Alternatives to Traditional Start Up Business Loans

Start up business loans are the age-old solution for funding a new business.  Since the beginning of capitalism, entrepreneurs have used a combination of investors and business loans to fund a startup.  But what happens when the traditional routes don’t work?  What happens when you can’t get a start up business loan, for whatever reason? 

What are The Best Alternatives to Standard Start Up Business Loans?

Today, entrepreneurs have more options for start up funding than ever before.  In addition to traditional investors, you have SBA loan programs.  Dig deeper and you’ll find angel investors, crowdfunding, online lenders with alternative eligibility criteria, and hybrid options that most don’t even know about. Let’s dive into what’s out there so you can have a better idea of which options will work best for you. 

Start Up Business Loans: SBA Loans

SBA loans are the most like standard start up business loans. In fact, they are exactly the same, except that they come with a government guarantee.  That means lenders can relax their standards a little when making approvals. 

That’s not to say they are easy to get.  Due to the government guarantee, there is a ton of red tape involved.  However, once you cut through it, it is easier to qualify for SBA loans than regular start up loans.  Here are a couple of SBA loan programs that work well as start up business loans. 

7(a) Loans

This is the Small Business Administration’s most popular program. It offers federally funded term loans that go up to $5 million. The money can fund expansion, purchasing equipment, working capital and even start ups. Lenders partner with the SBA to process these loans and disburse the cash.

The minimum credit score to qualify is 680, and there is also a required down payment of at least 10% for the purchase of a business, commercial real estate, or equipment. You have to be in business for at least 2 years. However, business experience equivalent to two years will meet this requirement if you are a start up.

504 Loans

You can get up to $5 million from the 504 program as well.  You can use the money to buy machinery, facilities, or land. Generally, they are for expansion.  Private sector lenders or nonprofits process and disburse the funds. They work especially well for commercial real estate purchases.

Terms for 504 Loans range from 10 to 20 years, and funding can take from 30 to 90 days. They require a minimum credit score of 680.  The asset that is being financed has to be used as collateral. There is also a down payment requirement of 10%, which can increase to 15% for a new business.

Like 7(a) loans, to qualify you must be in business at least 2 years, or management must have equivalent experience if the business is a startup.

start up business loans Credit Suite

Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.


The microloan program offers funds up to $50,000. You can use the money to start a business, purchase equipment, buy inventory, or for working capital. Unlike most other SBA loan programs, this financing comes directly through the SBA.

SBA Express Loans 

You can get up to $350,000 through the express loan program.  To qualify, your credit score must be above 680, and you must have a debt to service ratio of 1.1 or higher. If the loan is greater than $25,000, collateral may be necessary depending on the lender.

These loans have a much faster turnaround.  In fact, the SBA takes 36 hours or less to give a decision. Necessary paperwork for application is less also.  Consequently, express loans are a great option for working capital, among other things, if you qualify.

Start Up Business Loans: Private Lenders

What do you do if you do not qualify for an SBA loan?  You can try a private lender.  The lenders operate largely online.  They draw is that they rely on things other than credit score to determine whether a borrower qualifies for a loan.  Most still do a credit check, but they do not require as high of a score as traditional loans and SBA loans. 

Yet, you do have to be careful.  There are a lot of scammers when it comes to online lenders.  Do your research so you know exactly what you are getting into.  Here are a few to get you started. 


You will find with most any online lender, they often offer options more similar to invoice factoring and lines of credit.  This is because these present fewer risks than straight term loans.  You can find out more in our Bluevine review.


Upstart is an online lender that uses a completely innovative platform for loans.  The company itself questions the ability of financial information and FICO on their own to truly determine the risk of lending to a specific borrower.  They choose to use a combination of artificial intelligence (AI) and machine learning to gather alternative data instead.  They then use this data to help them make credit decisions.

This alternative data can include such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  The software they use learns and improves on its own. You can use their online quote tool to play with different amounts and terms to see the various interest rate possibilities.  

To be eligible for a loan with Upstart, you must meet the following qualifications:

  • Credit score of 620+
  • No bankruptcies or negative public records
  • No delinquent accounts
  • Meet debt to income standards (they only note they will check this ratio, not what their standards are.)
  • Have fewer than 6 inquiries in the past 6 months on your credit report, not including those related to student loans, vehicle loans, or mortgages

These are the requirements they list on their website.  One independent review said that the requirement for the debt to income ratio is a maximum of 45%. It also says that the minimum annual income has to be at least $12,000.  For more information visit our Upstart review

Fora Financial 

Founded in 2008 by college roommates, online lender Fora Financial now funds more than $1.3 million in working capital around the United States. There is no minimum credit score, and there is an early repayment discount if you qualify.

The minimum loan amount is $5,000 and the maximum is $500,000. The business must be at least 6 months in operation and the monthly revenue has to be $12,000 or more. There can be no open bankruptcies.


Obtaining financing from OnDeck is quick and easy. First, you apply online and receive your decision once application processing is complete. If you receive approval, your loan funds will go directly to your bank account. The minimum loan amount is $5,000 and the maximum is $500,000.

Just like any other online lender, they do have certain requirements to qualify for a loan.  For example, a personal credit score of 600 or more.  Also, you must be in business for at least 3 years. Annual revenue must be at or exceed $100,000. In addition, there can be no bankruptcy on file in the past 2 years and no unresolved liens or judgements.

It’s important to remember that, as with all lenders, the details of interest, minimum and maximums, and eligibility requirements can change without notice. Be sure to check all information with the specific lender for the most current information.

start up business loans Credit Suite

Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Start Up Business Loans: Credit Line Hybrid

This is an option that most entrepreneurs do not know about.  It allows you to fund your business without putting up collateral, and you only pay back what you use.  

To qualify on your own, 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, and 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.

However, if you do not meet all of the requirements, you can take on a credit partner that does.  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 partner with you to allow you to tap into their credit to access funding. 

What are the Benefits of a Credit Line Hybrid? 

There are many benefits to using a credit line hybrid.  First, it is unsecured, meaning you do not have to have any collateral to put up.  Next, the funding is “no-doc.”  This means you do not have to provide any bank statements or financials.  

Even better, typical approval is up to 5x that of the highest credit limit on the personal credit report. Additionally, you can often get interest rates as low as 0% for the first few months.  This will allow you to put that savings back into your business. 

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

Start Up Business Loans: Debt Free Alternatives

It is rare to run a business completely debt free.  However, you can definitely raise some funds that you do not have to repay.  Any little bit helps.  


Crowdfunding is a way to get lots of micro investors at one time.  You advertise your business on a crowdfunding platform, and pretty much anyone who wants can give you money.  Rewards based crowdfunding allows donations as low as $5, and backers receive some non-equity gift for their generosity. 

There is also a such thing as equity crowdfunding which works virtually the same way, but investors actually receive equity in the company for their outlay.  Usually these amounts have to be at least $500. 


Grants are another debt free option to help supplement start up business loans.  There are not a ton of them out there, and the competition is fierce, but it’s worth the hassle for free money.  If you are a business owner that is a minority, a woman, a veteran, or if you run a business in a low -income area, there are more grant options available. 

Start Building Business Credit

The best time to start building business credit is in the startup phase. It takes time, but with expert help to guide you through the process, it can go much more smoothly.  This will allow you to access funding for your business, as it grows, on the merits of the business itself rather than your own credit.  

Why is the start up phase the best time to begin the business credit building process?  Because the entire process hinges on how your business is set up.  It’s much easier to set it up to build credit for itself in the beginning than to try and back track after the fact. 

start up business loans Credit Suite

Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Start Up Business Loans: What’s Best for Your Business?

Usually, some combination of a number of different funding options is necessary if you do not qualify for traditional start up business loans.  Sometimes, this is necessary even if you do qualify for traditional financing.  The options you choose will depend on what you have available to you.  

If you can get SBA loans, that’s great.  If you want to get short term lower interest rates with no security, a credit line hybrid can be an amazing solution.  Of course, private lenders are there to help you out if you need them, but keep in mind they use higher interest rates to help reduce risk since they do not put as much weight on credit scores. 

In the end, you have to weigh what you are eligible to get against what makes the most business sense.  It helps to have an expert walk you through it.  For more about expert help and alternatives to traditional start up business loans, check out these options.

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