Startup Business Loans

They say it takes money to make money, and if you’re starting a business, you know this to be true. You have to pay for land (unless you own it already), you have to pay your employees, and you have supplies, equipment, insurance, licenses, permits, advertising, and plenty of other expenses. It’s like the invoice pile is a chia pet, and every day there’s fresh debt-water to make it grow. Now, unless you’re wealthy already, chances are you’re going to need a startup loan.

You’re in luck. A multitude of options exist to gather the funds. This article will provide a brief overview of the startup loan, and then illustrate four of the more popular means of acquiring startup capital, along with the pros and cons of each.

The Startup Loan

‘Startup capital’ is the official business terminology referring to money needed to start a new business. Sometimes called ‘seed money’ as well, it can come in the form of a loan, an investment, or a capitalist, as we will see.

Personal Loans

Much like using a credit card, taking out a personal loan involves APR and fees for not paying back on time. With a good credit score and history, a personal loan can be ideal, especially if paid back quickly. The pros of a personal loan are that the money can come quickly, it can build credit, and it is especially helpful for small expenses that can be paid back quickly. The cons of a personal loan include high APR, fees, and the possibility it was not enough.

Home Equity Loans

For homeowners only, provided you have at least 20% of the house paid off, a home equity loan can be taken out. Up to 90% of the equity can be borrowed, and the APR is usually very low, since you’re essentially borrowing against yourself. The pros here are the very low interest rates, the net of the loan (depending on the worth of the home), and the fact you can apply for this at your local bank. The major con here is that if unpaid or not paid on time, you could lose your home.


Perhaps the single most popular method of funding a startup is the microloan. These are smaller-sized loans offered by lenders with high forgiveness. If your finances are a bit shaky, consider a microloan. On the side of small businesses, microlenders traditionally help those who may not qualify for other larger loans. The pros here are the consistently fair loan terms, the relatively low APR, and the fact that your previous credit is not as much of a factor. The cons here are the lengthy application process (up to 6 weeks) and that the loans are indeed micro, and may not be sufficient.

Venture Capitalists & Angel Investors

A venture capitalist is an investor or team of investors who fund startup businesses wishing to expand but unable to access the stock market. Venture capitalists invest in the business itself and its projected profit. Bear in mind that venture capital is not easy to come across and is extremely competitive.

Angel investors are the polar opposites of venture capitalists. Angel investors are usually either local to the startup business or familiar already with the entrepreneur him or herself. Also, angel investors are investing in the entrepreneur, not necessarily the profit of the startup. Also known as private investors, an angel investor can be a friend, a family member, a former partner, etc.

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