Fri. Jul 12th, 2024

Starting a small business is not always as easy as it sounds. Sometimes, you have saved enough but can’t find what business to set up. For most of us, the idea is there but the funds are not enough. Setting up capital is an important part of the business because it will define the initial stage of your business.

There are some small businesses you can set up with minimal capital, such as consultancy or freelancing. However, other types of enterprises will require a lot of funding to set up the location, equipment, and inventory to get the business up and running. Either way, here are a few options where you can easily get a loan to start your own business.

Personal Loans

Setting up your own business usually means you have to provide the initial funds needed. Some continue their day jobs to build capital while sustaining their bills for their personal life. Others managed to save enough to fully commit themselves to their business. For some, the best option is to take out a second mortgage on their home or a credit card loan.

What separates personal loans from other forms of bank loans is that it is easier to apply. It requires less documents and checks and it is usually unsecured. It is generally understood as taking out money for personal uses like vacations or medical emergencies; or in this case, to set up a new enterprise. 

Since this will be your personal loan and credit at stake, you can prepare by checking your credit scores. You can draw your credit history from any of the major credit institutions: Experian, TransUnion, or Equifax. If you’re planning to commit fully, ensure that at least six months of your living expenses are stashed away in case of emergency.

Business Loans

As opposed to personal loans, you can get more money with a business loan, although it depends on what stage of setting up your small business you’re already in. If you’ve started with your small business, then this is good for you to accelerate your growth and build the funds you need. Business loans require business-related documents such as trade licenses and business registrations – the exact list varies from bank to bank. Also, business loans may be secured or unsecured while personal loans are mostly unsecured. Lastly, you can get more from a business loan compared to a personal loan. Working Capital Loans are also the way to get business loans.

For secured business loans, the bank may require something in collateral such as land, vehicles, or equipment. Banks also review your business credit history instead of your personal credit history. This means that you’ll have to maintain a pretty good credit score for your business in order to qualify for a business loan.

Government-Backed Loan Providers

There are multiple options that are directly backed by the government including the Small Business Administration (SBA) and credit unions that are regulated by the National Credit Union Administration. If you’re looking for something more borrower-friendly in terms of rates and payment terms, you can check these options out.

The SBA was expressly created to help small businesses take off the ground and survive, especially in these trying times. There are different SBA loan structures you can choose from. However, it is important to understand that the SBA won’t lend the funds to you directly. Instead, they will connect you to their network of lenders and act as a guarantor for up to 85% of the loan amount. It provides an incentive for lenders, which makes them accept borrowers with less-than-ideal credit scores or insufficient business history.

On the other hand, credit unions are cooperatives that earn money by lending. However, they are generally members-only but allow new members to take out a loan on the same day as their application. Since they have significantly lower overhead and operational costs than traditional banks, they charge lower interest rates. True to its cooperative roots, credit unions are focused more on helping their members by pooling their resources and giving back to them. As SECNY Credit Union President and CEO Walter Bobesky explains, credit unions are “not-for-profit, but for service.” He adds in the union’s 50th anniversary address, “We do not claim perfection, but we consistently strive to bring our members what they ask for, accompanied by the friendly service they expect.”

Private Lenders

One of the most convenient options, private lenders are a great option if you’re looking for fast approvals and payment terms that are amenable to you. They usually boast quick approval times, flexible payment terms, and their discretion to overlook issues in your credit history – advantages you’d rarely find with traditional loan providers.

Most of these private lenders can even be contacted through online platforms such as 1West, further making the process fast and convenient. As one of the United States’ premier business loan marketplaces, this online platform connects you to its own network of trusted lenders. Platforms like this one can get you approved in as fast as 24 hours, with the application process entirely online and can be done in only 15 minutes. This is a lot better compared to the usual bank loan that takes up to three months before you know whether you’re approved or declined, not to mention the numerous trips to the bank.

Equity Capital Financing

This is one of the most popular options used by startups. Using equity capital financing means you sell shares of your business to interested investors for a price. This is perfect for budding entrepreneurs who want to get started without incurring debt. You can even sell your company shares to friends and family. Of course, as the business starts to make money, profit is divided among the shareholders proportionate to the volume of shares they have.

Down the line, you can attract professional investors and venture capitalists to buy shares in your company. They usually look for promising enterprises with a proven track record of a few years at least. However, by selling your shares away, you are giving other people a voice in directing the direction of the company. If you feel this will interfere with your vision, it’s probably best to think twice before going for equity capital financing.


Knowing your options in taking out a loan could help you start your own business sooner. Instead of working a few more years to build the capital you need. Of course, these different loans cater to different kinds of borrowers looking to start small businesses in different industries. You still need to do your research and prepare the proper documents to make your loan application faster and give you more odds of being approved.

By Rajesh