small business loan

The Top 5 Startup Business Loan Options for Entrepreneurs

High-profile startups raised billions of dollars from venture capitalists in 2017, according to TechCrunch data. Even if you weren’t one of the lucky ones to attract VC money, you have more options than ever before for getting a startup business loan.

Think outside the box to get the funding you need, as your options go beyond traditional loans. Here are the top five startup business loan options of 2018:

Startup business loan

A startup business loan is a financing product designed specifically for a startup in the early stages of business, especially ones without much credit history:

  • Equipment financing: Get a loan to buy equipment for your business, using the equipment itself as collateral. Interest rates range from 8 percent to 30 percent, and you can use equipment finance for a variety of purchases, from computers to vehicles.
  • Business credit card: Get access to revolving credit, as well as sign-up bonuses, rewards earning potential and cash back. For funding early business operations, 0 percent intro APR business credit is great, as it gives you the ability to borrow money without incurring charges for 12 to 18 months.
  • Credit line builder: With a credit line builder, you apply for multiple business credit cards through a financing company. You can build your business credit so you can qualify for better loans later. And you can increase the max amount you can borrow.

Personal loan for business

You are putting your personal credit at stake, but a personal loan for business may well be worth it. Personal loans are great for business owners with limited business credit history, and can often be much less expensive than a business loan (APRs range from 5.99 percent to 36 percent).

The one downside is that they’re often capped at $40,000. That may be enough to supplement cash flow, inventory and payroll for a short time. However, you’ll need other forms of financing to fully fund your business.

To get the best rates, you need a personal credit score of 680 or higher. High revenue from your business and a longer business history will also help you secure better rates.



Grants

Do you know what makes grants so awesome? They don’t have to be repaid, unlike small business loans.

Now, you may think it’s hard to get a grant (and it is). But you also have plenty of options to explore. There are all sorts of small business grants, including:

From grants for veterans to federal grants for agriculture, many programs have distinct missions. Look for those that specifically match your need, and consider all of your available resources. You may have a better shot at getting a grant than you think.

Crowdfunding

Crowdfunding is expected to grow to more than $300 billion by 2025. Clearly, this should be looked at by startups as a way to raise funds.

For early-stage investments, you could opt to do equity crowdfunding on a site like Fundable. This may be more enticing to potential investors than just handing you money (although it’s certainly possible to get donations if you have the right idea).

The key to a successful crowdfunding campaign on Kickstarter and similar sites is to share your story in an inspiring way while highlighting the pain and gain your product or service addresses.

If you do reward-style crowdfunding instead of equity crowdfunding, be sure to offer worthwhile perks for supporting your business endeavor. Take time to make an engaging video and promote it across various channels.


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Friends and family

After personal savings, credit and loans, friends and family are the next largest source of startup money.

But how do you ask friends and family for money? Well, it’s a delicate situation.

Martin Zwilling, a business executive and entrepreneur, recommends engaging friends and family by pitching your idea over time and promoting it with passionate, persuasive conversation.

You should also show financial projections and commitment. Additionally, make sure everything is in writing, outlining if the investment is for equity in the business or will function as a traditional loan. Be clear on when payments or dividends will be made.

Getting the money you need for 2018 and beyond

As you can see, funding options for your startup aren’t limited to going into a bank and asking for a term loan. This is 2018 and you have access to both old and new ways of getting cash for your company.

So explore your various options, be honest about what you need, and calculate the costs of borrowing. By doing your due diligence, you’ll get funding to drive your business forward.

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