Low Cost Advisor

Best Startup Business Loans Of 2022 – Low Cost Advisor


Getting a small business loan can be challenging if your company doesn’t have an established history of success. However, there are several types of startup loans that are suited to a range of needs and qualifications.

Online Term Loans

Term loans are typically available through traditional banks and online lenders; however, banks may require more qualification requirements than online lenders. Term loans from online lenders generally have maximum limits between $250,000 and $500,000, but newly established startups likely won’t qualify for loan amounts that high. What’s more, online lenders usually require startups to be operational for at least six months to one year before they can qualify.

Online term loans can be an excellent way for startups with at least six months under their belt to secure business financing to help grow their company. If your startup has not been in operation for this amount of time, consider the other seven startup business loans below.

SBA Microloans

The SBA Microloan program offers eligible business owners access to startup loans up to $50,000. Terms extend up to six years and interest rates typically are between 8% and 13%, though this number varies by lender.

Loans are issued through nonprofit lenders and other financial institutions and backed by the SBA, so they’re generally more accessible to startups with limited financial records and credit history. And, while not helpful to all businesses, SBA microlenders are often more committed to funding startups in disadvantaged areas and those owned by women and minorities.

Asset-based Financing

Asset-based financing is a type of lender financing that’s secured by a business’ valuable assets, including inventory, machinery and equipment, accounts receivable and real estate. Secured financing often comes with more flexible lending standards because it poses less risk to the lender. This makes it an excellent option for startups that can’t meet traditional business loan qualifications.

One of the most common types of asset-based lending, invoice factoring, involves selling outstanding invoices to a third party in exchange for a lump sum of cash—usually between 80% and 90% of the total invoice amount. This can provide startups with working capital quickly and without having to demonstrate a strong business credit score or meet other stringent borrowing requirements.

Personal Loans for Business

Startup founders may also benefit from taking out a personal loan rather than a traditional business loan. Notably, personal loans are easier for a new business owner to qualify for than a business loan—especially for startups with limited or nonexistent business history.

What’s more, the application and approval process may be less rigorous with some lenders than for a business loan. Startup owners may also be able to access lower annual percentage rates (APRs) than available with some business loans, though available borrowing limits are usually lower.

Borrowers who use personal loans to fund their startups are personally liable for repaying the debt. Still, most lenders look at an applicant’s personal credit score when evaluating a startup business loan application anyway, so startup founders are likely to be personally liable for a startup loan as well.

Keep in mind, however, that using personal loan funds for business operations also involves commingling personal and business assets, which may cause bookkeeping, tax and/or legal issues down the line. What’s more, some personal loan lenders prohibit the use of funds for business purposes, so be sure to confirm with your desired lender before applying.

Related: Best Personal Loans

Business Credit Cards

Like personal credit cards, business credit cards offer revolving access to funds that can be used for everything from office furniture and supplies to legal fees, equipment and larger purchases.

The application and approval process is faster compared to traditional loans, and startup owners are more likely to get approved based merely on their personal credit scores. What’s more, business credit cards are unsecured so new business owners won’t have to come up with valuable collateral.

Business credit cards can be used on an as-needed basis, and cardholders only pay interest on any unpaid balances at the end of the billing cycle—typically every 30 days. This makes it a good option for month-to-month operating costs and other expenses that can be paid off each month to avoid interest. Some cards also offer introductory 0% APRs that let borrowers make interest-free purchases for six months to two years.

Friends & Family

It can be difficult to obtain business financing as a startup with limited credit history and financial records. Business owners who are unable to qualify for a traditional business loan or another method like a business credit card—or who only qualify for a small startup business loan—may want to borrow from friends or family.

Before agreeing to borrow money, startup owners should confirm they are comfortable entering into what is essentially a business relationship with them. This involves reviewing the business plan with the lending party, discussing their role (or lack of role) in the business and memorializing the terms of the loan in writing. Ensuring all parties agree to the loan amount, repayment terms, interest rate and other relevant factors can prevent conflict down the line.


If traditional lending tools aren’t an option and borrowing directly from friends and family feels too personal, crowdfunding may be a suitable alternative. Likewise, prospective borrowers who are unable to qualify for a business loan as a startup can use a crowdfunding platform like Kickstarter or Indiegogo to access cash and cover operating expenses.

To get started, choose an online fundraising platform, create an account and decide how much money you’re trying to raise. After setting up a crowdfunding campaign, users can donate varying sums of cash that will become available as soon as the campaign ends.

Not only does this form of business funding not require qualifying through a financial institution, but business owners also don’t have to give donors startup equity in exchange for funds. Likewise, the startup isn’t charged interest or other lender fees

Because of the nature of crowdfunding, this strategy is best suited to startup owners who don’t need to raise a large amount of money and businesses with creative or otherwise enticing offerings. It’s not necessary to provide a thank you gift, but campaigns may be more successful if startups entice donors with an exclusive product, service or commemorative gift.

Small Business Grants

A small business grant is money given to startups and other businesses to help them get off the ground and grow. Grants are offered by a range of entities, including state and local governments, the federal government and corporate organizations. Unlike other startup financing methods like loans and credit cards, small business grants don’t require repayment, and business owners aren’t charged fees or interest.

That said, this form of financing is extremely competitive and applications are often rigorous and time-consuming. Many grants also focus on specific types of businesses, including those owned by women, minorities, veterans and immigrants. So, it may be difficult to identify an appropriate open grant, prepare an application and await the award in the time available.

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