SBA Loans for Startups: What New Businesses Need

Is it possible without a track record

Yes, in some cases. Lenders substitute owner experience, equity, a detailed plan and collateral for operating history, but many prefer at least a year or two of history.

Without revenue, a lender cannot rely on past cash flow, so it leans on projections and the owner's background. A person with ten years in the field starting their own shop is stronger than a first-time owner entering an unfamiliar industry.

Expect to put in a meaningful share of your own cash, commonly in the range of 10 to 30 percent of the project, though lenders set their own expectations. Ask what yours requires.

Programs worth looking at

SBA microloans, which are small and made by nonprofit intermediaries, and 7(a) loans through lenders experienced with startups are the common options.

Microloans suit smaller needs such as equipment, inventory and working capital, and intermediaries often provide training. The 7(a) program is broader and can fund purchases of an existing business, which carries less risk than a pure startup. Read SBA microloans and the SBA 7(a) loan guide.

A franchise with a strong track record, or buying an existing business, often gets a better lender reception than a brand-new concept. See how to buy a business with an SBA loan.

If you have industry experience, say so prominently. A lender will read two years as a manager in the same trade as proof you understand costs, staffing and customers. If you lack it, consider partnering with someone who has it, or working for a similar business first. Lenders also like to see that you have secured a lease or key supplier terms, because they turn a plan into commitments.

What your plan and projections must show

A convincing startup plan shows the market, your pricing, startup costs, realistic revenue projections month by month and how loan payments are covered.

Build the projections from the ground up: customers per day, average sale, operating days, costs. Include a low case. Lenders discount optimistic forecasts. Show the break-even point and how long you can survive before reaching it.

See how to write a business plan for a business loan for structure.

What to prepare

Personal tax returns and financial statements, a resume, a business plan, quotes for purchases, lease terms, licenses and proof of your equity contribution.

• Personal financial statement and credit report
• Business plan with three-year projections
• Resume showing relevant experience
• Quotes, leases and contracts
• Evidence of the cash you are investing
• Formation documents and licenses

Check SBA loan requirements for the rest of the list.

Other ways to fund a startup

Savings, family or investor money, personal credit, grants and bootstrapping with early customers are the usual alternatives.

Many founders combine sources. Our guides on how to get startup funding and how to find investors go through the choices. Keep personal guarantees and personal risk in view before borrowing against your home or retirement savings.

Where ROI Funder fits

ROI Funder does not place startup loans for businesses under 6 months. It serves businesses with 6+ months in business and $20,000+ monthly revenue.

If you are still pre-revenue or very new, build a track record first and use SBA microloans, savings or investors. Once you have 6+ months of operating history, 500+ FICO and $20,000+ monthly revenue, working capital, a business line of credit or equipment financing may fit. See our page on startup loans for details.

Applying takes a few minutes with a soft credit pull and no obligation. We show true cost, payback period and monthly-equivalent payment before you sign. Apply when you are ready.