Small Business Loans For Startups


Are you thinking of launching your dream startup? Even after extensive planning, one thing always bothers the young and budding entrepreneurs. Money. To gain profit, you need to invest. It is a well-known proverb: money begets money. 

But what makes the matter complicated is that there is no such thing as a business startup loan. To add to your woes, you might not be familiar with different financial terminologies. Another point of concern is the type of loan that you wish to take. Not every loan is suited for every startup. For example, your startup might be better suited for crowd funding rather than SBA microloans. 

Let us know about different small business loans for startups & which type of loan is suitable for which business:

  1. SBA microloans: SBA or small business administration microloan program is the scheme meant to empower small businesses. Under this, intermediary lenders take a loan from SBA and then pass it onto individual entrepreneurs. The loan amount cannot exceed $50K. 

The program is meant to fuel self-help groups, small industries, and start-ups. You can take this loan to buy new equipment or machinery, working capital, and other expenses. The interest rate depends upon your lender. The maximum repayment period is 6 years and the average interest levied varies between 8%-13%. If you need financing for your heavy machinery equipment, you can check

This loan is aimed at meeting the financial requirement of those ventures that are otherwise not eligible for traditional bank loans. SBA micro lenders usually serve a certain geographical area. If you wish to take a loan, you need to contact your local lender. You need to fulfill the following criteria to be eligible for this loan:

  • You must have a small for-profit establishment.
  • Decent credit history
  • The area must be served by an intermediate lender
  • No history of bankruptcies or bank loan defaults
  1. Personal loans for business: As the name suggests, you can take a personal loan up to $50K for business purposes. The benefit of this loan is that they have lower interest rates( as low as 3%) than the traditional business loans. These are term loans which the borrower can get from online lenders, credit card companies, and banks. You just have to make sure that your lender allows the use of this loan for business expenses.

For a startup to take off, the initial investment can sometimes far exceed the loan limit for business. In such a situation, taking a personal loan can prove to be decisive. It comes with the following benefits:

  • You can take the loan against your assets.
  • You get a loan at lower interest rates
  • You also get the flexibility of spending the money on whatever area you wish. For most business-only loans, there are some restrictions. Like you cannot spend a business loan on the purchase of minor equipment or repair works. However, with a personal loan, you can fix that printer that helps you cut costs by printing receipts or buying new low-cost packing equipment.

             However, using personal loans for business comes with its drawbacks:

  • You risk losing your asset if you fail to pay back the loan
  • You cannot develop your business credit score
  • You eventually end up mixing your personal and business finances. This proves to be problematic in the long run.
  1. Asset-based financing: When you opt to get a loan against some tangible collateral, it counts as asset-based financing. If you have a start-up, you can take the loan against your machinery, inventory, or even your business account or real-estate holding. You will get a loan worth 50% of the value of the collateral or 75-80% of your business account value. 

You should consider taking this loan if:

  • You have a good back-up for your assets
  • You find other loan options are either impractical for you or are too expensive
  • You have a bad credit score

However, to get this loan, you must qualify for these 3 conditions:

  • Your business must be 2 years old
  • You must have valued collateral.

To know more about this loan, click here.

  1. Small business grants: Federal as well as private organizations provide small business grants to startups. In the case of federal grants, it is usually for a particular purpose. Since the grant is from the taxpayers’ money, extreme caution is taken to ensure that is used judiciously. Not all start-ups get this grant. 

Most of those involved in medical research, child welfare, or society upliftment are given this grant to fulfill a particular goal. Many private lenders give loans to minorities, women entrepreneurs, and those working for novel causes.

Before you apply for these grants, you must make sure that you fulfill their eligibility criteria. The federal, state, as well as private lenders have strict guidelines for these grants.

  1. Business credit cards: Just like your personal credit card, you can also have a business credit card. It will provide you not only monetary support but you can also enjoy benefits like reward programs, cash back, and free employee cards. Most prominent credit card companies like American express, ink business, bank of America, etc., have a customized startup credit card. 

Most of these do not have an annual maintenance fee. You can take a loan against this card’s limit. The biggest advantage of such credit cards is that you get to build your business credit. Also, a separate credit card for your business will keep you out of legal troubles.

  1. Crowdfunding: When you raise a large amount in the form of small donations from a large number of people, it is called crowdfunding. However, the challenge lies in pitching the idea in the right way. People eagerly invest in a startup with a clear idea and a crisp plan of execution. So, brainstorm properly before starting your crowdfunding campaign.


Being a startup owner is not an easy task. The biggest responsibility is the proper maintenance of the finances. Taking a loan may seem easy but before you take any last step, always consult a financial analyst. Always think carefully about the type of loan that you wish to take. It will ensure that your business takes off properly.

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