How to Apply for a Small Business Loan for Your Startup

When you have a great business idea, your next step is to figure out how to finance it. The good news is that there are multiple resources you can turn to to help get your business off the ground. Here’s what you need to know about exploring your options and applying for the best loan for your business.

Types of startup business loans

There are a few different types of startup business loans you can explore as an entrepreneur:

Term loans

Term loans are often granted to an established small business with sound financial statements. These loans come in specific amounts and have either a fixed or floating interest rate throughout the specified repayment schedule. Term loans are usually used by businesses to purchase a new building, real estate or equipment and may require a larger down payment to lessen payment amounts.

Lines of credit

A line of credit gives businesses flexible access to cash for expenses. Like a credit card, you decide when you withdraw money and the amount, and you’ll also have a spending limit and only accrue interest on the amount withdrawn. The disadvantages associated with business lines of credit include the difficulty of getting approved if your business is less than three years old and the potential to worsen debt.

SBA loans

Small Business Administration (SBA) loans are granted based on a business’s years in business, credit score and annual revenue. With qualifications and requirements less stringent than a normal bank loan, these loans are a great option for small businesses to pursue.