All businesses need access to capital to grow. However, obtaining funds can be challenging, especially for the companies that need it most. Luckily, several government-backed and private financial institutions offer loan programs tailored specifically to meet the needs of small businesses with high potential for growth. While these institutions can have stricter eligibility criteria, there are steps you can take to maximize your business' chances of securing a loan.
Our top 5 small business loans for startups
We’ve compiled a list of our current top startup business loans for 2025. That said, loan programs from Community Development Financial Institutions (CDFIs) may alter due to shifts in government funding. Check out the CDFI Briefing for updates if you receive funding from one of their institutions.
1. Small Business Administration (SBA) 7(a) loans
The Small Business Administration (SBA) doesn't directly provide loans, but does offer programs that pair small business owners with approved lenders in their network. You can use their lender match tool to connect with an organization that aligns with your business and funding goals.
SBA 7(a) is the organization’s primary loan program, offering both short- and long-term financing options for small businesses. The loans take more time to process and apply for and are harder to obtain than online lenders, but are vetted, guaranteed, and typically have lower interest rates. Generally, it's safer and more cost effective for startups to go with an SBA loan, despite the arduous application process and stricter eligibility criteria.
- Best for: Financing large, fixed assets on favorable terms
- Loan amount: Up to $5 million
- Term: Up to 10 years, or 25 years for real estate
- Interest rates: Vary by loan. The base maximum fixed rate as of June 2025 is 7.5%. Rates may adjust as a percentage added to this base.
- Eligibility: For-profit businesses that have operated for one year or more with a solid business plan and proven ability to repay the loan.
Pros
- Competitive interest rates
- Favorable terms for long-term business growth
- Guaranteed loans
- Lower down payments
Cons
- Prepayment penalties for loans with terms 15 years or longer
- Application process is long and complex
- May require collateral
2. SBA microloan program
SBA designed their microloan program to support early-stage businesses and under-served communities. For that reason, the eligibility and credit score requirements tend to be more lenient than other SBA programs, although generally still stricter than an online lender.
On their website, SBA provides a list of microlenders in various locations across the U.S. You can use this list to find an intermediary lender in your area and contact them for information on how to apply.
- Best for: Smaller startup loans for equipment or operational expenses
- Loan amount: Up to $50,000
- Term: Up to seven years
- Interest rates: Typically start at 8%
- Eligibility: Varies by lender
Pros
- Generally low interest rates
- Good for a variety of business needs
- Lenders are often nonprofit organizations that provide guidance and support to their borrowers
- Typically more lenient credit approval
Cons
- Often require a personal guarantee or collateral
- Stricter eligibility requirements
- Longer enrollment process
If you're not SBA ready, it may be worth slowly building your business' credit score and finances before applying for a term loan. Some of the following options, such as a business line of credit, are one way to work towards that goal while still obtaining the necessary capital to grow your business.
3. Community Development Financial Institutions (CDFI) funds
Similar to SBA, the U.S. Department of the Treasury doesn't directly offer government loans. But they do fund financial institutions that, in turn, support small, local businesses. These intermediary lenders are called Community Development Financial Institutions (CDFIs). They provide funds to entrepreneurs who struggle to obtain traditional business loans.
Thanks to government funding, CDFIs can provide financial support to underserved small businesses without focusing as heavily on credit scores, time in business, or other requirements. In 2024, the CDFI fund gave nearly $789 million in awards and even more in tax credits and bonds.
CDFIs can be credit unions, banks, loan funds, or venture capital funds and offer a variety of financial services, depending on their type. Check out the Department of the Treasury's program website to find a CDFI in your community.
- Best for: Small to large loans for businesses that struggle to access funding
- Loan amount: Up to $25,000 or more, depending on the loan
- Term: Usually up to 10 years, or 15 to 20 years for real estate
- Interest rates: Generally 4% to 9%, depending on the type of loan
- Eligibility: Varies by lender, but requirements often focus on the size of the business, industry, and/ or demographic.
Pros
- Flexible overhead requirements
- Wide range of business financing options
- Even businesses with bad credit may qualify
- Focus on underserved populations
- Some CDFIs also provide mentorships
Cons
- May require collateral or a guarantee
- Eligibility may be reserved for target groups
- Processing times may be longer than an online lender
4. American Express business line of credit
A business line of credit is somewhere between a traditional loan and a business credit card. It allows companies to borrow money that they'll return through monthly payments (with interest), but companies can draw only as needed and pay interest just on the amount used, instead of the full available sum.
American Express offers a business line of credit that's especially tailored to startups. It has lenient minimum eligibility requirements, flexible financing options, and no prepayment penalties. Companies can apply online through American Express' website with generally short processing times.
- Best for: Fast, ongoing access to business capital
- Loan amount: From $2,000 to $250,000
- Term: Six-, 12-, 18-, or 24-month loans
- Interest rates: Generally range from 3%–9% for six-month loans, 6%–18% for 12-month loans, 9%–27% for 18-month loans, and 12%–18% for 24-month loans.
- Eligibility: Recipient must be 18 years or older, have a minimum of one year in business, a FICO score of 660 or higher, and an average monthly revenue of $3,000 or more.
Pros
- Low overhead requirements
- Flexible financing options
- No prepayment penalties
- Shorter processing times
Cons
- Requires collateral to secure the loan
- Conducts a hard credit check
- Higher interest rates, especially for long-term loans
5. Wells Fargo Small Business Advantage
Business lines of credit can be either secured or unsecured. A secured line requires the borrower to provide some type of collateral to back up the loan, while an unsecured line doesn't. That said, unsecured lines often ask for a personal guarantee, which means that the individual signing the agreement is still personally liable for repaying the loan if the business defaults.
Wells Fargo offers an unsecured business line of credit tailored to startups. It requires a personal guarantee, but waives annual and other fees. Businesses that meet SBA requirements can apply for the loan online or at a Wells Fargo location.
- Best for: Long-term access to funds to supplement your cash flow
- Loan amount: From $5,000 to $50,000.
- Term: Five years
- Interest rates: 12%-15% depending on your business credit profile
- Eligibility: Have operated your business for under two years and own less than $500,000 in personal assets.
Pros
- No annual fee or review
- No fees for ATM, over-the-counter transactions, transfers, checks, and bill pay
- Only pay interest on what you draw
- Long-term access to business capital
Cons
- Requires a personal guarantee
- Lower credit limits may be insufficient for higher startup costs
- Requires credit approval
How to get a small business loan in 5 steps
While the process of applying for a specific loan varies by the lender and program, you should generally follow these steps to apply for a small business loan.
Step 1. Choose a loan program
Often, whether or not a loan is right for your business depends on your financing needs. As you compare the various options, measure how the loan amount, term, and repayment plan align with your goals. Will you benefit more from a large lump sum that you'll return over a set period of time, or flexible borrowing up to a limit?
Then, compare lenders. Traditional banks and government-backed lenders typically offer lower rates but have longer processing times and stricter requirements. In contrast, an online lender can be more lenient and offer faster funding, but is less regulated and often has higher rates.
Step 2. Gather all the necessary documents
Once you know which loan program you'll apply to, gather all of the required information first. This will significantly simplify the process. While every lender is different, they'll generally require the following information:
- A business plan
- An estimated annual gross revenue
- Credit information
- Business records, including tax documents and cash flow statements
- A business tax ID (EIN)
- Proof of ownership, such as formation documents
- Business licenses or permits
- Asset information, if collateral's needed
Step 3. Complete and submit the application
Similarly, loan applications also vary by program and lender. Typically, you'll submit the required documentation, provide basic business and personal details, and verify that all the information provided in the application is accurate.
Step 4. Review the offer
Before accepting a loan agreement, thoroughly review the terms of the offer. Look at the interest rate, repayment terms, and fees or penalties, and consider whether or not your business will reasonably be able to meet and grow under those conditions.
Step 5. Sign the loan agreement
If you're ready to move forward, sign the agreement and provide your business bank information for disbursement. Depending on what organization is providing your loan, you may need to connect your bank account to a third party to access funds.
How are small business loans for startups different?
Startups tend to have less established credit and financial history, which makes it more difficult to acquire traditional bank loans. For this reason, they often need financing options with more lenient eligibility requirements. However, these types of loans often come with higher fees, shorter repayment terms, and a lower maximum loan amount.
Here are some of the most common loan options for startups:
- Small Business Administration (SBA) loans
- Business lines of credit
- Community Development Financial Institutions (CDFI) funds
- Crowdfunding
- Credit unions
- Online lenders
How to avoid predatory lenders
Small businesses often have a greater need for funding support, but fewer resources to access traditional loans. This paradox can make startups more vulnerable to predatory lenders. To help protect your business from abusive loan practices, look out for these red flags:
- Extremely high interest rates
- Hidden fees
- No credit review
- Vague terms
- Pressure tactics
Instead, work with trusted sources and compare multiple lenders before signing on for a loan. Consult a lawyer if you have questions about the fine print.
How can LegalZoom help small businesses get funding?
Applying for a loan can sometimes make it feel as though only businesses that don't need the money are eligible for the loan. Despite this frustrating aspect of the process, it's often better to take the time to build your business to where it can receive a loan from a trusted source rather than jump on a quick solution with long-term consequences.
It can be easier than you think. Services like LegalZoom can help you take the steps to make your business more appealing to lenders, such as forming your business, applying for licenses and permits, registering a patent, staying compliant, and more. If you have questions, don’t hesitate to consult an attorney in our network for more tailored advice.
Business loan FAQs
Here are answers to some common questions regarding small business loans.
What is the average amount of a small business loan in 2025?
According to a report from the Small Business Administration, the average size of a small business loan is around $400,000.
What is the approval rate for small business loans?
Approval rates vary based on the institutions providing the loan. However, SBA lenders approved 70,242 loans in 2024. Of those, nearly 50,000 loans came from banks, such as Wells Fargo and American Express.
Are there startup-specific small business loans?
To an extent, yes, there are business loans designed specifically to support new businesses with high growth potential, such as SBA loans, business lines of credit, and microloans. Crowdfunding is also a great way for startup businesses to access necessary business capital, although pitching your business may require more work upfront.
What credit score do I need for a small business loan?
Credit report requirements vary by lender, but generally, lenders require a credit score of around 600 or higher to qualify for a small business loan.
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