Search
startup loan

Best Small Business Startup Loans for 2021

Almost every small business needs a pool of capital to get off the ground, and it’s rare to find one funded entirely by personal savings. This is where startup loans come into play, providing you the cash injection necessary to get your dream up and running.

Financially Reviewed by Thomas J. Brock, CFA, CPA on 8.25.2021

Our Choice of The Best Overall Small Business Startup Loan

Fundbox allows you to get funding in under 6 minutes. Eligibility requirements are lenient and it’s a great way for new small businesses to establish credit. 

Apply for a Fundbox Loan now

Startup business loans can be used to cover a huge range of expenses, such as putting down a deposit on retail property, buying your first batch of stock, covering the legal fees of setting up a new venture, and even hiring top talent to get you started.

This type of borrowing can sometimes be difficult to find - as many traditional lenders aren’t willing to take a chance on an untested venture. Luckily, our experts pulled together a list of some of the best options in the market for you. 

The Best Business Startup Loans - A Quick Overview

Many new business owners have no idea where to find startup loans. To get you started, check out our list of the best options below.

Company

Max/Min Loan

Loan Rates

Special Requirements

Application Process

Fundbox

Fundbox review

Up to $150,000

Not disclosed

Minimum credit score of 600

Funds could be in your account within 24 hours

Fora Financial

Fora Financial review

Offers loans of up to $500,000

Not disclosed 

Minimum credit score not disclosed

At least six months of business history

Fora Financial offers merchant cash advances and short-term loans

Fundera

Fundera review

Borrowing amount determined on application

9.99% - 26.99%

Minimum credit of 450

Fundera offers a range of credit cards and approval times vary

Lendio

Lendio review

$500,000 - $750,000

6.00% - 17.00%

Minimum credit score of 680

It usually takes between two to four weeks to arrange funding

GoKapital

GoKapital review

$25,000 - $500,000

6.00% - 18.00%

A minimum credit score of 700


Evidence of previous installment loans

Funding is usually approved and disbursed within five business days

The Best Small Business Startup Loans Explained

1. Fundbox - Best for Quick Funding

Fundbox focuses on providing relatively low-dollar value loans that are repaid over the short term. This makes it a good choice for startups that need funding quickly but don’t plan to hold debt over the long term. 

Pros

Cons

  • Simple application process
  • No long-term commitments
  • No origination fees
  • Weekly repayments can impact cash flows

Features

You’ll be repaying your loan over a 24- or 52-week period in weekly installments, meaning this would be well suited for businesses that only need to cover short-term expenses. Interest rates aren’t disclosed before you apply, but your credit score won’t take a hit for having a look.

Our Thoughts

Fundbox is a top choice for businesses that don’t have the time to wait around for funding and need cash to cover expenses right now. Eligibility requirements are lenient, and it’s a good way for fledgling organizations to build credit.

2. Fora Financial - Best for Merchant Cash Advances 

Fora Financial was founded in 2008. Since then, it has provided over $2 billion in funding to more than 25,000 small businesses. This lender has maximum terms of 15 months; so, you won’t be hit with additional fees. Fora Financial also offers fast funding, which can facilitate growth opportunities with limited time horizons.

Pros

Cons

  • Working capital from $5K – $500K
  • Terms up to 15 months
  • Approval not solely credit based
  • You require $5,000 in monthly credit card sales to be eligible for Fora Financial's merchant cash advance
  • Requires $5,000 in monthly sales

Features

Fora Financial is a great choice for short-term loans, as the duration is limited to 15 months. In this space, Fora Financial offers a high degree of flexibility, providing financing for any business need. However, this lender does have credit score requirements (undisclosed), which can weigh on loan issuances. Beyond these factors, borrowers must be able to show at least six months of business history.

Our thoughts

Fora Financial provides merchant cash advances and small business loans with terms capped at 15 months. This alternative provider makes it simple and straightforward to apply for a loan. It has an online application process and only needs bank statements dating back three months.

3. Fundera - Best for Business Credit Cards

Founded back in 2014, Fundera has since risen to become one of the most popular and well-known loan aggregator services on the market. It doesn’t offer startup loans, but you’ll find a huge range of business credit cards to help new businesses.

Pros

Cons

  • Poor credit is welcome
  • Large range of credit cards to choose from
  • Reasonable APR
  • Some credit cards have annual fees
  • Those with poor credit could face high-interest rates

Features

Business credit cards are one of the most popular routes to funding for those organizations that are struggling to get more traditional types of lending. Fundera offers cards with rates ranging between 9.99% - 26.99%, has very achievable eligibility requirements and has partnered with some big names like American Express and Capital One. 

Our Thoughts

If you only have small expenses to cover in the early days of your business, we highly recommend exploring which credit cards you can get through Fundera. They’re an ideal solution to help you off the ground.

4. Lendio - Best for New Ventures

Lendio is a popular loan marketplace that has a lot of options that cater to startups. In addition to a loan specialized for new ventures, you’ll find a range of different credit card options.

Pros

Cons

  • Low starting rates of 6.00%
  • Lenient credit requirements of 680
  • Generous borrowing limit up to $750,000
  • Funding can up to four weeks
  • There are prepayment penalties

Features

Lendio is near the top of our list, given its low rates, which start at just 6.00%. Plus, it’s a fairly flexible platform, with a generous borrowing limit and terms that can extend to 25 years.

Our Thoughts

Lendio is an excellent avenue for any brand new entrepreneurs looking for funding. With lenient eligibility criteria and a wide range of options, you’re almost certain to find a good match. 

5. GoKapital - Best for Startups With Good Credit

GoKapital has been helping startups succeed since 2013. It has an excellent reputation for customer service, which is underpinned by the guarantee of a personal advisor on hand throughout the lifetime of your startup loan.

Pros

Cons

  • Low starting rates from 6.00%
  • Personal loan advisers are available to answer any questions
  • High approval rates for those that meet the criteria
  • You’ll need a credit score of at least 700
  • Funding can take up to five days to be disbursed

Features

GoKapital offers excellent startup packages with rates as low as 6.00%. However, you’ll need to meet some very strict criteria – a credit score of 700 and evidence of paying off other personal installment loans – before you can apply.

Our Thoughts

GoKapital loans might be a little difficult to get, but are definitely worth it for those with good credit. If you meet the criteria, we highly recommend making it your first or second stop.

GoKapital review

What Is a Startup Business Loan?

A startup business loan is used by brand new companies to fund initial setup costs. These businesses have little to no prior operational experience and lack financial history, which typically coincides with higher rates and shorter terms than other types of financing. 

Given the aforementioned hurdles, new businesses need to be resourceful when it comes to financing. This entails entertaining a wide range of products, including credit cards, microloans, and asset-based borrowing.

Recommended Reading: Best Business Acquisition Loans in 2021

How Do Startup Business Loans Work?

Startup business funding has three key goals:

  • To cover large initial purchases like equipment, stock, or staff costs
  • To stabilize your cash flow so you don’t go under in your first six months
  • To help establish a good credit history and lay the groundwork for future expansion and bigger loans

Many brand new ventures can often find it difficult to secure funding, but there are actually a lot more options available than you might think:

  • Lenders that specialize in new businesses - We’ve covered many of these lenders above. While eligibility requirements can be stringent, good rates are available to those that qualify.
  • SBA loans - Small Business Administration (SBA) loans are partially guaranteed by the federal government. You might have to jump through a few hoops to get one, but they’re worth the wait. Several of the lenders on our list offer this option.
  • Credit cards The most common source of small business lending, largely due to the fact they don’t require long business histories. Borrowing limits are usually lower on credit cards, but the funding can be ideal for small outlays.
Recommended Reading: Best Small Business Loans and Grants for Minorities

Business Startup Loan Requirements

If you run a new small business of 1,500 employees or fewer and less than $7 million in revenue, a business startup loan may be for you. However, there are some things you need to keep in mind when you apply:

  • How long does funding take? – If you’re prepared, some loans for startup business projects can take just a few weeks to complete. However, if you’re required to justify your application, it could take a few months. That said, more and more platforms are now offering fast turnaround times.

  • How should I choose a startup loan? - The loan you choose will depend on your needs. For example, startup business loans with no collateral requirement are ideal for brand new ventures. In contrast, if you’re in a niche field deemed as high risk, crowdfunding might be the best option. A broker can be a great way to identify and close the right deal.

  • How to request a startup business loan - A startup loan for new business projects requires a combination of personal details and business data. In general, you’ll need to meet the criteria outlined below to submit an application.

  1. In many situations, you’ll need to have a credit score of 600+; although, there are a growing number of platforms that will take a risk on those with lower credit.
  2. Many lenders require you to have at least three to six months of business experience. Along that scale, the less experience you have, the higher your credit score will need to be.

How to Get a Startup Business Loan?

When you apply for startup business loan offers, there are certain pieces of information you’ll need to provide. In practice, each lender has its own requirements. However, if you intend to apply for a small business loan startup deal, you’ll need to do the following:

  1. Explore the different types of funding on offer. There’s a wide range of lending types out there now and if you’re not eligible for one, you may be for another
  2. Review the terms and conditions attached to the loan you’re applying for to see if it’s the right fit for you
  3. Complete an initial form of interest
  4. When invited to, provide detailed information about you and your business, including your name, address, business plan, bank statements/cashflow statement, personal financial information, employment history

Assuming you meet the entry requirements, you’ll be offered a startup loan. If you’re happy with the interest rate and terms, you can accept and grow your business. 

Recommended Reading: Merchant Cash Advance Guide For Small Businesses

Startup Business Loans Pros and Cons

Startup Business Loan Pros

  • Capital to grow - The most obvious benefit associated with a startup loan is the funding. This type of loan can provide the capital you need to start your dream.
  • It’s easier than finding investors - Rather than hunting around for multiple investors for your business, taking out a single loan is far easier and, potentially, much cheaper. This is because a loan allows you to retain ownership in your venture, which ensures that future net income accrues to you, not your business partners.
  • You can build credit - Lots of new businesses struggle with borrowing because there’s been no time to build business credit. Taking out small startup loans can put you on a path toward more effective and economical financing arrangements.
  • Smooth cash flow management - Not only do startup loans get you through the bumps in your early days, their fixed-rate nature and predictable payments are conducive to planning and budget management.
  • Some loans are federally backed - Opting for SBA loans means you get the extra security of being backed by federal funds in the event of a catastrophic macroeconomic scenario.
  • Obtain collateral - By using a startup loan to buy equipment, you can build up your pool of assets, which can be used to secure future financing, if necessary.

Startup Business Loan Cons 

  • Can be tough to qualify for - Lenders usually look for borrowers with good credit scores. Credit challenged applicants may face more stringent criteria to qualify for a loan.
  • Low borrowing limits - Startup loans generally have much lower borrowing limits than other types of lending. For many lenders, this manifests itself in “credit card only” offerings for startups.
  • They discourage bootstrapping - When entrepreneurs have access to a pool of cash, they might be tempted to spend it on items they can’t really afford, thereby hindering the entrepreneurial potential of a venture. While we list this as a con of startup business loans, this tendency is better characterized as imprudent management. Remember, strive to thoughtfully assess your cash needs, and only borrow what you truly need. 

See Our Additional Guides on Business Loan Types

Final Thoughts

It’s easier than ever to choose the best startup loan to meet your needs. The majority of applications can be completed easily online and the wide range of platforms means you’re more likely than ever to be approved. 

We suggest you give Fundbox your first look. It has fairly lenient eligibility requirements, an easy application process, and no origination fees. It never hurts to take a look. In doing so, you could be on your way to building your dream business in no time at all.