How to get a loan to start a business in 2026

Startup business loan options at a glance

Where to get a startup business loan

We’ll dive into your different options for financing shortly, but let’s open the conversation looking at where you can get a small business loan. Fortunately, you’ve got plenty of options.

Banks and credit unions

Banks might be your first stop, particularly the bank you already have a business or personal relationship with. They tend to offer low-interest loans and SBA loans, though they may be harder to qualify for. 

Credit unions offer business financing too, so if you’re a member of a credit union, you might consider applying for a loan there. If not, it might make sense to join one.

While every bank and credit union has their own qualification requirements, most require at least two or more years in business.

Online lenders

There are dozens of online lenders that offer the gamut of business financing, from term loans to lines of credit to merchant cash advances. There is really an option for every business and every situation.

Compared to banks and credit unions, online leaders usually have more flexible requirements for startups. While credit may still count, revenues are often most important. 

In addition, many lenders can approve your loan the same day and deposit funds available in your account within a day or two.

SBA lenders

The U.S. Small Business Administration (SBA) offers a variety of loans for small businesses, including a microloan program. 

Through an SBA microloan, you may access up to $50,000 in financing, which you can repay with terms ranging up to seven years and lower interest rates between 8% to 13%.

Instead of originating the loans directly, the SBA guarantees a portion of loans originated by approved lenders, which can reduce the risk the lender takes on. 

Each lender determines their own eligibility criteria, so it’s possible you get denied if you don’t meet the revenue or time in business requirements. 

Community development financial institutions (CDFIs)

Often overlooked, community development financial institutions (CDFIs) are mission-driven lenders that offer financing to underserved entrepreneurs and low-income communities. They provide a variety of loan options, such as term loans, lines of credit, and even SBA loans. 

A CDFI might be a bank, credit union, loan fund, or venture capital fund, certified by the U.S. Treasury. To find one, you can use the database on the U.S. Treasury website or the Opportunity Finance Network’s CDFI locator.

What lenders look for in startup loan applications

Depending on the type of loan you’re applying for and the lender, you may see different approval criteria. In general, though, here are some of the factors that lenders consider when you apply for a business loan:

Personal credit score requirements

Even though you’re applying for a loan for your business, your personal credit scores may play a big role in your business loan application. There are two reasons for this: Your business likely doesn’t have a credit history of its own, and the loan may require a personal guarantee.

Since a startup probably hasn’t had the chance to build its business credit scores, lenders only have your personal credit history to see how risky of a borrower you may be. And many business loans require a personal guarantee, which means that you’ll be personally on the hook to pay back the debt if your business can’t. 

However, if you do have good credit (personal or business), you’re more likely to qualify for favorable loan terms. The type of loan you choose will also play a role in credit requirements. Here’s a look at preferred credit scores for different loan types:

• SBA microloans: 620+
• Business credit cards: 670+
• Equipment financing: 600+
• Personal loans for business use: 670+

Business plan and financial projections

You can think of a business plan as a roadmap for your venture. Most lenders will ask you to attach one to your application as it can give them confidence you have the ability to run your business successfully. 

A typical business plan includes these sections:

• Executive summary: This part provides basic information about your business. It dives into your products and/or services, leadership team, employees, and location.
• Market analysis: Here, you’ll share your competitor research, target market details, and industry outlook. Also, describe how you’ll stand out from the crowd.
• Organization and management: Explain how you’ll structure your business legally. An organization chart of the key team members is also a good idea.
• Marketing and sales strategy: The marketing and sales strategy outlines how you plan to sell your products and/or services. It will likely include a variety of tactics, such as digital marketing, print ads, and word-of-mouth promotions.
• Financial projections: Create a financial outlook for the next five years. Supplement it with anticipated income statements, balance sheets, cash flow statements, and capital expenditure budgets.
• Funding request: In this section, you’ll clarify how much funding you’re asking for and what you plan to do with the funds. Be as detailed as possible to convince the lender you’ll use the money wisely. 

Collateral and personal guarantees

Not all business loans require collateral, but having it can improve your chances of getting approved. That’s because collateral, typically in the form of a physical asset, vehicle, or real estate, acts to secure the loan in case your business defaults. Instead of going after your personal assets for repayment, the lender seizes the collateral and sells it to satisfy the debt. 

Collateral reduces the amount of risk a lender takes on more than a personal guarantee, so secured business loans are typically easier to get than unsecured ones.

Secured business loans require collateral and are usually easier to get than unsecured loans. The caveat, however, is the lender can seize your asset if you fail to make your monthly payments. 

Industry experience

In any credit situation, the lender’s biggest priority is ensuring the loan gets repaid, and the industry your business is in could be one indicator of how likely you are to succeed. What’s more, lenders will want to see whether you already have experience in that same industry, or if it’s all new to you. 

In general, if you’ve been in the industry for a long time, your chances of success with the new venture are higher than if it’s something you’ve never done before.

How to prepare your business for loan approval

Before you go ahead and apply for a startup loan, complete these steps to help streamline the process and avoid delays.

Form your business entity

Sole proprietorships make up the vast majority of businesses in the U.S., but it can be more difficult to get a business loan as a sole proprietor than if you were to create a separate entity. That’s because there’s no legal separation between you and your business and lenders will have to rely heavily on your personal credit. 

As you consider how to structure your business, there are several options, the most common of which include a sole proprietorship, partnership, limited liability partnership (LLP), limited liability company (LLC), S corporation, and C corporation. 

Each of these entities has benefits and drawbacks when it comes to taxes, liability, and other features, so it’s important to take your time to research each one to ensure you choose the right one for you. It may also be worth consulting with tax and legal professionals to get some advice for your situation.

Get an EIN

An employer identification number (EIN) acts like a Social Security number but for businesses. While it’s not required for every business to have an EIN, having one can help you separate your business and personal finances and give you a better chance of qualifying for a business loan and checking account.

You can get an EIN for free by requesting one on the IRS website. The process is quick and painless.

Open a business bank account

Another thing you’ll want to do to separate your business is to open a business bank account, and possibly a savings account as well. This will make it easy to manage your accounting and file taxes.

When you do so, it’s a good idea to establish a relationship with the bank or credit union. You’ll find it easier to secure financing from a financial institution that already knows you and your unique needs. Plus, you might qualify for lower rates or other incentives. 

Separate business and personal finances

Depending on the nature of your business, it may also make sense to get a separate phone number and address from that of your home. If your business is home-based, consider getting a P.O. box or using a mail forwarding service. 

These actions aren’t absolutely necessary, but they can show potential lenders that you’re serious about keeping your business and personal life separate.

Calculate how much startup funding you need

Rather than guessing, take the time to do the math and determine how much you’ll need to borrow to meet your startup goals. While asking for too little can cause cash flow issues, asking for too much may lead to higher interest costs and monthly payments.

Keep in mind that some expenses, such as licenses and permits will be easy to plan for while others like marketing and employee salaries will require some online research or conversations with vendors, mentors, or service providers. 

Startup funding checklist

Before applying for a loan, estimate the cost of these common startup expenses:

• Advertising and marketing
• Employee salaries
• Equipment and supplies
• Inventory
• Legal and accounting fees
• License, permit, and business registration fees
• Market research
• Office, retail, or warehouse space
• Utilities

Best startup business loan options

As you shop around for loans to support your startup, you’ll find a variety of options, including:

SBA microloans

With an SBA microloan, you can receive up to $50,000 and take up to seven years to pay it back with competitive rates around 8% to 13%. The funds may be used to cover a wide array of startup expenses, such as working capital, inventory, machinery, and equipment. 

To get a microloan, you’ll need to look for a SBA microloan intermediary lender via the SBA's lender search tool. You can also contact your local SBA district office. Depending on the lender, you may need collateral and a personal guarantee. As of April 1, 2026, all direct and indirect owners must be U.S. citizens or U.S. nationals with a U.S. principal residence to qualify. 

Business credit cards

Business credit cards act as a business line of credit that you can use over and over again as funding for your business. They’re also perfect for new businesses because they typically don’t require any time in business, a minimum annual revenue, or a business credit history. If you have good personal credit, you’ll find it easier to qualify for a variety of cards. 

As with consumer credit cards, your statement on a business card will close each month, giving you a grace period and a due date for payment. As long as you pay your monthly balance on time and in full, you’ll avoid annual percentage rate charges and can start building a business credit history.

In addition to giving you access to credit, many business credit cards also offer other features, including sign-up bonuses, rewards on everyday spending, introductory 0% APR promotions, and more. So if you’re considering going this route, take your time comparing options to ensure you find the best fit for your business.

Equipment financing

If you need to buy or lease equipment to run your business, you may be able to get equipment financing relatively easily, without much time in business. This is primarily because equipment loans typically require you to use the asset you’re purchasing as collateral to secure its repayment. 

Equipment financing is also worth considering because it typically comes with favorable terms, including low interest rates and flexible repayment options. 

Personal loans for business use

As the name suggests, a personal loan isn’t credit that you apply for in the name of your business. But with so few options available for startups, it could be worth considering. 

Many personal lenders allow borrowers to use loan funds for business expenses. If your credit is in good shape, you can also expect relatively low interest rates, potentially even in the single digits. 

Personal loans are typically unsecured, which means you don’t have to put up collateral to get approved. One big drawback of using a personal loan, however, is that it won’t help you establish a business credit history.

A personal loan might be a good option if you’re a newer entrepreneur with strong personal credit who doesn’t qualify for other types of business loans, especially if you need a smaller amount of money. 

Vendor credit and net terms

Instead of looking for a business loan directly from a lender, you may be able to set up a credit arrangement with one of your vendors.

Vendor credit gives you a set period to pay what you owe instead of requiring cash on delivery. Common terms include net-30, net-45, and net-60, which give you 30, 45, and 60 days from the invoice date, respectively, to pay. In some cases, you may even be able to qualify for a discount on the invoice if you pay immediately. On the flipside, late fees might apply if you’re late. 

Vendor credit doesn’t work as a loan, giving you an injection of cash that you pay back over time. But it can give you the flexibility you need to manage your working capital and allow you to run your business more effectively.

Also, many vendors will report your payments to the commercial credit bureaus, allowing you to use the arrangement to establish a business credit history.

Alternative funding for startups without loan eligibility

Crowdfunding

If you have a great idea for a product or service, you may be able to turn to the public to get the money you need. Crowdfunding allows business owners to go straight to their potential customer base. In exchange for small “investments,” future customers can gain early access to your product or service when it launches. Some crowdfunding campaigns may also offer special incentives, such as discounted pricing on bulk orders or limited-edition products.

Unlike a loan, crowdfunding allows you to get funding for what you need without requiring you to pay the money back. Instead, you’re working directly with people who want what you’re selling.

There are a few crowdfunding websites out there, including Kickstarter and Indiegogo, and some campaigns have been wildly successful, generating millions of dollars in funding. While those are major outliers, it’s possible to get the money you need if your product or service is good enough and you can present it in a powerful way.

Grants for startups

Many organizations, such as governments, foundations, and corporations offer grants to support entrepreneurs and early-stage startups. Unlike traditional loans, you don’t need to pay them back. 

 In most cases, you’ll need to complete an application and share details about your business model and goals. You may also be required to pitch your idea verbally or in written form. After you apply, be prepared to answer follow-up questions or participate in an interview by the grantor. 

To hone in on grants for your particular startup, check out industry groups, government databases, and specific grant websites. 

Friends and family financing

If you have friends or family members who want to support your startup, they may offer financing. Though this is an informal option, it’s important to clearly write out and communicate the terms of the loan. This can help prevent disagreements and ensure everyone is on the same page right off the bat.

Keep in mind that some friends or family members will ask you to repay them fully with interest while others may only ask for a portion of the funds back or forgo interest charges to save you some money. Regardless, you should thank them and agree to their terms before accepting their offer.

Venture capitalists

Enlisting the help of investors is another way to get the funding you need without setting up a creditor-borrower relationship. There are several venture capital firms that specialize in working with and funding new business ventures. 

The only problem is that venture capitalists are extremely selective about which businesses they’re willing to work with. In many cases, they only work with high-growth tech startups.

A venture capital firm’s top priority is to maximize its return on investment, so it’s essential to create a powerful pitch that highlights your product or service, business plan, and the likelihood of success.

Even then, though, there’s no guarantee that you’ll get the capital you need, and very few business owners get funding this way. Even if you do, you’d likely need to exchange equity and even a measure of control for capital, which could make it difficult to take your business in the direction you want.

How to apply for a startup business loan

Once you’re ready to apply for a startup business loan, follow these steps. 

Gather required documents

Each lender has their own documentation requirements but most will require you to submit the following:

• Business plan
• Balance sheets
• Profit and loss statements 
• Bank account statements
• Personal and business tax returns for the last 2 to 3 years
• Business licenses and permits
• EIN confirmation
• Proof of insurance
• Commercial mortgage or lease agreements
• Proof of collateral  

Compare lenders and prequalify

Many lenders let you prequalify for startup business loans and receive estimated rates and terms.  All you have to do is submit a few basic details about yourself and your business. Fortunately, you can usually do this online without agreeing to a hard credit check so there’s virtually no risk involved. 

Ideally, you’d complete the prequalification process with at least a few lenders so you can compare loan offers and zero in on the right ones. Only after you formally apply for a loan, will the lender run a hard credit inquiry, which may affect your credit. 

Submit your application

Most lenders let you fill out a formal business loan application online. Make sure you have your documents handy as you’ll need to submit them. Approval and funding times vary by lender and loan type but responding to questions and additional requests for information promptly can speed things up. 

Tips for getting approved with limited business history

Though it can be a challenge to get approved for a small business loan with limited business history, it’s not impossible. These tips can increase your chances of success:

• Improve your personal credit score: If you don’t have a business credit score, your personal score matters, so it’s worthwhile to improve it. Pay your bills on time, keep debt to a minimum, and only apply for new credit when you absolutely need it.
• Create a solid business plan: Your business plan can help convey you have a strong business idea and convince lenders it’s worth funding. Make sure it's compelling, original, and clearly laid out.
• Open a business account: Lenders prefer your business finances to be separate from your personal finances. That’s why you should open a designated bank account for your business. 
• Consider a cosigner: Sometimes, you can apply for a startup loan with a cosigner who has strong credit and stable income. Only consider this option if you trust the individual and feel confident you can repay the loan. Otherwise, they may have to take over your loan and you might ruin your relationship 
• Prioritize documentation: You’ll likely be asked to submit a variety of documents relevant to your new startup. Gather them right off the bat. 
• Be flexible: Some business loans are easier to get than others. For example, vendor credit and equipment financing with your equipment as collateral have less rigorous requirements than traditional loans from banks for SBA loans. Be open to different financing options. 

The bottom line

No matter your industry or business model, there are a variety of startup business loans that can help you launch and grow your venture. Before you sign on the dotted line, however, explore all your options.

Once you find a loan or two that meets your needs, review the eligibility criteria to ensure you meet it and prequalify with multiple lenders. From there, you can formally apply, wait for acceptance, and repay your loan as agreed upon.

Frequently asked questions