What’s the Minimum Years in Business for a Startup Business Loan?

You’re ready to get your business off the ground, but you need funding to bring your ideas to fruition. Can you qualify for a startup business loan?

Surprisingly, the answer might be no. Many “startup loans” have a minimum time in business requirement, as lenders are often wary to fund younger companies. Having a few months or a year of business experience under your belt opens the door to more financing options. But with an ambitious road ahead, it’s not always possible to wait that long to fund your startup idea.

What are your options if you’re not sure you meet new business loan requirements?

The first step is to understand how lenders view startups, and where you can turn to find startup funding when traditional options are unavailable.

What is Considered a Startup Company?

The most basic definition of a startup is a business just getting off the ground. Startups have little or no business history, few customers and uncertain futures. They may be headed up by a single entrepreneur chasing a dream, or a small group of dedicated people pursuing a common vision.

But for true startups, there’s more to the picture.

Rather than establishing a business with the intent of contributing to a known industry, startups seek to make a big impact on their niche markets by offering disruptive products or services.

The business model is experimental. In some ways, it can be more of a test run than a foundation on which to build a long-term business, and growth tends to be rapid. A reliable market is available, but the company must prove its processes, and product/service to achieve success.

These startup companies can catapult new products and services into the market and create a lot of buzz very quickly. But with that speed comes more significant risk. Startups can’t show lenders detailed business credit information because they simply don’t have it. A limited business history means current financial statements may not be indicative of future profits.

How to Get Your Startup Funded: 3 Possible Options

Risk is precisely the reason why many lenders want a business to have some established history before they’ll consider extending funding. This presents an obvious paradox for startups: It’s impossible to get your business off the ground without sufficient funding, but lenders won’t give you money unless you’re up and running.

Still, many entrepreneurs are able to get startup business loans or find other means of support. About 40% of startups receive capital, and 38% have money from investors. Here are three ways you can follow their example and get the money you need to put your startup on the path to success.

Third-Party Investors

Other people who have an interest in your business may be willing to lend you anywhere from a few thousand to several million dollars in exchange for equity. The two most common sources of this type of funding are:

  • Angel or Seed Investors – Experienced entrepreneurs with market knowledge who make initial contributions in exchange for equity
  • Venture Capital Firms – Teams of financial professionals, entrepreneurs, and other investors interested in growing companies’ equity, especially with growing customer bases and stable revenue

Accepting money from either of these sources means giving up some business equity and working hard to provide the returns your investors expect. Equity investments might translate to a short-term profit— but you’ll be forced to share massive profits down the line.

Bank Loans

Qualifying for a bank loan can be very difficult for startups. Banks expect to see assets, a good credit rating, a strong financial standing and a proven track record of success and growth. In some cases, collateral may be required. Lacking business experience and a strong managerial team can also work against you.

One possible option is to get an SBA loan through a participating bank. The Small Business Administration doesn’t have a set rule for time in business to qualify for their funding programs, and having SBA backing reduces the risk to the lender. However, the application process can be rigorous, and wait times for approval are long.

Alternative Financing

Alternative lenders ask for minimal documentation and may offer options geared toward startups. Requirements vary, but you usually need to have a FICO score somewhere in the mid to high 600s, and bring in a minimum annual revenue.

In addition to a startup loan, you can fund your business with:

  • A line of credit, providing a reservoir of funding from on which you can draw to meet expenses during the initial stages of growth without taking on large amounts of debt
  • Equipment financing to cover equipment costs, leaving more capital free to invest in other areas of the business and using the equipment as collateral to protect personal assets
  • Accounts receivable financing, which allows you to get money from sales billed via invoices that customers haven’t yet paid

Check the requirements for each of these loan types to see if your business qualifies. Some have time-in-business limitations, but others are open to most companies in need of funding.

Should You Wait Until You Meet Startup Business Loan Qualifications?

Some entrepreneurs decide to bootstrap their startups, running on the absolute minimum budget possible until their products or services begin to generate profits. This can be a practical way to establish a history and build credit until your business is stable enough to qualify for a loan. However, it doesn’t work for everyone, and waiting to apply for funding has its drawbacks.

The Pros of Waiting

  • Better business credit
  • Clearer picture of where loan funding can be invested to generate the most returns
  • Access to more loan options and bigger loan amounts
  • Potential to qualify for better rates and terms

Cons to Consider

  • Missing out on growth opportunities
  • Limiting access to essential equipment and technology
  • Competitors have a chance to move in and dominate the same niche

Your industry, the current market, the number of competitors and the types of products or services your startup offers are all important factors when deciding whether it’s more beneficial to wait for a loan or to find a funding option you can take advantage of right away.

How to Get a Loan to Start a Business – Fast

If you decide a loan is the best option for your startup, the most important thing to know prior to applying is how much money you need to get your idea off the ground.

Calculate your startup costs and subtract what you plan to invest from your own assets to determine the size of loan to ask for.

You can increase your chances of qualifying by:

  • Performing a detailed market analysis or reviewing your initial research
  • Reviewing and revising your business plan
  • Mapping out the most strategic way to allocate the loan funds
  • Gathering profiles of company management
  • Showing why you’re perfectly positioned to reach your intended audience

Presenting this information shows lenders your startup is viable and has the potential to succeed. But, it can take a while to gather and may not be detailed enough if you haven’t been in business very long.

National Business Capital & Services doesn’t require you to have a lengthy business history to qualify for a startup business loan. All you need to get started is a FICO score of 620 or more and a little information about your company to get access to up to $150,000. If you’ve already been in business for three months, you may be able to get a larger small business loan to support continued growth efforts.

With startup funding available in as little as one week and small business loans funded in 1 to 3 days, you’re free to pursue your goals, make and impact and capture the market with your innovative ideas.

Get started disrupting your market by filling out the application form, or calling us at (888) 488-GROW!

National Business Capital & Services is the #1 FinTech marketplace offering small business financing and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

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About the Author, Lauren Coppolone
Lauren Coppolone is the Marketing Coordinator at National Business Capital & Services. She enjoys keeping the marketing team organized and on track! Lauren is proud to work for a company that provides resources to small businesses to help them achieve success.