How to Get a Startup Business Loan

Whether you’re a brand new business, or have been in operation for a year or so, there may come a time where you find yourself looking for a startup business loan. This type of loan varies depending on your exact time in business, how much capital you need, whether or not you need collateral, and if you need to personally back the financing. Below are some funding options you may want to consider when thinking about how to get a startup business loan.

• Bank Loan – A traditional bank loan is often the first option that comes to mind when looking for small business financing. There are some traditional lenders that may work with new businesses, but most require at least a few years in business and collateral or a founder who can personally guarantee the loan. While this option can have reasonable interest rates, it does require a minimum monthly payment regardless of changes in your business’s revenue. This means if you have a slow period or a seasonal business, you’re stuck making the minimum payments.
• Venture Capital – If you’re trying to raise a large amount of money for a new venture you can go the venture capital route. This is generally a relatively long process that includes a number of pitches to various firms, the possibility of rejection from multiple or all firms, and sometimes changes to your overall business plan. The firm you ultimately choose may also require equity in your business and ask for a board seat. This can be a pro or a con for your business, depending on how you operate. However, venture capital is not a realistic option for the average small business owner.
• Revenue-Based Financing – Revenue-based financing, also known as sales-based financing, is a type of funding for businesses that provides access to an upfront sum of capital in exchange for a portion of the business’s future revenue. Because payments are a percentage of a business’s revenue, if your business revenue decreases, your payments can too. This funding does not require any equity or ownership, and typically only requires a minimum of one year in business. So although a true startup with no time in business may not qualify for this type of financing, it can be very appealing for businesses in early phases of operation.

What type of funding is right for you?

For most small businesses that have been operating for at least 12 months, revenue-based financing may be a great option. There are some experienced, reputable revenue-based financing providers, like Forward Financing, that can help you access working capital. To learn more about this flexible funding solution, visit What Is Revenue-Based Financing.