The short answer
Only take a startup loan if the money will earn more than it costs, and only after you’ve tried the cheap options. Before your business has revenue, the fast online lenders on this page won’t lend to you.
With no sales, what’s realistic is an SBA microloan, a 0% Kiva loan, a business credit card or money from people you know. Once you have six months of sales and enough yearly revenue, faster loans open up. They also cost a lot more.
A loan is a bill that shows up whether or not your business does.
So the first question isn’t which lender to pick. It’s whether you need one at all.
Here’s the order we’ll go in: whether to borrow, what you can get at your stage, what it costs, how to apply, what to do if you don’t qualify, and which lenders fit which stage. Already have a year of sales and want more names? Our list of the best small business loans covers 13 lenders. If you’re newer, the startup business loans page is built for you.
Should you take a startup loan at all?
Maybe, if the money buys something with a clear payback. Equipment that lets you take paid work. Inventory you already have orders for. A hire that frees you up to sell.
Skip it if the loan would cover losses, pay your own bills or fund an idea with no customers yet. A loan doesn’t fix a business that isn’t selling. It adds a payment on top.
Here’s a quick test. If you can’t show how the loan pays for itself inside its term, wait.
Many business loans also come with a personal guarantee, which puts your own assets on the line. More on that below.
What you can get at your stage
When you’re young, lenders care about two things: how long you’ve been open and how much money comes in. Here’s what’s realistic at each stage, using each lender’s own time and revenue bars.
| Your stage | What is realistic | The catch |
|---|---|---|
| No revenue yet | SBA microloan (up to $50,000, average about $13,000), Kiva (0% interest, $1,000 to $15,000), a business credit card, or friends and family. | Slow. A nonprofit lender sets the terms on a microloan, Kiva takes 20 to 25 business days to review, and the fast online lenders need sales. |
| Under 1 year, some sales | Everything above, plus Fora Financial at 6 months in business and about $240,000 a year in revenue, or Quickbridge at 6 months and $250,000 a year. | The revenue bar. Below it the fast lenders still say no, and National Funding needs $250,000 a year. |
| 1 year or more, with revenue | Bluevine line of credit (up to $250,000, 625 FICO, 12 months, $120,000 a year), OnDeck ($5,000 to $400,000, 625 FICO, 1 year, $100,000 a year), plus Fora Financial and National Funding. | Cost and credit. OnDeck’s average term loan APR is 53.2%, and the cheaper options want strong credit. |
Look at what’s missing from the first row. The lenders that advertise money in a day all need revenue.
If an ad promises fast funding to a brand-new business, read the requirements before you apply.
One more option sits at the top. SBA 7(a) loans go up to $5 million at rates the SBA caps. But you have to be creditworthy, show you can repay, and be unable to get the credit elsewhere on reasonable terms.
That’s hard to show with no track record. You also apply through a lender, not the SBA.
What a startup loan costs, and what can go wrong
Cost is where young businesses get burned. Mostly it’s because the price isn’t quoted the way you’d expect.
Factor rates are not interest rates
Some lenders quote a factor rate instead of an interest rate. Fora Financial’s runs from 1.13 to 1.50.
On $50,000, a 1.30 factor means you pay back $65,000. The money costs you $15,000.
That looks like 30%, but you hand the money back over months, not a year, and in daily or weekly pieces. So the true yearly rate is higher.
Ask every lender for the total you’ll repay and the APR, in writing, and compare on those two numbers.
Fees come on top. Fora’s origination fee starts at 2.5%, plus a one-time wire fee. Paying early can bring its factor rate down to as low as 1.05, and there’s no prepayment penalty. Want a sense of how high fast money can run? OnDeck publishes what its borrowers pay on average: a 53.2% APR on term loans and 59.8% on lines of credit.
Daily and weekly payments
National Funding’s working capital loans are repaid daily or weekly over 4 to 24 months. Fora’s run 4 to 18 months, also daily or weekly.
A daily payment comes out whether or not you had a good day. If your sales are lumpy, that can squeeze you fast. SBA 7(a) loans, by contrast, are usually repaid monthly from the business’s cash flow.
Personal guarantees
A personal guarantee means the lender can go after your personal assets if the business can’t pay. It overrides any LLC protection, so setting up an LLC won’t shield you. Bluevine’s line of credit, for one, comes with it.
Find the words “personal guarantee” in the agreement before you sign, and ask yourself what they could reach.
What applying does to your credit
Applying with Fora uses a soft check. A hard inquiry can follow later if you move to final approval. Fora also doesn’t report to the credit bureaus, so paying it on time won’t build your business credit.
National Funding doesn’t run a hard credit check to apply.
| Option | What it costs | How fast | The catch |
|---|---|---|---|
| SBA microloan | Interest rate set by the lender and it varies. Repayment up to 7 years. | Varies. The lender runs it. | A nonprofit lender makes every credit decision and sets all terms. |
| Kiva | 0% interest and no fees. | 20 to 25 business days to review. | You invite friends, family or others to lend first. |
| Fora Financial | Factor rate 1.13 to 1.50, plus an origination fee from 2.5%. | Decision in as little as 4 hours, funding as soon as 24 hours after you accept. | Costs more than a bank or SBA loan. Needs revenue. |
| National Funding | Rates not published. | As soon as the next business day after approval. | Needs $250,000 a year in sales. Get total repayment and APR in writing. |
| OnDeck | Average APR 53.2% on term loans. | Same day for approved borrowers. | Highest cost here. Needs 1 year and $100,000 a year. |
How to apply, step by step
- Open a business checking account and run every sale through it. Lenders ask for business bank statements (Fora wants three months of them), so your clock starts the day the account does.
- Write down three numbers: months in business, yearly revenue and your personal credit score. They decide which lenders will even look at you, so check them against the stage table above.
- Decide how much you need and what it buys. Borrow that, not the maximum. Work out the daily, weekly or monthly payment and check it against the sales you have today, not the ones you’re hoping for.
- Try the cheapest doors first. For an SBA microloan, find an SBA-approved intermediary lender near you on sba.gov. For Kiva, apply online and line up the people who’ll lend to you first.
- If you have the revenue and need speed, apply to two or three lenders and ask each for the same things: total repayment, APR, the payment amount and schedule, and whether the credit check is soft or hard. Fora’s application takes about five minutes online.
- Read the agreement before you sign. Look for a personal guarantee, any origination or wire fee, and what paying early does. If a lender won’t put the total cost in writing, walk away.
What to do instead if you don’t qualify
A no is common at this stage. It usually means one of three things: not enough time in business, not enough revenue, or credit that needs work.
Ask the lender which one it was. Then look at these.
SBA microloans. The SBA’s microloan program lends up to $50,000, and the average is about $13,000. Nonprofit lenders called intermediaries make the loans, decide who qualifies and set the terms, so talk to more than one.
The money can pay for working capital, inventory, supplies, furniture, fixtures, machinery or equipment. It can’t pay off existing debt or buy real estate. Interest rates vary by lender, so ask before you apply.
Kiva. It makes loans of $1,000 to $15,000 at 0% interest with no fees, no collateral and no minimum credit score. The catch is that you have to ask friends, family or others to lend to you first, and approval takes 20 to 25 business days.
Repayment usually takes 12 to 36 months. Kiva also excludes some kinds of businesses, such as multi-level marketing and direct selling, so check its list.
A business credit card. If your personal credit is decent, a card is often the easiest startup money to get. Many open with a 0% intro APR on purchases, which works like a free short loan if you pay it off before the intro period ends. After that the rate is much higher. We compare cards on our best business credit cards page.
Friends and family. It’s cheap and fast, and it’s the riskiest for the relationship.
Put the amount, the rate (even if it’s 0%) and the payback dates in writing. Only borrow what they could lose without it hurting.
Grants. They’re rare for startups. The SBA doesn’t provide grants for starting and expanding a business, and the limited grants it does offer go to nonprofits, resource partners, schools and a few research and exporting programs.
Be wary of anyone promising free startup grant money. The SBA only contacts people from email addresses ending in @sba.gov.
You can also borrow nothing and start smaller. For more ways to fund a startup, see our guide to funding your startup and our rundown of how to finance your business.
Lenders by stage
Two lenders are worth knowing once you have revenue. Neither one is for a business that hasn’t started selling.
Fora Financial, for six months in and selling
If you have six months of sales, Fora Financial is the faster of the two to qualify for. It asks for 6+ months in business, about $240,000 a year in revenue and a 570 FICO score or better, and you apply with a soft credit check. Fora’s FAQ puts the revenue bar at $17,000 a month instead, so check your offer for the number that applies to you.
A decision can come back in as little as 4 hours, and funding can land as soon as 24 hours after you accept an offer. Amounts go up to $1.5 million, though what you’re offered depends on your revenue.
The trade is cost. Terms run 4 to 18 months with daily or weekly payments, and it’s priced higher than a bank or SBA loan.
National Funding, for $250,000 a year in sales
National Funding is for businesses that already sell a lot. It requires at least $250,000 in annual gross sales, so if you have no revenue or you’re just getting started, skip it for now and come back.
If you clear that bar, it offers working capital loans from $6,000 up to $500,000, with no hard credit check to apply and funding as soon as the next business day after approval. It has been funding businesses since 1999.
Working capital payments come out daily or weekly over 4 to 24 months, and rates aren’t published. Get the total repayment and APR in writing first.
Not at either bar yet? Go back to the microloan and Kiva options above. They’re slower, but they’re the ones open to you.
Startup loan questions
Only if the loan will pay for itself. If it buys equipment, inventory or a hire that brings in more than the payments cost, it can make sense. If it would cover losses or fund an idea with no customers yet, wait. Many business loans also carry a personal guarantee, which puts your own assets at risk.
Yes, but the list is short. SBA microloans go up to $50,000 through nonprofit lenders that set their own terms, and Kiva lends $1,000 to $15,000 at 0% interest with no minimum credit score. A business credit card is another route if your personal credit is decent. Fast online lenders like Fora Financial and National Funding need revenue.
It depends on the lender. Fora Financial lists a 570 FICO minimum. Bluevine and OnDeck list 625. Kiva has no minimum credit score, and an SBA microloan lender sets its own requirements.
A factor rate is a multiplier instead of an interest rate. Fora Financial’s runs from 1.13 to 1.50, so on $50,000 a 1.30 factor means you repay $65,000. Because you repay over months, usually in daily or weekly payments, the true yearly rate is higher than the factor suggests. Ask for the total repayment and the APR in writing.
It’s a promise to repay the loan from your own assets if the business can’t. It applies even if the business is an LLC, so the lender can come after you personally. Look for it in any loan agreement before you sign.
Not many. The SBA doesn’t provide grants for starting and expanding a business. It does offer a few limited grants for things like scientific research and exporting. Be wary of any offer of free startup grant money.
Sources
- SBA, MicroloansLoan size, average loan, eligible uses, how to apply, lenders set terms.
- SBA, 7(a) loans$5 million maximum, eligibility, monthly repayment.
- SBA, GrantsNo SBA grants for starting and expanding a business.
- Kiva U.S., Borrow0% interest, no fees, $1,000 to $15,000, review time, eligibility.
- Fora Financial, FAQSix months in business, 570 FICO, 4 to 18 month terms, soft credit check.
- National Funding, small business loansUp to $500K, no credit impact to apply, next business day funding, since 1999, daily or weekly payments over 4 to 24 months.
- Best small business loansLender requirements and the Fora, Bluevine, OnDeck and Quickbridge figures, as listed on that page.
