Small Business Start Up Loans and Other Funding Options

There are many options for funding a startup.  The most popular is small business start up loans.  However, not everyone can just go to the bank and get a loan.  Things like income and credit score get in the way. There are options if you find yourself in this situation.

Small Business Start Up Loans are Great, But Are There Other Options?

While business start up loans are the most popular option for funding a start up, sometimes you have to think outside of the box.  Sometimes you have to stack different types of funding to get what you need. Here are some funding options, some loans and some not, that you should consider outside of traditional loans.

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Credit Line Hybrid

What if there were an option that allowed you to have an even better interest rate than a secured loan, and yet get the money faster and easier than any type of traditional funding.  Consider if you could get business funding without having to supply any bank statements or credit stubs? Just think, you could get funding in a few days rather than weeks without supplying any collateral or documents. That is exactly what the credit line hybrid lets you do. 

It is revolving, unsecured financing.  It allows you to fund your business without putting up collateral, and you only pay back what you use.  

What are the Qualifications? 

How hard is it to qualify?  Not as hard as you may think.  You do need good personal credit.  That is, your personal credit score should be at least 685.  In addition, you can’t have any liens, judgments, bankruptcies or late payments.  Furthermore, in the past 6 months, you should have less than 5 credit inquiries.  Also, you should have less than a 45% balance on all business and personal credit cards.  It’s also preferred that you have established business credit as well as personal credit.

If you do not meet all of the requirements, it’s okay. You can take on a credit partner that meets each of these requirements.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can pair with you to allow you to tap into their credit to access funding. 

What are the Benefits of a Credit Line Hybrid? 

This type of funding has many benefits.  First, it is unsecured.  That means you do not have to have any collateral.  Next, you do not have to provide any bank statements or financials.  

Not only that, but generally approval is up to 5x that of the highest credit limit on your personal credit report. Sometimes, you can get interest rates as low as 0% for the first few months, allowing you to put that savings back into your business. 

The process is pretty fast, especially with a qualified expert to walk you through it.  Another benefit is, with the approval for multiple credit cards, there is competition.  This makes it easier, and even likely if you handle the credit responsibly, that you can get interest rates lowered and limits raised every few months. 

Credit Cards

Credit cards get a bad rap.  Yet, if you know what you are doing, they can work well to help fund a start up in addition to small business startup loans. The draw is that these are accessible even with a credit score that isn’t great. However to be fair, the lower the credit score, the higher the interest rate. Also, there are limits on how low they will go with a credit score.

Typically, most business owners are eligible for a credit card of some sort. They do a credit check, but your credit doesn’t have to be as high as it would to gain approval for traditional small business start up loans. 

The downside of business credit cards is that they usually have a high interest rate. The upside is that many of them offer rewards in the form of cash or points that can be helpful.


This is an increasingly popular option for startup funding.  Here is how it works.  Crowdfunding is a type of investment option.  You get a lot of smaller investments from a lot of people.  Hence the term, crowdfunding.  This is different from getting the bulk of your small business funding from one or two larger investors. 

First, you have to figure out which crowdfunding platform is best for your situation. Kickstarter and Indiegogo are two of the most popular. Be sure to take note of the rules each platform has for when you gain access to funds.  They can vary greatly. 

Angel Investors as an Alternative to Small Business Start Up Loans

Investopedia defines angel investors as those who  “… invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages.”

They are usually a lot less formal than regular investors. An angel investor can be anyone. Like, it could be your mom or someone you met through networking.  

The best way to find angel investors is to ask people you know. Also, you can try an angel investors website or network. For example, Gust keeps a database of investors, companies, and programs. Startups can even search for business plan competitions and other opportunities.

SBA Options

Small business start up loans are a specialty of The Small Business Administration.  These programs are designed for borrowers with lower credit scores than those required for traditional loans.

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Small Business Startup Loans: 7(a) Loans 

This program offers federally funded term loans of up to $5 million. Funds can be used for expansion, purchasing equipment, and working capital in addition to startup. SBA partner lenders, usually banks,  process these loans and disburse the funds.  

The lowest credit score to qualify is 680.  There is also a down payment requirement of at least 10% for the purchase of a business, commercial real estate, or equipment. The minimum time in business is 2 years. For startups, business experience equivalent to two years will serve this purpose.  

504 Loans 

These loans are also available up to $5 million.  Funds can be used to buy machinery, facilities, or land. Typically, these loans are used for expansion.  Like 7(a) loans, partner lenders process and disburse funds. These are especially great for real estate purchases.  

Terms for 504 Loans range from 10 to 20 years, and funding can take from 30 to 90 days. They also require a minimum credit score of 680.  The asset being financed is required for collateral. In addition, the down payment requirement of 10% remains, but can increase to 15% for a new business.  

Again, you must be in business at least 2 years, or management has to have equivalent experience if the business is a startup.  


Microloans are available in amounts up to $50,000. They work for starting a business purchasing equipment, buying inventory, or for working capital. Community based non-profits administer microloan programs as intermediaries, with financing coming directly from the Small Business Administration.  

The minimum credit score is 640, and the collateral and down payment requirements vary by lender. 

Private Lender Options for Small Business Start Up Loans

If your personal credit score isn’t the best, consider looking at private lender options.   

These are alternative lenders that have less strict eligibility requirements.  They do have higher interest rates and less favorable terms than traditional loans however, so choose wisely. 


BlueVine requires that you be in business for at least 6 months.  If you have at least $120,000 in annual revenue, you may qualify for a loan from them.  The minimum credit score for a line of credit from BlueVine is 600. Furthermore, if you want invoice factoring, you can get approval with a score as low as 530, 3 months in business, and $10,000 in monthly revenue.


Kiva is different. How different?  They are actually very different.  For example, the interest rate is 0%.  That means, even though you have to pay it back, a loan from them is free money. They don’t check your credit at all. However, you have to get at least 5 family members or friends to throw some money in to help fund your business. In addition, you have to pitch in a $25 loan to another business on the platform.


Accion may be a good fit for small business start up loans also. It’s a nonprofit that offers microloans.  Installment loans are available to both startups and already existing businesses through Accion. The minimum credit score is 575. You don’t have to already be in business, but if you are not, you must have less than $500 in past due debt. In addition, your business needs to be home or incubator based.

Fundability is Important for Small Business Start Up Loans

Fundability, in the simplest terms, is the ability of your business to get funding. When lenders consider funding your business, does it appear to them to be a good idea to make the loan?  What do they look at to make that determination? 

You see why it makes a difference.  Lenders have to perceive lending to your business as profitable.  But what makes a business fundable? How do you become fundable?

First, you have to have a fundable foundation.  That includes the following. 

Separate Contact Information

The first step in setting up a fundable foundation is to ensure your business has its own phone number, fax number, and address.   That doesn’t necessarily mean you have to get a separate phone line, or even a separate location.  There are ways around that.  


The next thing you need to do is get an EIN for your business.  This is an identifying number for your business that works in a way similar to how your SSN works for you personally.  You can get one for free from the IRS.

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Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It offers liability protection and helps separate your business from you as the owner, among other things.  

Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.  Also important to note is that, when you incorporate, you become a new entity. You’ll also lose any positive payment history you may have already accumulated, and your time in business will start over. 

This means it is vital to incorporate as soon as possible.  It’s important for fundability and building business credit, but time in business makes a difference for those things as well.  The longer you have been in business the more fundable you appear to be.  That starts on the date of incorporation, regardless of when your business actually opened.

Business Bank Account

You have to open a separate, dedicated business bank account.  First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

Furthermore, it is much easier to show you meet the minimum income a lender requires for small business start up loans if you have everything in a separate business account.  


For a business to be legitimate it has to have all of the necessary licenses it needs to run.  If it doesn’t, red flags are going to fly up all over the place.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business.  

There is much more to fundability than these foundational factors, but none of it matters if you don’t have the foundation in place.  Taking care of that piece at startup is the way to go.

Small Business Start Up Loans Are Just One Way to Fund a Startup

There are many ways to fund a startup.  Small business start up loans are just one of them.  The truth is, most businesses have to access more than one option to make things work.  If you can start debt free with angel investors or crowdfunding, do that. If not, these other options are just what you need to get up and running.

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