How to Get a Startup Business Loan (and When a Loan Beats Equity)
A loan can fund a startup without giving up equity or control, but lenders evaluate risk very differently from investors. This guide covers when a loan makes sense, the main loan types, and how to actually apply.
Updated August 7, 2026.
When a loan makes more sense than raising equity
- You have predictable revenue or a specific, revenue-generating use of funds (inventory, equipment, hiring for a signed contract).
- You want to keep full ownership and control instead of adding investors and a board.
- You need a smaller, defined amount rather than a large, open-ended growth round.
- Your business model does not fit typical venture return expectations, even though it is profitable.
Main types of startup loans
| Loan Type | Typical Amount | Best For | Notes |
|---|---|---|---|
| SBA 7(a) loan | Up to $5M | General working capital, expansion, equipment | Government-backed, lower rates, longer application process. |
| SBA microloan | Up to $50,000 | Very early-stage or first-time borrowers | Delivered through nonprofit intermediary lenders, often with mentoring included. |
| Term loan (bank or online lender) | $10,000 – $500,000+ | A specific, one-time investment (equipment, hiring, inventory) | Faster than SBA loans; rates depend heavily on credit history and revenue. |
| Business line of credit | $5,000 – $250,000 | Managing cash flow gaps | Draw only what you need; interest applies only to the drawn amount. |
| Revenue-based financing | $10,000 – $2M+ | Startups with recurring revenue that want non-dilutive growth capital | Repaid as a percentage of monthly revenue instead of a fixed schedule. |
What lenders look for
- Personal and/or business credit history.
- Time in business — many traditional lenders want at least 6-12 months of operating history.
- Consistent revenue or receivables that can support repayment.
- A clear, specific use of funds rather than general 'growth capital'.
- Collateral or a personal guarantee, especially for early-stage businesses.
Loan alternatives if you don't qualify yet
- Revenue-based financing, which underwrites against revenue rather than credit history.
- Startup grants and competitions relevant to your industry or region.
- A smaller friends-and-family or angel round to bridge to loan eligibility.
- Bootstrapping until you have 6-12 months of revenue history to qualify for better loan terms.
Put this into practice on Bowora
Common questions
- Can a brand-new startup with no revenue get a business loan?
- It's difficult through traditional banks, which usually want 6-12 months of operating history. SBA microloans, revenue-based financing once you have early revenue, or a personal-guarantee-backed line of credit are more realistic early options.
- What is an SBA loan and why does it matter for startups?
- SBA loans are partially guaranteed by the U.S. Small Business Administration, which reduces the lender's risk and typically results in lower rates and longer terms than a standard bank loan. They still go through a participating bank or lender, not the SBA directly.
- Is a loan better than raising venture capital?
- It depends on your model. A loan keeps full ownership and control but requires repayment regardless of how the business performs. Equity does not require repayment but dilutes ownership and adds investor expectations. Many startups use both at different stages.
- What documents do I need to apply for a startup loan?
- Most lenders ask for a business plan, financial projections or statements, personal and business tax returns, bank statements, and a clear explanation of how the loan will be used.
- What is revenue-based financing?
- It's a form of non-dilutive funding where you repay a fixed percentage of monthly revenue instead of a fixed loan payment, until a pre-agreed total (usually the amount borrowed plus a flat fee) is repaid.
Sources
Facts, frameworks, and program details were checked against these first-party references. Last content review: August 7, 2026.