How to Get a Loan to Start a Business

Starting a business is exciting—until you realize you need money to make it happen. Equipment, rent deposits, inventory, and payroll for your first hires. For most entrepreneurs, knowing how to get a loan to start a business isn't just helpful—it's essential.

The good news? You don't need years of revenue or perfect credit to secure startup funding. Banks, the Small Business Administration, online lenders, and alternative options all offer loans for new businesses. The challenge is knowing which fits your situation and how to prepare an application that gets approved.

This guide covers everything about how to get a loan to start a business—from choosing the right loan type to navigating applications, even with bad credit or no revenue.

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TL;DR: How to get a loan to start a business

Whether you're opening your first restaurant or launching a retail store, knowing how to get startup business funding quickly separates successful entrepreneurs from those stuck in planning mode. 

The process isn't as complicated as it seems—you just need to understand which lenders work with new businesses and what they're actually looking for.

• You can get a loan to start a business through SBA loans, banks, online lenders, or personal loans—each with different requirements and approval speeds.
• Most lenders evaluate your credit score (typically 580-680+ minimum), business plan, fund usage, and repayment ability. Collateral or personal guarantees are often required.
• Startups with bad credit or no revenue have realistic options including microloans and online lenders—expect higher rates (typically 8-40% APR).
• The best way to get a business loan is preparing documents in advance, comparing multiple lenders, and choosing the loan matching your credit and timeline.

Why startups need loans to start a business

Most businesses aren't profitable on day one. There's a gap between when you spend money and when customers pay you—often lasting months.

Typical startup costs include first month's rent and deposits, equipment and supplies, inventory, licenses and permits, marketing, and payroll before revenue flows. These easily reach $10,000 to $100,000+ depending on your industry.

A loan to open a business bridges this gap, covering upfront costs while you build your customer base. For businesses with hourly teams like restaurants, retail, or healthcare practices, loans are especially critical. 

You need to pay employees from day one, but building the customer base that supports your payroll takes time. Small business loans give you a runway to hire and train your team while gaining traction.

Types of startup business loans

Getting a loan to start a business means choosing the right financing for your situation. Here's what's available.

SBA loans to start a business

Small Business Administration loans are partially government-guaranteed, making lenders more willing to approve startup financing.

SBA microloans offer up to $50,000 (average loan size around $13,000) with relatively easy approval. Community lenders provide these specifically for new businesses and interest rates typically range from 8-13%. The SBA microloan application is less intimidating than traditional loans, making this a solid option if you need smaller amounts.

SBA 7(a) loans offer up to $5 million for established startups with solid credit and plans. These cover almost any business purpose—working capital, equipment, real estate, or refinancing. Interest rates currently range from 10-15% depending on loan size and terms, with repayment terms extending up to 25 years for real estate.

The tradeoff? SBA loans take 60-90 days to approve and require extensive documentation including detailed business plans and financial projections. If you need money quickly, look elsewhere. But for the best rates and longest terms, an SBA loan to start a business is worth the wait.

Traditional bank loans for new businesses

Banks offer competitive rates—if you qualify. That's the challenge for startups.

Most banks prefer businesses with two years of revenue and strong credit (typically 680+). They want proven cash flow, substantial collateral, and low debt-to-income ratios. For brand-new businesses, approval is difficult unless you have exceptional personal credit or significant collateral.

Banks also move slowly—expect 30-60 days for approval. Bank loans make sense when you have existing relationships, strong finances, and time. First-time entrepreneurs with limited credit should consider other options.

Online lenders and startup loans for new businesses

Online lenders have transformed business financing. They approve loans faster (often within 24-48 hours, sometimes same-day), require less documentation, and accept lower credit scores than banks.

The easiest way to get a business loan is often through online platforms evaluating bank account activity and personal credit rather than extensive financial history. Many specialize in startup loans for new businesses and understand you won't have years of tax returns.

The tradeoff is cost. Online lenders charge 6-99% APR depending on creditworthiness and loan type, with shorter terms (typically 3 months to 5 years, though some extend to 10 years). Short-term working capital loans often have 3-18 month terms with higher rates, meaning higher monthly payments that can strain cash flow.

Online lenders work best when you need capital quickly, don't qualify for SBA or bank financing, or can repay within a shorter timeframe. Just ensure you can afford the monthly payments.

Personal loans for business startup costs

Plenty of entrepreneurs bootstrap with personal loans when business financing isn't an option. If your personal credit is solid (typically 670+), a personal loan cuts through the red tape—no 47-page business plan required, no revenue projections, just you and your credit score.

Lenders only care about three things: 

1. Your personal credit
2. Your income
3. Whether you're already drowning in debt

That's it. No explaining your business model to a loan officer who's never run a company.

But here's what you're signing up for: this debt follows you personally. Your business tanks? You still owe every dollar. It hits your personal credit report, affects your debt-to-income ratio, and could haunt you when you apply for a mortgage or car loan down the road.

And watch the fine print—some lenders explicitly prohibit using personal loans for business purposes. Break that rule and they can demand immediate repayment. Others don't care what you do with the money. Read your loan agreement like your business depends on it, because it might.

What lenders look for when you apply for a business loan

Understanding what lenders evaluate helps you prepare stronger applications. Here's what matters most for getting a business loan.

Credit score requirements for startup loans

Your personal credit score is the most important factor for first time business loan approval. Most lenders require 580-680 minimum:

• SBA loans: Prefer 680+ (some accept 640+)
• Traditional banks: Typically 680-700+
• Online lenders: Often accept 580-640+
• Personal loans: Usually require 670+

Lower scores don't automatically disqualify you but result in higher rates. If your score is below 640, focus on microloans or online lenders specializing in lower-credit borrowers.

If you're wondering how to get a loan with no business credit, the answer is straightforward: your personal credit becomes your business credit for initial financing. Business credit develops over time as you establish vendor relationships and business accounts.

Do you need collateral for a business loan?

Collateral requirements vary dramatically. Many startup loans require either collateral or personal guarantees—sometimes both.

Secured loans require specific assets as collateral—real estate, equipment, inventory, vehicles, or personal assets like your home. The loan amount is typically 70-80% of collateral value.

Unsecured loans don't require specific collateral but almost always require personal guarantees, making you personally responsible if the business fails.

SBA microloans typically require collateral and/or personal guarantees, though requirements vary by intermediary lender. Larger SBA loans require collateral plus personal guarantees from owners with 20%+ ownership. Banks almost always require both for startup loans.

Business plan and financial documentation

Most lenders require a business plan. This doesn't need 50 pages, but should clearly demonstrate you've thought through your model.

A solid business plan includes: 

• Executive summary
• Business description
• Market analysis
• Operations plan
• Management team
• Financial projections for 3 years
• Specific use of funds

Beyond the plan, expect to provide 2-3 years of personal tax returns, personal financial statements, 3-6 months of bank statements, business formation proof, and government-issued ID.

Organized documentation signals you'll manage the loan responsibly. Accurate payroll records, documented time tracking, and professional employee onboarding show lenders you're running a real business—not just winging it.

How to apply for a business loan: Step-by-step

Knowing how to apply for a business loan strategically improves your approval odds and secures better terms.

1. Calculate how much you need. List every startup cost:

• Equipment
• Inventory
• Rent
• Licenses
• Payroll
• Marketing
• Plus 3 months working capital

Add a 10-20% buffer for the stuff you didn't think of. Don't overborrow (you'll pay interest on every dollar), but don't underborrow either. Running out of money three months in is worse than paying a little extra interest.

2. Choose the right loan type. Strong credit and patience? SBA loans offer the best rates. Need money fast? Online lenders can fund you this week. Zero business credit? Personal loans or microloans skip the business history entirely.

3. Check and improve your credit. Pull reports from all three bureaus before applying. See an error? Dispute it immediately. Quick wins: pay credit cards below 30% utilization, don't miss any payments for 3 months before applying, and resist opening new accounts right before you apply.

4. Gather required documents. Get everything organized before you start: business plan with projections, 2-3 years of personal tax returns, personal financial statement, 3-6 months of bank statements, business formation documents, and government ID. Having documents ready means you respond immediately when lenders ask, not three days later when they've moved on to the next applicant.

5. Compare multiple lenders. Never—and we mean never—accept the first offer. Apply to 3-5 lenders and compare APR (the real cost including fees), all fees and closing costs, monthly payments, prepayment penalties, and collateral requirements.

6. Submit and follow up promptly. Respond to lender requests within 24 hours. Underwriters juggle dozens of applications. Fast responders move to the top of the pile. Slow responders get buried.

Loan options for new business with no revenue or bad credit

Bad credit or no revenue doesn't disqualify you from getting a loan to start a business. Your options narrow and cost more, but they exist.

Microloans are designed for borrowers traditional lenders won't touch. SBA microloans offer up to $50,000 (average around $13,000) through nonprofit lenders who evaluate your business potential, not just your credit score. Many accept scores as low as 575-600. Expect collateral and/or personal guarantee requirements.

Community Development Financial Institutions (CDFIs) work similarly, focusing on underserved entrepreneurs. They provide startup business loans to people traditional banks ignore. Many include training and mentoring—not just money.

Online lenders with flexible criteria focus on your bank account activity rather than credit scores alone. They evaluate daily deposits, looking for consistent cash flow even without traditional revenue history. These lenders approve quickly (sometimes same-day) and accept scores as low as 550-600. The tradeoff: 18-40% APR with short terms (6-18 months).

Personal loans or cosigners leverage personal credit when business credit doesn't exist. If your personal score is 670+, you can qualify with rates around 8-18%—much better than high-cost business lenders. A cosigner with strong credit can also help you qualify for better terms.

What to expect with bad credit or no revenue: Higher rates (typically 8-40% APR vs 7-15%), shorter terms (6-36 months vs 5-10 years), lower maximums ($5,000-$50,000), personal guarantees and often collateral, and more frequent payments (sometimes weekly).

Comparing your startup loan options

So you know you need a loan to start a business, but which one actually makes sense for your situation? The easiest way to get a business loan depends entirely on what you're working with—your credit score, how fast you need money, and whether you've got business history to show. 

Here's how startup business loans stack up against each other.

SBA loans: Best for lower rates and longer terms

Pros:

• Government-backed with competitive rates
• 8-13% for microloans, 10-15% for 7(a) loans (as of December 2025 with 7% prime rate)
• Terms up to 10-25 years

Cons:

• 60-90 day approval process
• Extensive documentation required
• Stricter qualification standards

Bank loans: Best for established credit

Pros:

• Competitive rates (7-12%)
• Full banking relationship and support

Cons:

• Hardest to qualify for
• Requires 680+ credit and collateral
• Slow approval process

Online lenders: Best for speed

Pros:

• 24-48 hour approvals (sometimes same-day)
• Accepts 580+ credit scores
• Minimal documentation required

Cons:

• Higher rates (6-99% APR depending on creditworthiness)
• Shorter repayment terms
• Higher monthly payments

Personal loans: Best for no business credit

Pros:

• Simple application process
• Faster approval than business loans
• No business plan required

Cons:

• Personal financial risk
• Affects your personal credit
• Typically limited to $5,000-$50,000

Microloans: Best for small amounts

Pros:

• Easier approval process
• Accepts 575+ credit scores
• Designed for startups and underserved borrowers

Cons:

• Up to $50,000 maximum (average $13,000)
• Typically require collateral
• May require training participation
• Limited availability by region

The best way to get a loan to start a business depends on your credit, timeline, and capital needs. Get the financing you can access now, then refinance to better terms once your business establishes revenue.

Understanding the costs and risks

Here's what nobody tells you about business loans: the interest rate is a distraction. What actually matters is whether you can afford the monthly payment without suffocating your business.

Let's talk APR

A lender advertises 10% interest and it sounds reasonable. Then you get the paperwork and discover the APR is actually 13% because they buried origination fees in the fine print. This is why you ignore the interest rate entirely and only compare APR between lenders. It's the only number that doesn't lie.

Now the fees

Origination fees take 1-6% of your loan right off the top. Application fees run $50-$500. Prepayment penalties punish you for paying early. And late fees? They can hit $25-$50 per incident. Some credit lines charge annual fees just for existing. Borrow $50,000 with a 3% origination fee and $1,500 vanishes before you touch a dollar. Gone.

Here's what actually kills businesses

The monthly payment they couldn't really afford. You see $2,000 per month and think "I can manage that." Then reality hits. Payroll comes due. Rent's due. Your supplier needs payment. Equipment breaks. 

And that $2,000 loan payment is still sitting there, every single month, whether you had a good month or a terrible one.

Run the worst-case numbers, not the optimistic ones. If you can't cover that payment during your slowest month of the year, you can't afford the loan. Period.

The mistakes that wreck people

Here’s what not to do when it comes to making a business loan:

• Borrow too much because the bank approved it
• Pick the lowest monthly payment without looking at how much you'll pay total
• Compare interest rates instead of APR and get fleeced
• Use expensive short-term loans to solve long-term problems and end up in a debt spiral

Getting funded as a startup is hard. But if you show up with a clear plan, realistic projections, and proof you've managed money responsibly, you've got a real chance.

Turn your loan into a real business

You didn't get a loan to become a part-time accountant.

Homebase handles the operational stuff so you can actually run your business:

Time tracking that just works. Your team clocks in from their phones. You see who's working, who's late, who forgot to clock out. Everything's documented with timestamps and photos if you need proof. No more "I worked 8 hours, trust me."

Payroll that doesn't make you want to cry. Hours automatically flow into payroll. Tax calculations happen in the background. Direct deposits go out on time. You get records that are actually organized instead of scattered across three spreadsheets and a shoebox.

Hiring that looks professional. Digital I-9s, W-4s, and all the other government forms nobody enjoys. New hires complete everything before their first shift. You store it all in one place instead of filing cabinets or "that folder somewhere."

You got funded to build something. Build it on systems that won't fall apart the first time you hit 10 employees.

Try Homebase for free today.

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FAQs: Getting a loan to start a business

Is it hard to get a startup business loan?

Getting a startup business loan is harder than financing an established business, but it's absolutely possible. Difficulty depends on your credit score, business plan quality, and which loan type you're pursuing.

SBA loans and traditional banks have stricter requirements and longer approval times (60-90 days). Online lenders and microloans offer easier approval with more flexible credit requirements, though you'll pay higher rates.

With 680+ credit, a solid business plan, and organized documentation, most entrepreneurs can secure financing. The key is choosing the right loan type for your situation and preparing your application thoroughly.

What credit score do I need to get a startup loan?

Most lenders require 580-680 minimum personal credit score for startup loans, though requirements vary significantly by lender type.

SBA loans typically prefer 680+, while traditional banks usually require 680-700+. Online lenders often accept scores as low as 580-640+, and microlenders may work with borrowers at 575+.

Better credit scores unlock lower rates—a 700+ score might get you 8-12% APR, while a 600 score could mean 18-25%+ APR. Since startups lack business credit history, lenders evaluate your personal credit to assess risk.

Do I need a business plan to get a loan?

Yes, most lenders require a business plan for startup loans, though the level of detail varies by lender. SBA loans and banks want comprehensive plans with market analysis and detailed financial projections.

Online lenders may accept simpler plans focused on core elements. At minimum, lenders need to understand what your business does, who your customers are, how you'll generate revenue, and specifically how the loan will help you succeed.

A clear, realistic business plan demonstrates you've thought through your model and improves approval odds significantly.

How much can I borrow to start a business?

Startup loan amounts range from $500 for microloans up to $5 million for SBA 7(a) loans, depending on your creditworthiness, collateral, and business type.

Most startups borrow between $10,000-$250,000. First-time borrowers typically qualify for lower amounts—SBA microloans cap at $50,000 (averaging around $13,000), and many online lenders limit startup loans to $25,000-$100,000 until you establish business history.

Your specific amount depends on your credit score, business plan strength, and ability to demonstrate repayment capacity.

Can I use a personal loan to start a business?

Yes, many entrepreneurs use personal loans for startup costs, but check your lender's terms carefully. Some lenders explicitly prohibit using personal loans for business purposes, while others allow it.

With 670+ personal credit, personal loans are easier to qualify for, approve faster, and don't require business plans. However, you're personally liable for full repayment even if your business fails, and it affects your personal credit.

If lender terms aren't clear about business use, ask directly before applying to avoid violating loan agreements that could trigger immediate repayment demands.