Startups and small businesses are integral to the U.S. economy. So much so that 99% of U.S. businesses have fewer than 500 employees.
While starting a business is an exciting endeavor, startup owners have to make a lot of major decisions when starting up, such as your startup business loan options.
Are you unsure what loans are available for startups? Fortunately, there are more small business startup loans than ever. Here are the 4 best startup business loans you should consider.
1. Equipment Financing
Out of all of the types of business loans, equipment financing is one of the easiest to qualify for. Equipment financing is a great option for businesses that only need capital to purchase specific capital and can’t qualify for traditional business loans. You’ll have monthly repayment terms over a long period. You typically get equipment financing loans from a bank or other financial institution.
The best part about equipment financing is the collateral portion. Collateral for equipment financing isn’t as strict as other loans. Most banks will put the equipment up as collateral — if you default on your loan, the bank will only take your equipment.
2. SBA Microloans
If you’re not sure how to get startup business loans, the Small Business Association (SBA) should be your first option. The SBA can connect you with non-profit organizations as well as community development financial institutions (CDFIs) to secure a microloan.
A microloan is a loan up to $50,000 that you can use toward equipment, supplies, and even any other purchase such as furniture or fixtures.
3. Business Credit Cards
If you’re still not sure how to get a business loan, you can likely qualify for a business credit card.
Business credit cards are recommended because you can a small line of credit that you can use for any purchase. Since many banks offer rewards such as cashback and 0% introductory interest, this is also a good way to earn some extra perks and save money.
You can also use your business credit card to establish business credit, which will help you secure a better loan in the future.
Qualifying for a business credit card is easy for startup business owners. If you don’t have much capital, banks will look at your personal credit score as well as your combined personal and business credit.
4. Invoice Financing
Do you mainly get paid via invoices? If so, invoice financing is a great beginner’s business loan option. This is a convenient way to improve your cash flow, in case your invoicing periods are long. Invoice financing requires little paperwork, you receive your funds quickly, and you only need to be in business for a few months.
The only downside to this financing option is it’s expensive. Let’s say your invoice financing advances you some money for your next invoice. If you can’t pay it back immediately (for example, let’s say your customer pays the invoice late) then the financial institution will impose a fee.
What Startup Business Loans Will You Choose?
Choosing the best startup business loans is one of the biggest issues that small businesses have to face. Unfortunately, it’s not your only issue. There are many obstacles to owning a business. But with the proper training, you can work through different issues associated with business ownership.
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