5 Popular Startup Loan Options to Fund Your New Business in 2025

Starting a new business can be an exciting venture. But as you’ll soon discover, it’s also financially demanding. No matter what type of business you plan to run, having access to the right funding to meet your business needs is essential.

But sometimes, that’s easier said than done. Traditional financing wasn’t designed with startups in mind. A lack of revenue history and limited credit history can make it difficult to qualify for startup business funding.

Thankfully, in 2025, entrepreneurs have more options than ever to secure the capital they need to start and grow their businesses.

This article explores the top five startup business funding options, whether you’re a new entrepreneur who hasn’t yet opened your business or a new small business owner still in the early stages of growth.

What to Know Before Applying For Startup Business Funding

Before discussing the different types of startup business funding, it’s best to understand small business lenders and what they look for in borrowers. This can give you the best chance of approval. Whether you’re considering a guaranteed small business startup loan or a business line of credit, preparing for the business loan application process is key.

Most traditional lenders look at three criteria: credit score, time in business, and annual revenue. A new business often lacks these things. Still, there are tools you can use to impress lenders and weigh in favor of getting approval for your startup business funding.

These include:

A business plan: A comprehensive plan that shows you’ve done your homework can make a difference in moving your startup business funding forward. Your business plan should show you’ve researched your market, have a better understanding of your target consumers, and know your competitors.

Include strategies of how you plan to grow your business and detail projected operating costs and revenue forecasts. Then state how much funding you need and how you plan to use the money.

Downpayment: For lenders, assessing a loan application is all about risk. A downpayment can lower the risk for lenders and show you’re invested in the business. Small business owners with lower credit scores or lack of credit and other business credentials have more of a chance of a loan getting approved with a larger downpayment (at least 20% to 30%).

Collateral: Once again, it comes down to lowering the risk for lenders. When a lender approves a loan, they prefer a safety net in case a borrower defaults on the loan. Collateral can include personal or business real estate, equipment, inventory or any of the business owners personal assets.

Best Small Business Financing for Startups

Choosing the right lending option for your new business can seem overwhelming. But, not to worry. There is a startup business funding solution that’s tailored to your business needs. Each of the following five types of startup financing has distinct advantages to help you launch or grow your business.

1. Business Credit Lines for Startups

A business line of credit can help your company get startup business funding that can be used towards almost any business need, including equipment or inventory purchases, marketing, or cash flow needs.

The line of credit works similarly to a credit card, but will sometimes have a higher limit with lower interest rates. However, if you have a lower credit score, the limit might actually be lower until your credit is established.

With a line of credit, the lender will usually offer you a maximum credit line to draw from and charge interest only on the credit you’ve used. As you repay part of the credit line, it resets back to its original limit.

2. SBA Microloans

SBA microloans were designed with new business owners in mind. These SBA-backed loans offer funding up to $50,000 and up to six years to repay the loan. Microloans are usually offered through nonprofit community lenders, and the funds can be used towards working capital and equipment, inventory, supplies, furniture, or fixtures purchases. Microloans can’t be used for real estate or paying current debts.

SBA Microloans are usually easy to qualify for and come with low interest rates. But $50,000 is often not enough to start a business. Some small business owners use a combination of startup business funding options, or even partner with angel investors, or use crowdfunding to get the entire startup capital needed for their business.

3. Equipment Loans

If your business uses equipment, an equipment loan is the best startup funding option. With equipment financing, the equipment is collateral for the loan.

It’s also easier to qualify for equipment loans, even for startups. You can get equipment financing through any of the three types of lenders. It also offers faster approval than other types of business financing.

Several types of equipment qualify for equipment loans, including industry equipment, such as construction, medical, manufacturing, restaurant, or farming equipment. Machinery, computers and IT equipment, and vehicles used for business purposes can also be purchased with an equipment loan.

4. Commercial Real Estate (CRE) Loans

If you operate a brick-and-mortar business, a commercial real estate loan may be another great startup business funding option for your startup. If you want to buy an office building, warehouse, manufacturing facility, store, or restaurant building, you can use a CRE loan towards the purchase.

Most lenders require a significant downpayment (20% to 30%, depending on credit and other factors) for real estate financing. Repayment terms range from five to 25 years, and most CRE loans won’t require additional collateral other than the real estate being purchased.

5. Alternative Loans

Some online lenders and fintechs offer alternative startup business funding. Alternative financing options include term loans, real estate loans, equipment financing, and revenue-based financing.

Startups and small businesses that don’t qualify for bank or SBA loans usually end up applying for alternative financing. But many small business owners choose alternative loan platforms from the get-go because of the ease of meeting eligibility requirements and qualifying for the loans. Online loans also offer faster approval and funding. This makes them ideal for startups that need quick capital.

Depending on the lender and the borrower’s credit profile, alternative financing sometimes comes with higher interest rates and shorter repayment terms, but not always. Many entrepreneurs get an alternative loan to help with building credit so they can get better repayment terms later on.

Other Funding Opportunities Available for Startups

While startup loans are a common way to fund new businesses, there are other options.

Grants

Grants, including government grants and grants from corporations and private organizations, are often highly desirable because unlike loans, they don’t need to be paid back if you meet the conditions of the grant. Often, grants are focused on special interest groups like women, veterans, or minorities.

For example, an eco-friendly organization may offer grants for businesses that focus on sustainability.

The caveat is that it isn’t easy to get a grant. It’s also very time-consuming to apply for them. However, if you manage to land one, it’s free money for your business.

Venture Capital

Venture capital is a popular funding avenue for tech startups. Venture capital works by providing large sums of capital in exchange for partial ownership of the business.

It’s not a great option for every business owner, particularly if you want complete control of your business. But it is a viable option if your startup shows significant potential for growth, a good business idea, and a team that can lead it to success.

Crowdfunding

Crowdfunding can be a great way for your startup to raise capital. It works by launching a campaign on a crowdfunding platform like Kickstarter, StartEngine, or Indiegogo and pitching your business idea. The goal is to get supporters who believe in your idea and raise money for your startup.

Some entrepreneurs offer perks in exchange for financial support or presell products. Others give a small amount of equity in the business in exchange for funding.

But crowdfunding goes beyond financial support. It can offer validation that your product or service is in demand. It can also bring together a loyal community that can drive brand awareness and engagement for your startup.

FAQs about startup business funding

1. How much startup business funding can I get with a loan?

While the SBA has loan programs for up to $5 million, for most startups, the number is probably much lower because newer businesses don’t have the financials or revenue to back up a larger loan. The average SBA loan size in 2024 was just over $443,000, but that was for new and established businesses combined.

2. Can I get a startup loan with little to no interest?

You are unlikely to find a zero interest startup loan, however you may be able to get a business credit card with a 0% introductory rate. If you have good credit, you can use your personal credit to qualify for the card. Although a credit card probably won’t cover all your startup costs, you might consider combining different startup business funding solutions.

3. What credit score do I need for startup business funding?

It’s best to have the highest credit score you possibly can if applying for financing with a traditional lender. However, alternative lenders have loan solutions for small business owners with lower credit scores.

4. Can a startup use their personal credit for startup business funding?

Absolutely, and it’s very common. However, there are a few things to keep in mind. If your business fails, it can affect your personal credit. Also, if you use personal collateral for a loan, such as your home or vehicles, you can lose them if you can’t repay your business debt.

5. What are the best small business loans for startups?

SBA microloans, equipment loans, and online loans through alternative lenders are all great options for startups because they’re easier to qualify for than regular business loans. But the best startup loan will depend on what you need funding for.

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