Start-Up Business Loan Reviews

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  FundRazr

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  Pros Excellent public reputation No platform fees (if you choose the free package) Nonprofit fundraising supported Can keep whatever you raise Cons Some support materials are dated The platform is less trafficked than major competitors Overview Born in the late 2000s (as crowdfunding began its meteoric rise to fit our capital-starved post-Great Recession era), FundRazr […]

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  GoFundMe

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  While GoFundMe’s brand centers on charity, with personal and charitable causes accounting for most of the campaigns, many people don’t realize that GuFundMe can also be used to raise funds for business projects as well. In 2020, it's not an unfamiliar sight to see business recovery fundraisers on GoFundMe for companies negatively affected by the COVID-19 outbreak or social unrest.

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  Guidant Financial

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  Guidant Financial is an alternative lender that specializes in Rollovers as Business Startups (ROBS). It also offers SBA loans and lines of credit. Guidant is suitable for mature businesses with excellent credit.

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  Indiegogo

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  Indiegogo is available to creators and backers from just about every nation. With a comparatively broad array of project categories that qualify for Indiegogo approval, it’s a crowdfunding platform with wide reach and appeal. The flip side is that shadier campaigns have a better chance of slipping through the cracks on Indiegogo than they would on more restrictive crowdfunding platforms.

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  Kickstarter

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  Kickstarter is dedicated to the crowdfunding of creative projects, not charity or personal use. Kickstarter has seen over 5 billion dollars pledged to projects, over 184,000 successfully funded projects, and over 18 million total backers. While Kickstarter is not without its critics, it occupies a commanding position in the crowdfunding field.

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  Kiva U.S.

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  Kiva offers crowdfunded microloans and is one of the least expensive forms of financing available to business owners. It is definitely worth checking out if you run a community-oriented business that needs a small infusion of cash. It is suitable for startups but not for large businesses.

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  LendingClub Personal Loans

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  Lending Club Personal Loans can be used for entrepreneurial and business startup purposes. The application process is easy and its rates and terms are highly competitive. Lending Club Personal Loans are ideal for startups.

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  Patreon

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  Patreon declares itself a crowdfunding platform for creators, as its platform allows creators to draw a steady, continuous income from The Crowd. This funding model makes Patreon particularly well-suited to creators of viral videos, online journalists, writers, and musicians.

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  Republic

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  Republic is an equity crowdfunding company. Be informed that besides the fees charged by Republic, there are additional costs associated with equity crowdfunding. Republic is exclusive and not suitable for small startups.

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  Ulule

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  Ulule is a crowdfunder that takes a hands-on approach with helping their campaigners achieve their goals. Be cautious of the over-complicated fees.

What is a Startup Business Loan?

Although term “startup” has many definitions, for the purposes of this category, we define startup loans as any loans used to launch a business. All lenders (and other types of business financiers) reviewed in this category offer financing to businesses three months old or younger.

If you want to know whether your business is eligible to borrow from a specific lender, look at the “Borrower Qualification” section of the review, which lists all the basic benchmarks your business must meet to be eligible for financing.

Startup financing can come from a number of different sources. Here are the most common:

Friends and Family

If you can no longer fund your business enterprise using your own resources, the next step for many entrepreneurs is to borrow from friends and family. Loans from these sources are very flexible, as they don’t tend to carry interest rates or require a set repayment schedule like other sources of capital. However, if you (or your friends and family) want a little more structure, some platforms help you draft up legal documents, create a payment schedule, disperse payments, and other services.

Personal Loans and Lines of Credit

Although it’s not generally advisable for merchants to mix personal and business expenses, exceptions are often made for startups. Because personal loans are based on your own creditworthiness (and not that of your business), they are often a viable source of financing for startups.

Unfortunately, personal loans are not always easy for entrepreneurs to get. To be eligible for a personal loan, you will have to have at least fair personal credit and a strong source of revenue to support repayments.

Business Loans and Lines of Credit

While more difficult to obtain than from other sources, it is possible to get a business loan or line of credit for your startup via your bank, credit union, the SBA, or an alternative (non-bank) lender.

Often, the easiest source of startup business loans is via a nonprofit. These institutions seek to strengthen communities by helping local businesses, and are often able to offer loans with relatively inexpensive rates and fees.

Entrepreneurs who have collateral to put up (such as a house or vehicle) will have an easier time using this type of financing.

Crowdfunding

A type of funding that has become popular as of late, crowdfunding simply entails raising money via contributions from a large number of people. There are a few different types of business crowdfunding arrangements which vary based on what backers receive for their investment:

• Debt: You must repay the money borrowed plus interest or a borrowing fee for borrowing. Backers receive their investment back plus some of the interest or fee.
• Equity: Backers have a share of your business and future revenue.
• Rewards: Backers receive some sort of reward, often a product made by your business.
• Donation: Backers simply donate money and receive nothing in return.

Regardless of the rewards model, businesses who use crowdfunding will have to set up a profile, market their business or product, and otherwise attract backers. For this reason, a crowdfunding campaign can take up to a few months to complete.

Cash Flow Financing

Many business lenders are primarily concerned about your business’s overall profitability, which means that startups are often exempt from borrowing. Cash flow financiers, on the other hand, are more interested in your day-to-day revenue stream. The better your revenue, the more money you will be eligible for. As you might expect, cash flow financing is best for startups that are already generating consistent revenue.

Cash flow financing can come in two forms:

• Short-Term Loans: As the name might suggest, these are loans with short borrowing term lengths. Generally, instead of interest, they carry a fee that is between 10% and 60% of the borrowing amount, and must be repaid on a daily or weekly basis.
• Merchant Cash Advances (MCAs): Much like short-term loans, merchant cash advances charge a fee of 10% – 60% of the borrowing amount (instead of interest). However, your advance will be repaid by collecting a percentage of your daily sales.

Cash flow financing tends to require hefty fees and fast repayment schedules, so it’s generally advisable to exercise caution and explore other options before resorting to short-term loans or MCAs.

Any cash flow financier that funds businesses of six months or younger will fall into the startup loans category, but for a full list, head over to the merchant cash advance review category.

Invoice Factoring

B2B businesses often have unique cash flow problems caused by slow-paying customers. If you run such a business, invoice factoring may be the solution. Because invoice factoring is contingent on your customers paying, even startups and young businesses are eligible for financing.

In an invoice factor arrangement, a business sells invoices to a factoring company at a discount in exchange for immediate capital. In doing so, merchants can solve problems that may be caused by unpaid invoices and keep their businesses running smoothly.

Invoice factors are not covered in our startup loans category. For a full list of reviews, head over to our invoice factoring category.