STARTUP BUSINESS LOANS

If your startup already has revenue coming in via invoices, invoice factoring may be a way to help with your cash flow. Invoice factoring companies base your approval on your clients’ credit scores and repayment history, not your own, making them more viable for startups.

With invoice factoring, you sell your outstanding invoices to a lender. The lender pays your business a percentage of your outstanding invoices and collects payments from your customer. Once your customer pays the invoice, you get the remainder, minus the factoring fee. Keep in mind: This can be costly, and you typically pay more the longer an invoice goes unpaid.

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Term loans are what people usually expect a traditional business loan to be. You’re approved for a loan amount, receive the funds in a lump sum, and pay back the loan over a specified period (or term) at a set interest rate.

Term loan criteria varies by lender, but most will usually require startups to be operational for at least six months to a year with proven consistent cash flow before they can qualify. So these types of loans may be better for startups that are already operating, not for those initially launching.

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SBA 7(a) loans are government-backed loans available through commercial lenders. Because the U.S. Small Business Administration guarantees a portion of SBA loans, these may be an affordable option for businesses in early stages.

Loan amounts go up to $5 million, but will vary by lender. Eligibility factors include how the business generates income, its credit history, and where it operates. It must be U.S.-based, operating for profit, and be considered small under SBA size requirements.

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A business line of credit (LOC) gives you on-demand financing to help cover operational expenses or financial emergencies. Lines of credit work more like a credit card, where the provider sets a credit limit and you repay (with interest) only on what you use. You can reaccess the credit line as you repay.

A startup may qualify for a short-term LOC. You may need to secure the financing with collateral, such as real estate or other company assets.

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Microloans are small-amount business loans—usually less than $50,000. Terms can be up to six years.

Microloans are designed for newly established businesses, making them a good option for startup financing. Both collateral and a personal guarantee may be required. They may be backed by the SBA or offered by nonprofit organizations specializing in helping small businesses get funding.

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Equipment loans are business loans you use to purchase business equipment, and they are typically secured by the assets you purchase with the funds. Equipment loans are not limited to use on heavy machinery—they can also can be used for office tools, furniture, or other equipment needed to operate your business.

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A merchant cash advance (MCA) is not a loan, but can be an option for your startup business if you have significant daily debt and credit card sales.

A merchant cash advance provider advances you a lump sum of cash in exchange for a percentage of your future daily credit card and debit card sales. While this option may be beneficial for certain businesses, this type of funding can be expensive and will impact the profits of your sales until repaid.

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If your startup already has revenue coming in via invoices, invoice factoring may be a way to help with your cash flow. Invoice factoring companies base your approval on your clients’ credit scores and repayment history, not your own, making them more viable for startups.

With invoice factoring, you sell your outstanding invoices to a lender. The lender pays your business a percentage of your outstanding invoices and collects payments from your customer. Once your customer pays the invoice, you get the remainder, minus the factoring fee. Keep in mind: This can be costly, and you typically pay more the longer an invoice goes unpaid.

Search for financing

(without impacting your credit score)^†