Where to Look to Find New Business Loans

Where to Look to Find New Business Loans

Where to Look to Find New Business Loans

More than half a million startups are launched every month in the U.S., according to Fundable, and there are many ways to get the funding you need to get your business off the ground.

While there are small business loans available, they aren’t always the cheapest form of credit, and you may need to search for alternative forms of financing to make sure you get the best loan for your needs. 

However, understanding what types of loans are available can give you a wider selection, especially if other options are off the table. Here are some of the best places to look for new business loans and how they work.

Vendor or supplier credit

If your business relies on vendors or suppliers for your products and services, working out a financing deal with them could help you better manage your cash flow. Instead of paying cash on delivery, for instance, you may ask if you can set up an agreement to pay within 30 days — this is known as net-30 payment terms.  

Taking advantage of vendor or supplier credit is not only a great way to better manage your working capital, but it’s also typically free financing, as long as you pay by the due date. Also, some suppliers may report your on-time payments to the business credit reporting agencies, giving you a chance to build your business credit while you’re at it.

That said, you may need to have been in business for a short while before a vendor will agree to extend credit, and some may require you to work with them for a set period before they’ll take that step. As you shop around for suppliers, include credit options in your decision-making process.

Business credit cards

Approval odds for a business credit card are typically based on your personal credit score rather than your business. So you don’t have to have been in business for any amount of time, you don’t need a minimum annual revenue, and a business credit history is not required. 

When used properly, business credit cards can help you manage your operating expenses. They typically offer a grace period between the statement date and the due date, giving you time to pay off the debt you’ve incurred. 

Many business credit cards also offer business owners rewards every time they use the card, as well as various perks. Depending on your spending habits and preferences, it’s possible to get a lot more out of your credit card than you pay in fees. 

On the flip side, business credit cards are a revolving form of credit, so there’s no set repayment term. If you pay off your balance in full by the due date each month, you won’t incur any interest. But if you carry a balance, you could end up paying an interest rate close to 20% or more — and there may be no end in sight. 

Equipment financing for startup businesses

Most small businesses can qualify for equipment financing because of how they’re designed. If you’re buying a vehicle or another type of equipment for your startup, the thing you’re purchasing will be used as collateral on the loan.

If your business fails or just can’t repay the debt, the lender can take the collateral to satisfy the debt. Because there’s a verifiable asset with value in the mix and the lender isn’t relying on the success of your business or your ability to make good on a personal guarantee, there’s a lot less risk involved. 

Keep in mind, though, that this type of secured financing isn’t a sure thing for everyone. Lenders will likely still have a lot of criteria you’ll need to meet to qualify for a loan, it just won’t be largely dependent on how long you’ve been in business.


Microloans are relatively small-dollar loans that startups can qualify for to get off the ground. There are two main places you’ll find these new business loans.

SBA microloans

The U.S. Small Business Administration, for example, has a microloan program, where qualified borrowers can get up to $50,000, which can be repaid over a term of up to six years. 

Business owners can apply for an SBA microloan from an approved lender, with the SBA providing insurance for the loan. 

SBA microloans are relatively cheap, charging between 8% and 13% interest. However, eligibility requirements are set by the lender, not the government agency. So it’s still possible to get turned away without any time in business or evidence that your business can afford repayment.

Non-profit microloans

Also, some non-profit organizations, such as Kiva, offer microloans. These loans are typically even smaller than what you can get through an SBA-approved lender, and there may be some alternative criteria you need to meet.

With Kiva, for instance, you need to first raise money for your loan through people in your community. If you’re successful, it will open up the opportunity to the Kiva community, allowing individuals to help lend you the money you need.

Personal savings and credit

According to Fundable, a whopping 57% of new startups are funded using the personal savings and credit of the business owner. While you don’t necessarily need to tap into your personal savings or apply for a personal loan, it can be helpful if you’re having a hard time getting financing in another way. 

If you’re considering going this route, however, consider giving yourself a buffer in your budget and savings in case things don’t go as planned. The last thing you want is to lose your business and have nothing to help keep you afloat until your next opportunity.

Family and friends 

The second-most common funding source for new businesses, according to Fundable, is the family and friends of the business owner. Thirty-eight percent of startups get some or all of their initial funding this way. 

Asking family members and friends for money may be an uncomfortable conversation for some. But if you’re confident in your product or service, and have a plan to repay the debt you owe or treat them as investors, it can end up being a good decision for everyone involved.

What often doesn’t work for new businesses

In addition to these new business loans and other financing options, you may have come across other forms of financing you may be considering. Before you apply, though, here are some that might not be a good fit for you and your business right now.

Merchant cash advances

Merchant cash advances are effectively an advance on your credit card sales, which you pay back over time from a percentage of your revenues from credit card purchases. 

The problem is that if your business is brand new, you likely don’t have enough revenue to convince a lender to offer an advance. Even if you did, merchant cash advances are one of the most expensive forms of business financing, charging interest rates in the triple digits. So if you can find financing elsewhere, it’s probably worth it.

Government loans to start a business

In addition to microloans, the SBA also provides other loan programs that business owners can use to finance their companies. As a new business owner, however, you’ll have a tough time qualifying.

Again, eligibility criteria can vary based on the individual lender. But, for instance, SBA loans provided through the SmartBiz marketplace require at least two years in business, a personal credit score of 650 or higher, no bankruptcies or foreclosures in the last three years, and more.

SBA loans can be a great way to get capital if you qualify. But it’s likely not an option as a new business loan.

Traditional bank loans and small business lines of credit

It is possible to get new business loans and lines of credit through a traditional bank lender. Loans typically have intermediate- and long-term repayment options, and lines of credit provide access to a revolving account. 

But according to Fundable, only 1.43% of startups have managed to finance their business in this way. 

Unlike SBA loans, where a portion of the loan amount is guaranteed by the government agencies, banks and credit unions are out the full amount if you can’t manage to pay back what you owe. As a result, they typically only offer traditional small business loans and lines of credit to established businesses with a strong track record. 

Also, you may be required to put up collateral to secure the loan, which can be tough if your business doesn’t yet have any assets that you could use. 

Angel investors and venture capitalists

Obtaining financing through an angel investor or venture capitalist can be appealing because it’s not a debt you have to repay. But while startups can get a lot of funding this way, it’s a relatively rare occurrence. 

In fact, just 0.91% of new businesses get funding through angel investors, and only 0.05% of startup owners manage to convince venture capital firms to invest. 

Even if you managed to get financing this way, it’s important to consider what you might be giving up. Yes, there’s no debt you have to pay back. But if you’re exchanging funding for equity, you could potentially give up more over time this way than if you were to try for a new business loan.

Of course, depending on the trajectory of your business, a small business loan might not be able to provide enough capital to scale your startup. In this case, an angel investor or venture capital firm may be worth considering.

Startup business grants

Compared with new business loans and investors, startup business grants are extremely appealing. After all, who doesn’t like free money? But while there are plenty of small business grants out there through private and non-profit organizations, you’ll be hard-pressed to find a lot designed for brand-new companies. 

Also, business grants aren’t easy pickings. You’re typically competing with hundreds, if not thousands, of other small business owners, so you have to sell yourself and your business well. 

Don’t let all that deter you from trying, though. There are some startup business grants out there, and you may have access to one that’s specialized for your business or demographic as a business owner.

Government grants

The federal government also provides grants for business owners, and you can run a search online at Grants.gov. But unlike private and non-profit grants, where getting a startup business grant is not entirely out of the question, the federal government’s eligibility criteria specifically include that government grants cannot be used to start a new business.

So in this case, it’s not worth wasting your time searching until you’ve got some experience under your belt. 

How to pick the right new business loan for you

Startup business owners have a lot of business loan options to choose from, but depending on your situation, one may be a better fit than the others. Here are some factors to consider before you apply for a new business loan.

Your credit score

With no business credit history to speak of, your chances of getting approved for a new business loan rest squarely on your personal credit score. 

With equipment financing, for instance, you may be able to get away with a lower credit score because of the secured nature of the loan. And some microloans from non-profit organizations may not run a credit check at all.

But if you’re applying for a business credit card or another loan type, having poor credit could severely limit your options. 

If you have time before you need the money, consider working on improving your credit before you apply. You can get free access to your credit score through the Nav app and can monitor it there as you make progress. 

Your specific need

Not all new business loans are created equal, and some are better suited for some things than others.  If you just need some help with managing day-to-day expenses, a business credit card or vendor credit may be all you need. 

But if you’re looking to expand your business significantly or make some big investments to get it off the ground, a microloan or equipment financing may be the better choice.

Your ability to repay the debt

Getting a big loan to do everything you want with your business may sound like the best choice. But if you don’t have a clear plan for how you’re going to pay it back, a new business loan could cause more problems than it solves.

Certain loan types can provide different repayment terms, so it’s important to look at that side of things to determine which is the best fit for you. And usually, the easy business loans cost more than ones that are harder to qualify for.

The bottom line

New business loans are designed to help startups get off the ground and get through the first year or two of building a business. As you search for financing, though, don’t be surprised if you notice that a lot of lenders aren’t interested in providing your financing. 

Instead of getting discouraged, take the time to research your options to find the best one for you. This process can take time, but it will force you to think seriously about the financing process and the nuts and bolts of your business.

Once you decide which new business loan is best for you, shop around with multiple lenders and compare what they have to offer. With different eligibility criteria and interest rate ranges, one lender may be able to offer you better terms than all of the others.

This article was originally written on June 28, 2019 and updated on December 9, 2020.

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