Best startup business loans February 2023
Michelle Honeyager is a freelance writer for Bankrate. She has had bylines appear in US News, CNET and other financial publications. She has a passion for helping people make the best financial decisions possible.
Helen Wilbers has been editing for Bankrate since late 2022. He values clear reporting that helps readers confidently land deals and make the best choices for their finances. He specializes in auto and small business loans.
Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers.
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Definition of Terms
Compare the best startup business loans in February 2023
| LENDER AND LOAN TYPE | BEST FOR | MIN. FICO CREDIT SCORE | LOAN AMOUNT | MIN. TIME IN BUSINESS |
|---|---|---|---|---|
| Credibly small business line of credit | Line of credit | 600 | Up to $300,000 | 6 months |
| Triton Capital equipment loan | Equipment loans | 600 | $10,000-$500,000 | Startups eligible |
| Fora Financial Revenue Advance | Working capital | 500 | $5,000-$1.4 million | 3 months |
| Kiva microloan | Community support | Not applicable | Up to $15,000 | Not disclosed |
| Fundbox line of credit | Fast funding | 600 | $1,000-$150,000 | 6 months |
Credibly small business line of credit: Best for line of credit
Overview: Credibly is focused on small and medium-sized businesses. Businesses may be funded in as little as 24 hours following approval. Credibly offers both secured and unsecured line of credit options. Though Credibly's minimum annual revenue is on the higher end at $180,000, its maximum loan amount is also on the high end at $300,000. The lender does not have set term lengths, since this is a revolving line of credit. Business owners are free to draw and pay interest on only what they use. Credibly offers both secured and unsecured options.
Why Credibly is the best for bad credit: Credibly has a minimum credit score of only 600. The company doesn’t just look at credit scores, but also weighs other data like bank statement information.
Pros
- Prequalification tool
- Considers factors beyond credit score
- High maximum loan amount
Cons
- May require an origination fee
- Credibly does not disclose its interest rates
- $180,000 minimum annual revenue
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To qualify for a line of credit, you’ll need a credit score of at least 600, six months in business and $180,000 in annual revenue. Your company must be based in the United States; Credibly’s website notes that some products may not be available in all states. Funding applications can be completed online or by phone; you can also prequalify online. If approved, a personal guarantee is required. You may also pay an origination fee. Funds must be used for business purposes.
Triton Capital equipment loan: Best for equipment loans
Overview: Triton Capital states to have helped thousands of businesses in over 175 industries acquire needed equipment. The application is online and business owners can apply in 60 seconds. This loan helps businesses to access funds for large-scale equipment and technology, so the annual revenue requirement is higher, at $350,000. The required credit score of 600 is also on the higher side compared to other featured lenders.
Why Triton Capital is the best for equipment loans: Triton has a large loan amount range of $10,000 to $500,000, so it’s a good option that could fund anything from a point-of-sale system to larger-scale manufacturing equipment. Though Triton Capital doesn’t state a minimum time in business, a representative told Bankrate that the company is “typically able to offer equipment loans to startup businesses” — a rarity for this type of loan.
Pros:
- Low minimum APR
- Available in all states
- Quick application process
Cons:
- Documentation fee
- Must have majority ownership of business to apply
- High minimum annual revenue at $350,000
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A minimum FICO score of 600 and minimum annual revenue of $350,000 are required. All owners with at least a 10 percent ownership stake must be on the application and must provide a personal guarantee, though the company also supports “corp only” requests. The time to access funds once approved is as short as one to two days. Triton Capital charges a $150 to $750 documentation fee. Equipment loans are secured by the equipment financed.
Fora Financial small business loan: Best for working capital
Overview: Fora Financial started in 2008 as Paramount Merchant Funding. A key feature of the revenue advance is the low credit score needed. However, businesses need $144,000 in gross sales annually to access the funding (or $12,000 monthly).
Revenue advances allow you borrow within the loan amount range against future revenue. Terms on the loan are variable. Payback works as a fixed percentage of daily or weekly receipts. You can also increase the amount borrowed after you pay back 60% of the original loan.
Why Fora Financial is the best for working capital: A standout feature is the wide range for the loan amount, going from just $5,000 all the way up to $1.4 million. According to Fora, the amount businesses receive depends on their revenue and other details. This can be a good loan option for a business owner with big plans to expand. You also only need to be in business for three months.
Pros:
- Wide loan range of $5,000 to $1.4 million
- Payments based on daily or weekly receipts
- No collateral needed
Cons:
- Fees
- High gross sale amount of $12,000 monthly
- Uses factor rate, so repaying your loan early doesn’t save you money
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Your business needs three months in operation, at least $12,000 in gross sales and a credit score of at least 500. The application is online and approval takes four to 24 hours. The company does a soft personal credit check when you apply and a full check after approval. Funds can be deposited within one to three days after approval. You will also pay one-time processing and wire transfer fees. Fora does not require collateral.
Kiva microloan: Best for community support
Pros:
- Zero percent interest on up to $15,000
- Helps impoverished communities access capital
Cons:
- Not a traditional loan
- Getting funds can take weeks and is based on fundraising
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Kiva works a bit differently from a traditional lender. The process starts by finding out if you’re prequalified and then filling out the application online. The website states that it takes about 20 to 30 minutes to complete this step. Then, you prove your creditworthiness by inviting friends and family to lend to you. This part of the process can take up to 15 days. Your proposal then goes public on the Kiva website, where other site users can choose to lend to you. You then have up to 36 months to repay your Kiva loan. To qualify, you must live in the United States, be at least 18 years old and use the loan for business purposes.
Fundbox line of credit: Best for fast funding
Overview: Fundbox has been around since 2013. It operates as an embedded working capital platform for small businesses. Loan amounts range from $1,000 to $150,000, making it a good source for a possible microloan. The company does not use traditional interest rates, and instead relies on an amortized weekly fee. Fees start at 4.66% per week for 12-week terms and 8.99% for 24-week terms. This loan from Fundbox is also unsecured.
Why Fundbox is the best for fast funding: The application is online and approval can come in as little as three minutes. You can apply and draw funds from Fundbox’s app. The time to funds is also listed as soon as the next business day.
Pros:
- Fast funds
- Fairly wide range of loan amounts
- Unsecured option
Cons:
- Minimum annual revenue is somewhat high at $100,000
- Non-sufficient funds fee
- Weekly fee instead of interest makes rate comparison hard
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To qualify, you must be based in the United States, have a credit score of at least 600, make at least $100,000 in annual revenue, be in business for over six months and have a business checking account. You’ll need at least 25 percent ownership of your business to apply. Fundbox charges a nonsufficient funds fee.
The Bankrate guide to choosing the best business loan for startups
Looking for the best startup business loans can be a daunting process, since there are so many lenders, rates and loan types. Few banks work with startups — instead, funds are available through nontraditional lenders and even crowdfunding platforms. We’ve created this page to make finding some of the top business loans for startups easier.
We picked the best loans for businesses under a year old based on loan amounts, terms and the minimum credit score to obtain the loan, as well as other features that might make them attractive to startups. Read on for information about the kinds of business loans available and advice on how to choose the best lender.
What is a startup business loan?
A startup business loan helps newer businesses with little or no credit history access financing. The lenders who provide these loans may have lower credit rating requirements, if they have credit requirements at all. Many look at financial health indicators beyond credit scores, such as gross sales or recent bank statements.
Types of startup business loan
You have a few options for small business lender types. The most traditional lender is a bank or credit union. But banks may have more stringent requirements, like higher credit scores or the requirement of being in business longer. Approval may also take longer. However, you can often go into a physical office and ask questions or do in-person transactions with a traditional bank.
The other main option is to go through an online lender. These services often have apps for managing your loans. These lenders are geared for faster and easier approval than a bank. Because of these features, online lenders can be a more convenient option for small businesses and startups. Research the lender’s legitimacy before applying, though.
There are eight main types of traditional business loans. Types that may interest startups include:
- Line of credit: Business lines of credit include set credit limits and draw periods. You can borrow, pay back the loan and then borrow again during the draw period. One plus: you can take out what you need in credit limits while only paying interest on what you borrow. It can also help businesses that make frequent purchases.
- Equipment financing: This is financing for technology and equipment you may need. It could be anything from a computer system to manufacturing equipment. These loans offer competitive interest rates and the loan amount is set to cover the equipment you need. However, they tend to be secured by the property you buy, so you could lose that property if you default on the loan.
- Microloan: Microloans are small loans meant to help a business get off the ground. Interest rates tend to be lower, but microloans might not be a good option if you need more than $50,000.
- SBA loans: This popular loan type is backed by the Small Business Administration. These loans come in various subtypes based on your needs, like microloans or real estate purchases. However, they’re more difficult to get approved for, and the application process can take longer than other small business loan types.
How to choose the best startup business lender
FAQs about startup business loans
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The best business loans for startups can depend on the type of business you are starting. If you want a brick-and-mortar location, you may need to look into a commercial real estate loan. Smaller businesses might even be able to look into microloans. SBA startup loans, equipment financing and business lines of credit are also popular choices.
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Lender requirements vary. Some lenders specialize in small businesses trying to get off the ground, so minimum personal credit scores can be as low as 500. SBA loans have a reputation for requiring higher credit scores. Some lenders may want to see your business credit score, so start working to build business credit early.
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Some lenders specialize in new businesses. You may be able to find a loan with a lender that has a requirement of being in business for a minimum of six months, for instance. Some lenders, such as the SBA, and microloan services even help people start up their businesses.
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Startup business loans range from $1,000 to over $1 million. It’s common to see loans go up to $250,000. However, the amount a lender approves you to borrow will vary based on your business’s finances, age, industry, collateral and more. Some loan types, like equipment financing, allow you to apply for the exact amount of financing you’ll need to purchase the equipment. If you’re unsure of your ongoing costs, you might apply for something more flexible, like a line of credit.
Methodology
To choose the best startup business loans, we ensured all loans featured are broadly available across the United States and have a time in business requirement of six months or less. We then considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, credit score requirements, minimum annual revenue and fees. Additionally, the featured lenders were evaluated for notable features such as niche loan offerings and funding speed.