7 Options for Small Business Startup Loans

Nothing deadens the dreams of a new startup like lack of finances. It may be in the form of lack of capital or lack of funds to sustain the business. 

It could even be the lack of funds to buy needed machinery or equipment. Without funding, a startup is nothing but an idea in the mind of a dreamer. 

Although business startups are a major source of employment for many, the business is still a very risky investment. This is especially the case for business startup owners that don’t have any history in the business world. 

How then is a startup meant to survive when the business owner is short of funds? Through small business startup loans! There are a lot of options for business startups that have no hope of funding from anywhere else. 

What is a Business Startup Loan?

The fund that is loaned to business startups to be used to meet their business needs. The need could be capital for purchasing equipment, or for establishing a physical base of operations. 

So what options are there for small business startup loans?

Loan Options for Business Startups

1. Business Credit Cards

This is one of the most popular loan options for business startups. Some loan options might require that the business be already running for a minimum of 6 months to 1 year before a business is qualified for their loan. 

Business credit card loans, however, often have no such requirement. All they need to do is to check the income and credit score of the business owner, so, you might need to improve your credit score. They rarely ask for collateral but might request for a personal guarantee. 

Business credit card loans have a major advantage in that they allow you to borrow just the amount you need monthly.

As the expenses come up, you are able to pay them off. This is unlike some other loan options where you have to make estimates of how much things would cost before knowing the total loan amount to apply for. 

In addition to that, business credit card loans set new business owners on the right business path by making them separate their business incomes from their personal incomes. 

However, a major thing you should try to avoid with business credit card loans is the carrying over of balances from month to month.

2. SBA Microloans

Small Business Administration Microloans allow business owners to be able to borrow as much as $50,000 at once. 

This way, business startup owners that believe they would need to cover a lot of costs can secure an SBA Microloan.

The thing about Small Business Administration is that they are not the ones that determine who is or isn’t qualified for their loans. 

All they do is that they loan their funds to financial institutions, who then set the standards for loan applicants to meet. 

An advantage of these financial institution intermediaries is that they are closer to the lenders than the SBA itself. 

That is, they have reaches that extend into communities, giving the disadvantaged, the minority, or people that have low hopes of securing a loan, a lifeline. 

Since the government owns SBA, the interest rates are low and competition is high among applicants. 

The only downside to SBA loans is that the application process usually takes longer than other loan options.

3. Non-SBA Microloans

Government-owned SBAs are not the only ones that offer microloans to business startups. There are many private or nonprofit organizations that offer these loans too. 

While these other options may not meet up to the $50,000 benchmark that government-owned SBA has set, it is still an option to consider. 

And since the application process of this loan option is not usually as competitive as the government’s microloan, there’s a higher chance of securing them.

Read also: 10 Best Online Business Ideas to Make Money in 2020

4. Business Grants

Business grants pose as a being free since you don’t have to pay anything back. However, it is not entirely free, especially when you consider the efforts you might have to put in to secure one. 

Business grants are known for their laborious application processes. This is because your company is most likely not the only company applying. 

You might have to submit a lot of documents, design a lot of business models, or even pitch your ideas to different people. 

This process takes a really long time, and even longer if the grant is an enormous sum. If your startup is in need of quick funding, look away from this option. 

Also, organisations offering business grants often concentrate their efforts on select minorities or disadvantaged communities. You might stand a chance if your startup is operating from such regions.

5. Equipment Financing

Yes, you guessed right. Equipment financing is geared towards helping startups buy needed equipment. This loan option has an advantage over conventional loan options that offer you loans for generic purposes. 

Equipment financing loans often come with low-interest rates, and they are easy to apply for. In fact, the application process rarely takes too long, and there is often less competition. 

Many establishments offer equipment financing loans, but banks are one of the most popular of them all. And when banks offer you this loan, they allow you to pay on a monthly basis. 

In the event that you default, they reserve the right to seize the equipment until you pay up on the defaulted amount.

6. Crowdfunding

Crowdfunding is another remarkable way by which business startups can raise funds. The way it works is that the business owner visits a crowdfunding platform, which is usually online, to set a cost goal. 

This cost goal is the amount the startup needs to kick-start the company. The business owner then pitches their ideas to the public on these platforms. 

When people are inspired by the startup’s idea, they make donations to the startup’s campaign. 

This option of startup funding is often a very good way of raising funds without having to worry about interests or paybacks. Usually, campaigners just offer gifts or even thank-you notes to donors and that’s all.

7. Family and Friends

Getting funds from friends and families is also another option, but it is considered as the riskiest. When you are getting loans through other options, it is strictly business. 

You don’t pay up; they take your collateral and they zoom off. Nothing personal. But as for getting loans from friends and family, it becomes personal. Your relationship with them is at stake as much as the future of your business. 

Some friends or family members may want to involve themselves past the funding phase and try to own your own business. After all, their money started the business. 

If you are not fine with this, let them know beforehand that their involvement in the business is nothing beyond financing. 

Let them also know that that they have no say in how you run the business. It could even be a good idea to sign a contract with them, keeping it professional.

It is often recommended that business startups make this option their last. There is nothing wrong with making it the first resort, however, if you are willing to keep things on a strictly professional level with them. 

Here, failure could mean broken businesses and broken relationships.


With these loan options, business startups don’t have to die at the funding phase anymore. 

Even if the business owner knows nothing about business, they could still qualify for a startup loan.

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