Lenders favor well-established companies with a good credit history and good growth prospects. They offer them low interest.<\/p>\n\n\n\n

To migrate startup failure risks, lenders generally provide loans with much higher interests. A high monthly repayment will strain your cash flow. Since cash is like startup food, with less money, your starving startup will grow slow.<\/p>\n\n\n\n

<\/span>Lengthy Application Process<\/span><\/h3>\n\n\n\n

Three things can slow your application process.<\/p>\n\n\n\n

First, deciding the right lender can be time-consuming because you have to shop around, talk with potential lenders, compare loan options, and select a loan you can afford.<\/p>\n\n\n\n

Second, preparing for loan required documents eats up your time: writing a business plan for your loan, getting your financial history and forecasts, showing collateral, etc.<\/p>\n\n\n\n

Lastly, the approval process can be slow depending on the loan amount because lenders scrutinize your business under a microscope and use many mathematic formulas to assess your repaying ability.<\/p>\n\n\n\n

<\/span>Business Loan Lenders<\/span><\/h2>\n\n\n\n

<\/span>Lender Selection Criteria<\/span><\/h3>\n\n\n\n

How do you identify your ideal lender?<\/strong><\/p>\n\n\n\n

The rule of thumb is to look at the following criteria:<\/p>\n\n\n\n

1. Simple application process. Your potential lender should have minimum documentation requirements to your time.<\/li>
2. Fast funding. A lender should fund you fast so you can meet the market demand on time.<\/li>
3. Loan term(interest rate, loan amount, and term length). The best lender should provide a loan tailored to your needs with low interest and a good loan term length.<\/li>
4. Loan usage restriction. You should have the freedom to spend the loan.  <\/li>
5. Loan approval rate. You should escrow those lenders with a low approval rate to avoid time waste.<\/li><\/ol>\n\n\n\n

   <\/span>Lender Types<\/span><\/h3>\n\n\n\n

   Now you know your perfect lender, you can find a business loan from any of the following four types of lenders:<\/p>\n\n\n\n

   1. Traditional banks,<\/li>
   2. Credit unions. They are like banks but non-profit and operated by members,<\/li>
   3. Private lending institutions. They are investment companies that lend business loans they borrow from individual investors or banks.<\/li>
   4. alternative lenders, including:<\/li><\/ol>\n\n\n\n
      • Online loan marketplaces offer you a loan from an individual bank or private institute or a combination of them.  <\/li>
      • Debt crowdfunding is where you raise a loan from individuals on an online platform.<\/li><\/ul>\n\n\n\n

        <\/span>Lender Type Comparison<\/span><\/h3>\n\n\n\n

        Since there are four types of lenders, which one would be the right one for you?
        The table below compares how they will match your ideal lender except for the loan term discussed in the loan option section.<\/p>\n\n\n\n

        <\/td>	Application Process<\/td>	Funding Speed<\/td>	Loan Usage Limit<\/td>	Loan Approval Rate<\/td>	Why Choose This Lender<\/td><\/tr>
        Traditional banks<\/td>	Complex and long-Need many documents<\/td>	take up to 6 months<\/td>	Applicable to Some Banks<\/td>	13.6% <\/td>	– Offer all loan types – High loan amount – Long term length up to 20 years – Lowest loan interest<\/td><\/tr>
        Credit unions<\/td>	Complex – Need many documents <\/td>	up to 3 months<\/td>	no <\/td>	20.7% -40%<\/td>	– Founders are a member of a local credit union – Founders have bad credit scores – Reasonable loan interest -Suitable for equipment or commercial real estate loans<\/td><\/tr>
        Private lending institutions<\/td>	Quick and straightforward – need a few documents <\/td>	24 hours – 3 days<\/td>	no<\/td>	66.1%<\/td>	-Founders do not qualify for a bank loan – Founders have bad credit scores – Startups have enough collateral to back the loan – Loan amount $25k-$250k – Funding fast -high-interest rate – short-term loan up to 2 years <\/td><\/tr>
        Alternative lenders<\/td>	Quick and simple and Finish in minutes<\/td>	24 hours – 3 days <\/td>	No<\/td>	56.3%<\/td>	– One year in business – moderately good credit – Loan amount $25k-$500k -Startups have  $25,000 + annual revenue – Loan term length up to 5 years <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/span>What Are Business Loan Options For Startups?<\/span><\/h2>\n\n\n\n <\/span>How do you determine the correct type of loan for your startup? <\/span><\/h4>\n\n\n\n Since there are numerous business loans types, we divide them into three categories to help you better understand your loan option:<\/p>\n\n\n\n 1) software companies 2) Hardware companies 3) software and hardware companies.<\/p>\n\n\n\n We will dive into each category in the following three sections and suggest you jump straight into the section that fits your startup.<\/p>\n\n\n\n In general, the business line of credit is the best choice for any startup due to the following reasons:<\/p>\n\n\n\n Unlike any loan, you only apply once and renew every one or two years.<\/li> You can borrow anytime for any business use. <\/li> There are no payments until you use your credit line, and you can pay interest only.<\/li><\/ol>\n\n\n\n <\/span>Loans for Software Startups <\/span><\/h2>\n\n\n\n <\/span>Loan Options<\/span><\/h3>\n\n\n\n Software company’s significant spending is on human capital (i.e., building development and marketing team). In other words, a company needs funding quickly for increased payroll.<\/p>\n\n\n\n You can use two types of loans:<\/p>\n\n\n\n Short-term business loan: suitable for short-term payroll <\/li> Business lines of credit: good for long-term payroll <\/li><\/ol>\n\n\n\n The table below provides the details about the above loans:<\/p>\n\n\n\n <\/th> SHORT-TERM BUSINESS LOAN<\/th> BUSINESS LINE OF CREDIT<\/th><\/tr> Terms<\/td> \u2013 Loan amounts from $2,5000 to $250,000 \u2013 Repayment term lengths: 2 to 18 months \u2013 Interest rates starting at 10%<\/td> \u2013 Credit amount of $10,000 to $1 million \u2013 Repayment term lengths: 6 months to 5 years \u2013 Interest rates starting at 7%<\/td><\/tr> Idea Startup Profile<\/td> \u2013 2+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$150,000 <\/td> \u2013 1+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$180,000 <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Be cautious! <\/strong>Since both short-term loans and business lines of credit are expensive, we suggest using them only as a short-term solution.<\/p>\n\n\n\n <\/span>Best Loan Lenders<\/span><\/h3>\n\n\n\n Because short-term loans require a fast funding time, your bet should be either private lending institutions or alternative lenders.<\/p>\n\n\n\n Here are the top four 2021 business short-term and line of business leaders:<\/p>\n\n\n\n <\/td> Lender Type<\/td> Loan Option<\/td> Loan Requirments<\/td> Term<\/td><\/tr> OnDeck<\/td> Online loan marketplace <\/td> Short-term loan<\/td> – 1+ years in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 <\/td> \u2013 Loan amounts from $50,000 to $250,000 \u2013 Repayment term lengths up to 2 years \u2013 Interest rates starting at 10% <\/td><\/tr> Credibility Capital <\/td> Online loan marketplace <\/td> Short-term loan <\/td> – 2+ years in business \u2013 founders credit score => 650 \u2013 Strong revenue -business lien and may require a personal guarantee.<\/td> \u2013 Loan amounts from $50,000 to $500,000 \u2013Repayment term lengths up to 5 years \u2013 Interest rates starting at 6.99%<\/strong> <\/td><\/tr> Bluevine<\/td> Online loan marketplace <\/td> the business line of credit<\/td> – 6+ months in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 . <\/td> \u2013 Loan amounts up to $250,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 4.88%<\/strong> <\/td><\/tr> Kabbage <\/td> Online loan marketplace <\/td> the business line of credit <\/td> – 1+ years in business \u2013 founders credit score => 640 \u2013 annual revenue >$50,000 <\/td> \u2013 Loan amounts up to $150,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 9%<\/strong> <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/span>Loans for Hardware Startups<\/span><\/h2>\n\n\n\n Hardware is a capital-intensive business. It takes a significant amount of money to get products to the market and even more money to scale your company. Therefore the majority of funding for hardware startups should come from outside investors. <\/p>\n\n\n\n However, cash flow is the lifeblood of hardware companies. Thus, startups often finance invoices or inventories between fundraisings. <\/p>\n\n\n\n There are three types of loans that can meet the needs:<\/p>\n\n\n\n invoice loan<\/li> short-term loan for inventory financing<\/li> The business line of credit (either invoice or inventory) <\/li><\/ol>\n\n\n\n <\/span>Loan Options <\/span><\/h3>\n\n\n\n <\/th> INVOICE LOAN<\/strong><\/th> SHORT-TERM BUSINESS LOAN <\/strong><\/td> BUSINESS LINE OF CREDIT<\/strong><\/th><\/tr> Terms<\/td> \u2013 Loan amounts up to $5 million \u2013 Repayment term lengths: until your customers pay the invoice \u2013 processing fee 3% – weekly factor fee until the invoice is paid: 0.23% to 3% – cash advance: up to 85% of the value of your invoices<\/td> \u2013 Loan amounts from $2,5000 to $250,000 \u2013 Repayment term lengths: 2 to 18 months \u2013 Interest rates starting at 10% <\/strong> –<\/td> \u2013 Credit limits of $10,000 to $1 million \u2013 Repayment term lengths: 6 months to 5 years \u2013 Interest rates starting at 7%<\/td><\/tr> Idea Startup Profile<\/td> \u2013 2+ years in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 <\/td> \u2013 2+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$150,000 <\/td> \u2013 1+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$180,000 <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Beware:<\/strong><\/p>\n\n\n\n An invoice loan is for B2B startups and is ideal for the case that your customers will pay you on time. Otherwise, it can kill your profits quickly because of the weekly factor fee.\u00a0<\/li> You take an inventory loan only if you are confident that you can sell all your products. Otherwise, the loan will strain your cash flow.<\/li> Always try to use the business line of credit first because you can pay interest only and skip the loan application process.\u00a0<\/li><\/ol>\n\n\n\n <\/span> Best Loan Lenders <\/span><\/h3>\n\n\n\n Unless you have a good relationship with a bank, it will be hard to get an invoice or inventory loan from banks. Recent data suggests banks only sign off on one out of four small business loans that come their way.<\/p>\n\n\n\n Thus alternative lenders are a better choice for you. The table below lists the top 2021 invoice loan, business short-term, and line of business leaders: <\/p>\n\n\n\n <\/td> Lender Type<\/td> Loan Option<\/td> Loan Requirments<\/td> Term<\/td><\/tr> OnDeck<\/td> Online loan marketplace <\/td> Short-term loan<\/td> – 1+ years in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 <\/td> \u2013 Loan amounts from $50,000 to $250,000 \u2013 Repayment term lengths up to 2 years \u2013 Interest rates starting at 10% <\/td><\/tr> Credibility Capital <\/td> Online loan marketplace <\/td> Short-term loan <\/td> – 2+ years in business \u2013 founders credit score => 650 \u2013 Strong revenue -business lien and may require a personal guarantee.<\/td> \u2013 Loan amounts from $50,000 to $500,000 \u2013Repayment term lengths up to 5 years \u2013 Interest rates starting at 6.99%<\/strong> <\/td><\/tr> Bluevine<\/td> Online loan marketplace <\/td> the business line of credit<\/td> – 6+ months in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 . <\/td> \u2013 Loan amounts up to $250,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 4.88%<\/strong> <\/td><\/tr> Kabbage <\/td> Online loan marketplace <\/td> the business line of credit <\/td> – 1+ years in business \u2013 founders credit score => 640 \u2013 annual revenue >$50,000 <\/td> \u2013 Loan amounts up to $150,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 9%<\/strong> <\/td><\/tr> BlueVine<\/td> Online loan marketplace <\/td> Invoice Loan<\/td> – 3+ months in business \u2013 founders credit score => 530 \u2013 annual revenue >$120,000 <\/td> \u2013 Loan amounts Up to $5 million \u2013 Factor fee:0.25% to 1.7% per week <\/td><\/tr> AltLINE<\/td> Bank<\/td> Invoice Loan <\/td> \u2013 founders credit score => 500 \u2013  ability to factor $15,000 worth of invoices per month <\/td> \u2013 Loan Amounts Up to $4 million \u2013 Factor fee: 0.5% to 3% for the first 30 days; maximum of 5%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/span>Loans for Software and Hardware Startups <\/span><\/h2>\n\n\n\n Software and hardware startups are both capital and technology intensive. Since loans are killers to cash flow, startups should count on outside investors to finance their business. However, from time to time, startups need loans to fund one of the following emergency cases:<\/p>\n\n\n\n purchasing inventory to meet a spike in demand<\/li> temporary financing (invoice or payroll) to release strain on cash flow <\/li> testing a new market<\/li><\/ol>\n\n\n\n There are three types of loans that can meet the needs:<\/p>\n\n\n\n invoice loan<\/li> short-term loan for inventory or payroll financing <\/li> The business line of credit (payroll or invoice or inventory) <\/li><\/ol>\n\n\n\n <\/span>Loan Options <\/span><\/h3>\n\n\n\n The table below shows the available loan options your startups can use.<\/p>\n\n\n\n <\/th> INVOICE LOAN<\/strong><\/th> SHORT-TERM BUSINESS LOAN FOR INVENTORY AND PAYROLL<\/strong><\/td> BUSINESS LINE OF CREDIT<\/strong> FOR INVOICES<\/strong>, INVENTORY, AND PAYROLL<\/strong> <\/th><\/tr> Terms<\/td> \u2013 Loan amounts up to $5 million \u2013 Repayment term lengths: until your customers pay the invoice \u2013 processing fee 3% – weekly factor fee until the invoice is paid: 0.23% to 3% – cash advance: up to 85% of the value of your invoices<\/td> \u2013 Loan amounts from $2,5000 to $250,000 \u2013 Repayment term lengths: 2 to 18 months \u2013 Interest rates starting at 10% <\/strong> –<\/td> \u2013 Credit limits of $10,000 to $1 million \u2013 Repayment term lengths: 6 months to 5 years \u2013 Interest rates starting at 7%<\/td><\/tr> Idea Startup Profile<\/td> \u2013 2+ years in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 <\/td> \u2013 2+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$150,000 <\/td> \u2013 1+ years in business \u2013 founders credit score => 630 \u2013 annual revenue >$180,000 <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n As you can see from the above table,<\/p>\n\n\n\n An invoice loan can quickly kill your profits and cash flow because of the weekly factor fee. You should avoid it if your customers chronically pay their bills over 30 days.<\/li> An inventory loan is expensive and can ruin your business if you can’t sell the inventory as planned.<\/li> The business line of credit should be your best choice because it is flexible and allows you to use it for any emergency cases. Plus, you can only pay the interest when you are pinched for cash.Best Loan Lenders <\/li><\/ol>\n\n\n\n <\/span>Best Loan Lenders <\/span><\/h3>\n\n\n\n Since traditional banks have low loan approval rates for startups, private institutions and alternative lenders have stepped in to fill the gap. In the table below, we list the six best lenders for your reference.<\/p>\n\n\n\n <\/td> Lender Type<\/td> Loan Option<\/td> Loan Requirments<\/td> Term<\/td><\/tr> OnDeck<\/td> Online loan marketplace <\/td> Short-term loan<\/td> – 1+ years in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 <\/td> \u2013 Loan amounts from $50,000 to $250,000 \u2013 Repayment term lengths up to 2 years \u2013 Interest rates starting at 10% <\/td><\/tr> Credibility Capital <\/td> Online loan marketplace <\/td> Short-term loan <\/td> – 2+ years in business \u2013 founders credit score => 650 \u2013 Strong revenue -business lien and may require a personal guarantee.<\/td> \u2013 Loan amounts from $50,000 to $500,000 \u2013Repayment term lengths up to 5 years \u2013 Interest rates starting at 6.99%<\/strong> <\/td><\/tr> Bluevine<\/td> Online loan marketplace <\/td> the business line of credit<\/td> – 6+ months in business \u2013 founders credit score => 600 \u2013 annual revenue >$100,000 . <\/td> \u2013 Loan amounts up to $250,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 4.88%<\/strong> <\/td><\/tr> Kabbage <\/td> Online loan marketplace <\/td> the business line of credit <\/td> – 1+ years in business \u2013 founders credit score => 640 \u2013 annual revenue >$50,000 <\/td> \u2013 Loan amounts up to $150,000 \u2013Repayment term lengths up to 18 months \u2013 Interest rates starting at 9%<\/strong> <\/td><\/tr> BlueVine<\/td> Online loan marketplace <\/td> Invoice Loan<\/td> – 3+ months in business \u2013 founders credit score => 530 \u2013 annual revenue >$120,000 <\/td> \u2013 Loan amounts Up to $5 million \u2013 Factor fee:0.25% to 1.7% per week <\/td><\/tr> AltLINE<\/td> Bank<\/td> Invoice Loan <\/td> \u2013 founders credit score => 500 \u2013  ability to factor $15,000 worth of invoices per month <\/td> \u2013 Loan Amounts Up to $4 million \u2013 Factor fee: 0.5% to 3% for the first 30 days; maximum of 5%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/span>Conclusion<\/span><\/h2>\n\n\n\n We have shown you the follows:<\/p>\n\n\n\n Why your startup growth primary funding should be from outside investors or your revenue.<\/li> How startup founders should use business loans to smooth cash flow whenever needed.<\/li> Why the business line of credit is the best choice for financing inventory, payroll, and invoices.<\/li> How business loans are expensive and can make your startup run out of cash, killing your business.<\/li><\/ol>\n\n\n\n We hope you can now decide if a business loan is right for your business and select the right lender and business option.<\/p>\n\n\n\n Our mission is to match more ambitious tech startup founders and women entrepreneurs to their ideal investors. If you have any questions, you could r<\/em>each out to us via email: info@zettasher.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Last updated on Nov 25, 2021, by Hong Zhuang Reading Time:10 min To answer this question, you first find out if your startup is eligible for a business loan. Why? Unlike VC or angel investors, lenders have strict and clearly defined eligibilities: a startup must be in the business for at least one yearRevenue (e.g., most US lenders… Continue reading How To Pick A Loan For Your US Tech Startup<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_eb_attr":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-663","post","type-post","status-publish","format-standard","hentry","category-uncategorized","entry"],"aioseo_notices":[],"featured_image_src":null,"author_info":{"display_name":"hong zhuang","author_link":"https:\/\/zettasher.com\/blog\/author\/hong-zhuang\/"},"jetpack_featured_media_url":"","wps_subtitle":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/posts\/663","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/comments?post=663"}],"version-history":[{"count":159,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/posts\/663\/revisions"}],"predecessor-version":[{"id":1022,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/posts\/663\/revisions\/1022"}],"wp:attachment":[{"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/media?parent=663"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/categories?post=663"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zettasher.com\/blog\/wp-json\/wp\/v2\/tags?post=663"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}