Comparing the Top 5 Types of Business Loans for Start-Ups

Written By Alla Levin
July 05, 2019

Startup Business Financing: Comparing the Types of Business Loans for Start-Ups

If you are looking to start up a new company or you are a new start-up looking for some additional funding there are lots of different options around you. Depending on what your company does, the company’s financial projections and the current credit rating will determine what options are in front of you. Here are 5 different options to consider when you apply for a business loan:

Unsecured Loan

Probably the most common type of lending is unsecured business loans. This option is usually for amounts that do not exceed $25k. In order to get a good unsecured business loan then it is essential that your credit rating is good and that you have a robust project plan that substantiates what it is you are going to spend the money on.

The lender will assess your affordability and also the risk that you pose to them. Depending on that outcome will not only determine if they will lend to you but also what rates and terms they offer. Start-up business financing: a low-risk company will receive pretty good interest rates however the higher the risk, the higher the interest rates are.

Secured Loanget a company credit card.

Secured loans are generally only ever used for higher amounts but if a lender sees you as a risk they may wish to offer you a secured loan rather than unsecured loan so that they have a level of protection if you do not keep up with the payments.

Secured loans are usually secured against high-value items such as property. As a result, if you do not keep up with the monthly payments then the property that you secured this against is at risk of being taken off you.


Unfortunately, generally, the overdraft option can be costly. If you have an overdraft then depending on the amount, the APR can be excessive. This option shouldn’t really be used for long term funding issues but more for short term gaps where maybe a month or two is required to support a short term cash flow issue.

Start up Business Financing: Business Credit Card

New start-ups could opt to get a company credit card. There are literally hundreds of different business cards to choose from which could include ones with rewards and perks.

You will see that for credit cards, there are many add-on benefits (things like travel insurance and cashback could form part of this) but be under no illusion – if you do not pay back the full amount every single month then you are normally heading for a large interest bill.

Equipment Financingunsecured business loans

Start-up companies may just need help with things such as computer equipment of furniture. Instead of getting a specific loan for this then the company may decide to go down the financing options.

One of the benefits of this is that you can then sometimes haggle with money off the equipment if they know you will take their finance option. This is sometimes an option that has a high APR rate also.

With one of these loan types, you are bound to be able to afford everything you need for your business. Take a look at each one carefully and decide what is right for you and your business.

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