Since most lenders require a minimum amount of time in business, a startup loan can be difficult to obtain.
Some loans are better for business needs than others. One option open to startups is the Small Business Administration, or SBA, loan.
Before you apply, review your budget, current debts and expenses to see how much borrowing you can handle. You’ll want to take on new debt only if you can manage your day-to-day finances comfortably and still pay off the loan on time and in full.
Early-stage companies struggle to obtain financing, with less than half receiving all the money they wanted. According to the 2024 Small Business Credit Survey, 48% of firms under five years old got all the money they sought. The other 52% got part or none.
Reasons lenders shy from new companies include high default risk, but some lenders still consider startups worth the bet.
Before you start looking, figure out what kind of loan you want and whether you qualify. And gather all the documents you’ll need. Then your chances of approval go up.
One big mistake is asking for far too much. You could be approved for a big sum but then struggle with interest and payments and default. Or you could be denied because the lender thinks the request is too high for your needs.
Instead of borrowing more than you need or not enough, make a financial projection. Work out exactly what money comes in and goes out each month. Calculate exactly how much you need until your startup gets enough revenue to cover costs. This way, you can ask for a loan that meets your needs exactly.
A financial projection is a core part of a business plan. It looks at expected revenue and estimates when you turn a profit. This information goes into what type of loan and amount you ask for.
Use a business loan calculator to estimate monthly payments before choosing any loan option, and make sure the numbers are realistic for your budget.
Some loan types serve different needs. A line of credit is like a business credit card, which keeps it flexible. Equipment financing provides a lump sum secured by the equipment you buy.
According to the 2024 Small Business Credit Survey, 35% of firms under five years old relied on owner money or loans from friends and family. Young firms tend to use family loans more than older ones.
While it may seem like funding is too hard for a young company, there are loans designed with startups in mind. The trick is finding a lender who’ll back you.
SBA loans cater to startups. According to the Small Business Administration weekly report, through July 14, 2025, new firms got 14.4% of FY2025 7(a) loans, around $4.6 billion.
Criteria That Determine Whether You’re Approved
Next, check if you meet the criteria.
Lenders set criteria that determine whether you’re approved, and these vary by lender and product. Requirements most often include time in business, personal credit score and annual revenue.
Lenders use several criteria to judge whether you can repay. They look at:
You may need between $100,000 and $250,000 in revenue a year. Online lenders have the lowest revenue requirements.
A lender will check your business credit if it has any, but personal credit often plays a bigger part for new firms.
Existing debts make a lender wonder if you can handle more. They may calculate your debt service coverage ratio, or DSCR, which is your net profit divided by annual debt.
Lenders usually want a personal credit score of at least 600 to 670, but some, mostly online lenders, accept scores in the 500s but charge higher interest.
Lenders often want the borrower to sign a personal guarantee, which makes you liable for the debt if your business defaults. That gives a lender extra reassurance.
Banks often want you to be in business two years or more, which poses problems for startups. Many online lenders need six months, so those are often your best bet. Few offer options for under three months.
No down payment startup loans are possible if you meet other requirements. Many lenders require a down payment, but some waive it if you meet other criteria such as steady revenue or a solid business plan. You’ll need to explain how you’ll turn a profit.
Compare Several Lenders
Startups often have the best odds with online lenders, who tend to have lower requirements than traditional lenders such as banks or credit unions. Compare several lenders, even if you’ve found one that looks promising. And compare a few types, too.
Look online and compare rates, terms and borrowing amounts. Prequalify on a lender’s site to see an offer without a hard credit check.
Many loans charge fees besides interest. Find out if you’ll be charged fees like an application fee, origination fee or loan guarantee fee. The SBA charges a 0.25% guarantee fee for 7(a) loans of $1 million or more. Some loans have prepayment penalties, so watch out for that. Evaluate every line of the terms, not only the rate. Check the monthly payment too, and make sure you can handle it.
Each loan has a turnaround time, the length of time it takes to get approved and get your money. This varies by lender and product. How fast the loan is funded matters if you need money urgently.
When applying for a loan, be sure to gather all required documents beforehand so your application goes smoothly. This checklist will guide you through the process.
- Balance sheet
- Loan proposal, including how much you need and how you will repay it
- Business plan, including financial projections and how funds will be used
- Cash flow statements
- Business license and state formation documents
- Unpaid invoices if you want invoice factoring
- Personal and business tax returns for the last three years
- Personal guarantee
- Owner’s personal identifying information, including Social Security number
- Profit-and-loss statements
- Proof of quarterly tax payments
- Recent personal and business bank statements
- List of current business debts
- Employer identification number
This is not a complete list, as requirements vary by lender. Ask your lender ahead of time so you have the documents prepared.
If One Lender Won’t Approve You
Don’t lose hope if you’re denied for a startup loan. Ask the lender why. It could be a mistake, a credit problem or something in the application. You can use the answer to correct your next application.
You can also try a lender with easier requirements or apply later. Try again when you have more time in business, higher credit, lower debt and steady revenue. You also have the following options:
There are federal, state and local grants that don’t require repayment, but they’re competitive and not a certainty. Grants can take time to get, so don’t count on one for startup financing.
You can crowdfund a campaign through platforms like Kickstarter or Indiegogo. Investors may get equity, a reward or repayment with interest, depending on the campaign type, but the platforms charge fees.
You may be able to borrow money from family and friends at a low or no interest rate. However, failure to repay the loan on time can strain your relationships.
If you have good or excellent credit, you may be able to open a business credit card. Many offer rewards or a low introductory interest rate.
Using your own savings has its advantages and disadvantages. It means no interest to pay, but if the startup fails, you could be financially vulnerable. Weigh that risk in your decision.
A personal loan might work if you get denied a business loan. However, if your business fails, the loan still has to be repaid. Some personal loans limit how the money can be used, so check that you can use a personal loan for business expenses. Defaulting on a personal loan can affect your personal finances, not just the business.
Getting a startup loan isn’t much different from getting any other business loan. You need to work out what you need and if you can qualify for it. Just make sure to find a lender that will work with a startup.
Even if you don’t qualify for a startup loan, you can still find other sources like a personal loan, a grant or crowdfunding. Don’t feel bad if you have to use other forms of financing.
What do you need to qualify for a startup loan? It varies by lender. Many set minimums for credit score, annual revenue and time in business. Contact lenders for their guidelines.
Without a credit or financial history, a startup may find it difficult to get a loan, but it’s not impossible. Expect to do some legwork: Research lenders, prepare documents and know your numbers before you apply.
How much can you borrow? That depends on the type of loan. There are loans from $1,000 to several million. The amount you can borrow usually depends on your personal and business credit score, time in business, annual revenue and debt-to-asset ratio.
In general, you need a score in the mid-600s, but some lenders accept borrowers with scores in the high 500s. If you have a lower score, expect to pay a higher interest rate.
About Delancey Street
Delancey Street is a premier, and award winning, business debt settlement company that helps business owners nationwide. Our goal is simple: help you escape debt in a safe and legal manner. Based out of New York, we can help in 49 of 50 states. We tell you how it is; because your business and future is on the line.
