Startup Loan

At a Glance

Entrepreneurs take note: The startup loan was designed specifically for your latest business idea. This loan can provide the necessary capital to help get a new business off the ground and fund key venture expenses – without relying on angel investors or friends and family.

Benefits & Drawbacks

Benefits:

-A startup loan does not affect your equity
-Offers a useful entrance into venture capital
-Can improve credit ratings

Drawbacks:

-Interest rates are higher than other business loans
-If a default occurs, you are personally liable
-Collateral is typically required – even if you don't have business assets yet

What Should I Know About Startup Loans?

Startup loans can come in many shapes and forms: Some may be traditional term loans, some may be business credit cards, and some may be SBA loans. However, they are all designed to help fund a new venture for entrepreneurs who are willing to use debt as a source of capital. Deciding on a startup loan is one of the most important early business decisions you can make, so finding the right loan terms is key.

How Difficult is It to Qualify?

Lenders are particularly careful of risk when it comes to startup loans – they are taking a chance on a business that doesn't exist yet. As a result, collateral – often personal collateral like your house or car – is typically required. Lenders also prefer to see a credit score of at least 680, as well as your tax returns and recent income. Additionally, traditional lenders will expect a full business plan and careful revenue forecasts for the next several years to show that you have the acumen and skills to create a successful company.

What Kind of Payments Should I Expect?

Startup loans interest rates can vary greatly based on individual circumstances and the type of loan that you settle on. Average rates tend to range between 7 and 30 percent, and may be higher than other types of business loans to help offset the greater risk. Loans specifically designed to help new entrepreneur and stimulate the economy, like certain SBA loans, tend to have the best terms.