Startup loan guide: Secure funding and grow your business

Published Friday 6 February 2026

Table of contents

• What is a startup loan?
• Types of startup loans
• How much can you borrow?
• Startup loan requirements
• How to apply for a startup loan
• Alternative funding options
• Manage your startup finances with confidence
• FAQs on startup loans

Key takeaways

• Prepare a detailed business plan with clear revenue projections and gather all required documentation before applying, as this speeds up approval and demonstrates your ability to repay the loan.
• Consider SBA loans for lower interest rates and longer repayment terms, though they take 2-3 months to approve compared to 1-3 days for online lenders.
• Maintain a personal credit score of 680 or higher for traditional lenders, though some SBA programmes accept scores as low as 620.
• Explore alternative funding options like investors, crowdfunding, or peer-to-peer lending if traditional startup loans aren't accessible due to lack of revenue history or credit challenges.

What is a startup loan?

Startup loans are business loans used to fund new ventures. While there's no single product called a "startup loan," several loan types work well for new businesses, including SBA loans, term loans, and business lines of credit.

The term "startup loan" describes how you use the funding rather than a specific loan product. This means you have options to choose from based on your needs and qualifications.

Types of startup loans

When you look for a startup loan, you'll find several different options. The right one for you depends on your business needs, financial situation, and what lenders are willing to offer. Startups typically access funding through three main loan types:

• SBA loans: Government-backed loans with lower interest rates and longer repayment terms. The SBA guarantees a portion of the loan, making lenders more willing to work with new businesses. Loan amounts range from $500 to $5.5 million depending on the programme.
• Term loans: A lump sum you repay over a set period with fixed or variable interest. Providing collateral typically results in lower interest rates.
• Business lines of credit: Flexible funding you draw on as needed, similar to a credit card but with lower interest rates. Lenders typically prefer businesses with some revenue history for this option.

How much can you borrow?

The amount of money you can get for your startup depends on several factors. Lenders will look at the strength of your business plan, your personal credit history, any collateral you can offer, and the type of loan you're applying for.

A detailed and realistic financial forecast in your business plan can help show lenders that you have a clear path to repayment, which may help you secure the funding you need.

Startup loan requirements

Startups face extra scrutiny from lenders because they lack a revenue track record. This caution is understandable. Research from the U.S. Small Business Administration shows only about a third of small businesses survive the 10-year mark. To improve your approval chances, lenders look for:

• business experience such as previous ownership or management of a successful business
• personal investment showing a significant portion of your own capital invested in the venture
• collateral like property, equipment, or inventory to secure the loan
• strong credit history with personal credit scores of 680 or higher for most traditional lenders, though some SBA programmes accept scores as low as 620

Meeting at least one of these criteria significantly improves your chances. Without any, you may need to explore alternative funding options.

How to apply for a startup loan

Follow these steps to apply for a startup loan and improve your approval chances.

1. Prepare your business plan and financial projections

Create a detailed business plan that shows how your business will generate revenue and repay the loan. Include:

• Executive summary and business description
• Market analysis and competitive positioning
• Revenue projections for the first 1–3 years
• Clear explanation of how you'll use the loan funds

2. Gather required documentation

Lenders typically request:

• Personal and business tax returns (if available)
• Bank statements from the past 3–6 months
• Personal financial statement showing assets and liabilities
• Business licences and registration documents
• Collateral documentation (property deeds, equipment valuations)

3. Research and compare lenders

Different lenders offer different terms and requirements:

• SBA-approved lenders have lower rates but longer approval times
• Traditional banks offer competitive rates for well-qualified borrowers
• Online lenders provide faster approval but typically charge higher interest rates
• Credit unions are often more flexible with new businesses

4. Submit your application

Complete the lender's application with accurate information. Double-check all figures and ensure your documentation supports your projections. Inconsistencies can delay approval or result in rejection.

5. Follow up and provide additional information

Lenders may request clarification or additional documents. Respond promptly to keep your application moving.

Approval timelines range from 1–3 days for online lenders to 2–3 months for SBA loans.

Alternative funding options

If traditional loans aren't accessible, consider these alternative funding options:

• Investors allow you to trade equity for capital and potentially gain a mentor with business experience. You can often buy back their share as your business grows.
• Friends and family let you borrow from people who believe in you. Put agreements in writing to protect both your finances and your relationships.
• Crowdfunding helps you raise small amounts from many backers through platforms like Kickstarter or Indiegogo. It's a rapidly growing field, with the World Bank estimating the global market for crowdfunding will reach US$96 billion by 2025. This option requires a compelling pitch and significant marketing effort.
• Peer-to-peer lending connects you with individual lenders through online platforms. Typically offers smaller amounts than traditional loans without collateral; for example, in China's P2P market, the average loan size has been around US$11,300. Get an intro to P2P lending.
• Bootstrapping means funding your business through personal savings, credit cards, or home equity. Maintains full ownership but puts personal finances at risk if the business fails.

Manage your startup finances with confidence

Once you secure funding, tracking how you spend it becomes critical. This may be why accountants are the most frequently used source of business advice for small and medium-sized enterprises. Clear financial records help you:

• Monitor cash flow to ensure you can make loan repayments
• Track expenses against your business plan projections
• Prepare accurate reports for lenders or investors
• Make informed decisions as your business grows

Accounting software like Xero helps you manage your startup finances from day one, with automated bank feeds, invoicing, and real-time reporting. Get one month free and start your business on solid financial footing.

FAQs on startup loans

Here are answers to common questions about getting a startup loan.

Can a startup get a loan without revenue?

Yes, startups without revenue can qualify for loans, particularly SBA microloans and some online lenders. You'll need a strong business plan, good personal credit, and potentially collateral to compensate for the lack of business income.

What credit score do I need for a startup loan?

Most traditional lenders require personal credit scores of 680 or higher. SBA loans may accept scores as low as 620, while some online lenders work with scores of 600 or above, typically at higher interest rates.

How long does it take to get approved for a startup loan?

Approval timelines range from 1–3 days for online lenders to 2–3 months for SBA loans. Traditional bank loans typically take 2–4 weeks. Having complete documentation ready speeds up the process.

Do I need collateral for a startup loan?

Not always. SBA microloans and some online lenders offer unsecured options for smaller amounts. Larger loans typically require collateral such as property, equipment, or personal assets to secure better terms.

Can I get a startup loan with bad credit?

Yes, though options are limited. Some online lenders and microloan programmes work with borrowers who have credit challenges. Expect higher interest rates, smaller loan amounts, and stricter terms. Improving your credit score before applying gives you access to better options.