How to Get a Small Business Loan as a Startup

Finding funding for startups can be a difficult game. If you’re in a place that actively encourages entrepreneurship, you might have extra options like grants and tax waivers that can help. In the end, though, you’ll still need some kind of credit to get off the ground. Between supplies, equipment, labor, facilities, and other unforeseen expenses, practically every small business needs a loan or credit line of one kind or another. If you’re looking for a small business loan as a startup, there are a few key strategies that can help you be more successful.

First, identify whether your needs can be best met with a loan or credit line. Believe it or not, one of the biggest reasons why startups are denied loans is because they are applying for loans to cover short-term credit needs, which is not what they are designed for. Credit lines are more flexible and easier to get approved for your business if your needs are short-term. The best part is they are reusable as their balance is paid down, so you don’t need to re-apply. Loans are best used for major investments, including equipment, facilities, and sometimes investments in training or other necessary operational expenses. They are generally medium or long-term instruments, although there are definitely exceptions.

The second thing to do if you’re trying to fund a startup is to identify which special programs do exist for your business. Many traditional lending institutions have trouble lending to companies with less than two years of operating history, but programs like SBA loans and startup incubator loans are specifically designed for companies like yours, so do your research and find out what you can access in your area. Sometimes, there are even grants available, which means you can get funding without debt or loss of equity.

Lastly, check out the resources for alternative financing in your industry. Alternative financing options include asset financing, hard money loans, and other forms of credit beyond traditional loan instruments and credit lines. Sometimes, you’ll even find lenders flexible enough to meet your needs for both traditional loans and alternative financing. In that case, it will be easy to build your startup’s credit portfolio one piece at a time, as your needs develop.

Startups are delicate, requiring careful attention at every phase of their growth. If you’re determined to reach that rapid expansion phase that allows a business to really take root and flourish, you’ll need a lending partner who understands your business. That’s why it’s important to explore all your avenues at once, increasing the odds that you’ll find the combination of funding you’ll need across them.


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