Starting a business is an exciting venture that has the potential to make dreams come true. You need a loan to start a small business that can cover the cost of resources and capital to make your plans a reality. For this, start up funding and small business loans help support your business, even if it has bad credit. However, you must be clear on the following things:
- What kind of funds do you need?
- Are you focusing on developing your product or service? or
- Do you need help getting your branding and marketing materials off the ground?
Remember: Applying for one of these loans is sometimes the right move if traditional bank loans are not an option and if the business owner needs personal funds to invest.
So, here is AdvancePoint’s list of start-up funding small business loans, curated just for you.
- SBA 7(a) Loan Program
- SBA Microloan Program
- Equipment Financing
- Personal Loan
- Angel Investment
- Invoice Factoring
- Advance on Merchant Cash
- Lines of Credit
- Business Credit Cards
SBA 7(a) Loan Program
The Small Business Administration (SBA) 7(a) Loan Program is one of the most popular loan programs among small businesses in America. It offers flexible financing options with low-interest rates and long repayment terms—up to 25 years—that make it easier for companies to qualify and access funds quickly. The maximum amount of an SBA 7(a) Loan Program loan is $5 million, so this option benefits businesses that need larger capital upfront.
SBA Microloan Program
The SBA Microloan Program offers smaller loans ranging from $500 to $50,000 with shorter repayment terms than traditional bank loans—typically six months to six years. This program focuses primarily on helping women-owned startups and companies in underserved areas gain access to the capital they would not otherwise have access to through traditional lenders. The program provides the following:
- Technical assistance.
- Education on managing finances and growing your business.
- Other resources like mentoring services and networking opportunities.
Equipment financing is an excellent option for new businesses that require equipment but lack the necessary funds. This type of loan allows startups to purchase necessary equipment without paying full price immediately or dip into their savings accounts or operating budgets—which can be very helpful when launching a new venture or product line. The lender typically covers up to 80% of the total cost while the borrower pays back the remaining 20%. This type of loan usually has shorter repayment terms than other types of start-up loans—usually five years or less—so you must make sure you can afford repayments over that period before signing up for one.
A personal loan is another option if you need money upfront but want to avoid the hassle or commitment associated with taking a large start-up loan from a bank or other lender. This loan can give you quick access to funds without going through all the paperwork. Additionally, interest rates are lower than on credit cards, making them more affordable in the long run.
Crowdfunding has become increasingly popular recently as an alternative way for entrepreneurs and startups to raise capital without taking out traditional loans from banks or venture capitalists. Platforms like Kickstarter allow entrepreneurs and innovators to connect directly with potential investors by offering unique rewards in exchange for financial support, ranging from pre-ordering products at discounted prices to get exclusive behind-the-scenes access (depending on how much they invest). An added benefit of crowdfunding campaigns? They are frequently successful because they generate excitement about products before they are released!
Angel investment refers to high-net-worth individuals (often called “angel investors“) looking for promising startups in exchange for equity stakes in those businesses. Angel investors typically provide more than just capital; they also offer advice, mentoring, and connections that can help startups grow faster than they could. However, securing angel investment requires extensive research into potential investors and building relationships with them over time before any money changes hands—so this isn’t something that happens overnight!
Invoice factoring loans allow startups to access capital against their existing invoices. In this situation, a business will sell its outstanding invoices to a factor at a discounted rate, usually 75–90% of face value. The lender then pays the company within 24 hours, giving them access to quick cash. The factor (lender) then collects on the invoice when it becomes due from the customer and keeps the difference as their fee for providing this service. It has fast funding – usually within 1-2 days after approval. It also gives flexible terms depending on the size and structure of each deal (e.g., some lenders offer revolving lines of credit).
Advance on Merchant Cash
A merchant cash advance (MCA) differs from other forms of financing because instead of receiving one lump sum payment upfront like most other forms of lending, MCA providers offer lump sums based on future credit card sales within certain windows, meaning the automatic deduction of payments each month to meet debt obligations. It’s important, however, to be aware that MCAs are usually more expensive than traditional funding sources. Hence, it’s best to conduct extensive research before any commitments.
Lines of Credit
A Line of Credit allows startups access to a pre-approved amount of money, making it a flexible option for start-up businesses. You are not required to pay back immediately, meaning there’s no set repayment schedule, and interest is only on the outstanding balance. You can use this loan as short-term or long-term financing.
Business Credit Cards
These loans give entrepreneurs the capital they need to launch their businesses and the flexibility to repay them. They are short-term in nature, with low-interest rates. There needs to be more money available for expenses such as inventory purchases and marketing campaigns. It doesn’t require any collateral, meaning it won’t affect your home or car.
Hence, different loans to start a small business are available depending on your needs and circumstances, so spend time researching which would work best for you! However, no matter how much effort you put into preparing your loan application, it doesn’t guarantee approval. It can be confusing and intimidating, so remember that AdvancePoint is here to help you find the right start-up funding for small business loans, even if you have bad credit.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.