amounts. 

Some P2P lending platforms include Prosper and Upstart. 

*All loans through Shopify Capital Loans are issued by WebBank. Offers are subject to change based on several factors including your store’s performance and the review of your financial information. Shopify Capital Loans must be paid in full within 18 months, and two minimum payments apply within the first two six-month periods. Offers to apply do not guarantee funding. Repayments are made based on a percentage of daily sales.

Interest rates and fees for startup business loans

Here are some of the typical rates and fees associated with business loans: 

• Origination fees
• Interest rates
• Prepayment penalties

Origination fees

Origination fees are one-time upfront fees lenders charge to process a loan application. These fees cover administrative tasks like evaluating eligibility, underwriting the loan agreement, and transferring funds.

Origination fees typically range from 0.5% to 8% of the loan total or principal and depend on factors like credit history, according to Experian. They are nonrefundable and typically deducted from the loan principal or paid at the time of issue.

Interest rates

Interest rates on small business loans vary widely. Annual percentage rates—which factor in interest rates and fees—from banks and credit unions can range from 7% to 16%, reports Forbes. Online lender rates may be even higher.

As a general rule, loan types tend to fall into this rate hierarchy:

• Lowest rates. SBA loans and traditional bank financing.
• Mid-range rates. Business lines of credit, invoice financing, and equipment loans.
• Highest rates. Online term loans and merchant cash advances.

Here are NerdWallet’s reported APR ranges by loan type, as of July 2026:

• Online term loans: 14% to 99%
• Business line of credit: 10% to 99%
• Merchant cash advance: 40% to 350%
• Invoice financing: 10% to 79%
• SBA variable loans: 9.75% to 13.25%
• SBA fixed loans: 11.75% to 14.75%
• Equipment financing: 4% to 45% APR

Lower-rate options often require stronger credit and come with longer approval timelines. Higher-rate loans usually trade cost for speed or flexibility. Understanding where each option falls can help you balance affordability with access when choosing financing.

Prepayment penalties

Paying off a loan early means paying less interest overall, which is why some lenders charge a fee for it.

On SBA 7(a) loans with a maturity of 15 years or longer, a prepayment penalty applies if you pay off 25% or more of the outstanding balance within the first three years of the loan. The penalty declines each year: 5% of the prepaid amount in year one, 3% in year two, and 1% in year three. There’s no penalty after that.

Prepayment terms vary by lender and loan type outside the SBA program. Check your loan agreement before signing to understand what a lender charges for paying early.

How to get a startup business loan

1. Calculate how much you need
2. Create a business plan
3. Evaluate your financial situation
4. Compare different types of loans
5. Apply for a startup loan

Whether you’re starting a new venture or trying to expand your existing business, you’ll generally follow the same steps to secure a startup business loan. 

Note that loan terms, rates, and eligibility requirements vary by lender and can change at any time. This article is for informational purposes only and doesn’t constitute legal, financial, or tax advice. Consult a financial adviser, accountant, or attorney about your specific situation before applying for a loan.

1. Calculate how much you need

Use a business loan calculator to figure out your funding needs. Start with what the loan will go toward, then factor in ongoing costs beyond the initial investment, like maintenance, commercial insurance, and utilities.

2. Create a business plan

A business plan is a strategic document that outlines your company’s goals, strategies, and timelines for accomplishing them. Lenders may use it to gauge whether you understand your business’s challenges and opportunities before they approve funding.

If you’ve already launched and made sales, lenders will want to see financial statements, future estimates, and a clear explanation of how you’ll use the loan to run or grow the business. If you’re pre-revenue, lenders may want to see market research that shows the idea is profitable and a plan for how it will make money. Back it up with proof the idea has traction, like user sign-ups or partnerships.

“The business plan that I wrote for the bank was different than the business plan that I actually had in my brain,” says Nicola Hamilton, Founder of Issues Magazine Shop. “So, you’re writing, like, the simplest version of a business plan for the bank. They just wanted to see that there was a world in which selling magazines could sustain itself.”

3. Evaluate your financial situation

Financial advisers can look at your business and personal finances to determine what hurdles you might face. They can also provide insight into the various financial institutions, their loan programs, and the necessary requirements. 

If speaking to a financial adviser is not within reach, take time to evaluate your personal credit, which may affect whether you qualify for financing, as well as the rates and terms you receive. Many apps and financial accounts let you check your credit score for free. In the US, you can get a free credit report each year from the three credit reporting agencies: Equifax, Experian, and TransUnion.

If you spot inaccuracies or red flags on your credit report, take steps to correct them or mitigate their impact. Dispute errors, pay off debts, or negotiate settlements with creditors. If you’re not already in the practice of paying your bills on time, start now. You’ll also want to keep your credit card balances low, and avoid opening unnecessary credit accounts.

4. Compare different types of loans

Assess your funding options with total cost in mind, not just the interest rate. Weigh repayment terms, external factors that might affect when and what you can pay (like seasonal lulls), and fees on top of interest, along with each option’s advantages and disadvantages.

For example, if you’re a small business without revenue, tapping friends and family can mean preferable terms and a lower total cost, but it won’t help you build business credit.

Don’t be afraid to shop around and get quotes from multiple sources. Comparing the total repayment amount, not just the advertised rate, is the clearest way to see what a loan actually costs. You’re not locked into anything until you sign the paperwork.

5. Apply for a startup loan

Once you’ve chosen a loan type, gather key documents like financial statements, tax returns, and business licenses. Review each lender’s eligibility criteria, then apply to a few lenders to compare offers.

If you’re a new business, keep these additional factors in mind:

• Personal guarantees. Lenders may ask you to promise that you will personally pay the balance of a loan if your business can’t pay back the loan.
• Collateral. Offering something valuable you own, like equipment, inventory, or property, can strengthen your application.
• Equity financing. Some small business owners without income choose to sell part of their company to angel investors or venture capitalists instead of taking a loan when they’re starting out.
• Valuation. If you raise funds by selling equity to friends and family, angel investors, or through an equity crowdfunding platform, you’ll need to calculate your startup’s valuation.

Common application mistakes

Borrower financials are the most common reason lenders deny a loan application, cited by 71% of respondents in the Federal Reserve Bank of Kansas City’s first-quarter 2026 small business lending survey. Check you’re not making these mistakes before you submit your application:

• Missing or inconsistent documents. Tax returns, signatures, and financial statements that don’t match across forms can stall or sink an application.
• Vague use-of-funds statements. Lenders want a specific answer for what the loan will pay for.
• Overly optimistic projections. Revenue forecasts without supporting data raise questions.
• Applying at the last minute. A rushed application leaves no time to fix weak financials or gather missing paperwork.

Once you receive offers, compare them to find the best fit for your business. You may be able to negotiate better terms at this stage.

If your application is denied, ask the lender for feedback. Rejections often come down to something specific, like limited credit history, insufficient revenue, or missing paperwork. That insight can help you strengthen your application, fill in gaps, or rethink the type of financing you’re pursuing. Sometimes the better move is finding a lender that fits where your business is today, like a community bank or nonprofit lender, rather than reapplying right away. 

*Based on a 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.