How Many Start-up Loans Can You Apply For?

A business start-up loan is financing to help with the financial needs of a new business. You can use the loan for things like working capital, the purchase of equipment, inventory, supplies, machinery, and furniture, or the purchase of real estate and construction equipment.

Alternatives to start-up loans include certain SBA loans (more on that later), business credit cards, and crowdfunding. 

Start-up loans can be a big help to a small business with one of their biggest challenges - obtaining the necessary capital to help their business grow.

How Many Start-up Loans Can You Apply For

According to a 2020 Federal Reserve report, new employer small businesses are the primary source of U.S. job growth and yet they are more likely to face challenges obtaining capital than larger companies. 

Start-up business loans could be invaluable in getting your business up and running. But is there a limit to how many loans you can apply for?

Well, in the case of an SBA loan, as long as each of your loans fits within the SBA’s lending guidelines you can take out multiple loans. This applies to both SBA 7(a) loans and SBA 504 loans.

In some cases, companies that have experienced rapid growth have taken up to 9 SBA 504 loans out over 15 years. However, if you get approved for two SBA loans of the same kind within 90 days of each other, the SBA may treat it as one loan for underwriting purposes. 

Who is eligible for more than one SBA loan?

Despite there being technically no limit to how many SBA loans you can take out, there are certain criteria you have to meet to take out more than one SBA loan.

You have to stay within the SBA’s maximum borrowing amount - $5 million for SBA 7(a) loans, and $5.5 million for SBA 504 loans. 

You must also remain within the SBA eligibility requirements for businesses, and be in good standing with your current SBA loan. You will also need to keep a good credit score, (preferably 680 plus) and have collateral for the new SBA loan.

Where can I get a small business start-up loan?

If you’ve started your search for a loan, you most likely know that there are countless options out there for a small business loan, from banks to online lenders.

Each has its merits and its drawbacks, and you may have noticed that some low-cost options are not available to people just starting their business out. So what are the alternatives? We’ve listed some viable options below to help you think outside the box.

Equipment Financing: These loans are similar to conventional loans with monthly payments over a set period, except they are specifically designed to pay for the purchase of equipment and machinery.

Lending standards for equipment financing may be more relaxed because your equipment will be used as collateral for the loan. This has its risks because, if you default, the bank has the right to seize your equipment to cover the debt. 

Another option could be equipment leasing, and there are numerous assets out there that can be leased. These include computers, and for restaurants things like furniture and pizza ovens. 

Some SBA loans may also be used to finance equipment. The SBA 504 loan, for example, is useful for financing larger equipment as well as real estate.

Business Credit Cards: As mentioned at the beginning of this article, business credit cards are also an option. As well as being a convenient way to make purchases, credit cards also offer access to an unsecured loan in the form of a line of credit.

They are also a good way to distinguish between business and personal finance and can help you build up credit for your business. Lenders will look at your personal credit score and combined income (business and personal) to determine if you qualify for a business credit card.

Lenders for a credit card generally don’t ask for collateral, but they usually require a personal guarantee. What’s more, some business credit cards have great rewards programs and sign-up bonuses. 

We would advise choosing a card that has a 0% introductory rate offer. This way, you can make purchases and carry a balance for 9-12 months (or even up to 15 months) without paying interest while you set your business up.

But don’t just take our word for it. The Federal Reserve Small Business Credit Survey found that 53% of small businesses used credit cards to help fund their businesses.

SBA 7(a) Loans: Generally, the Small Business Administration (SBA) guarantees loans rather than makes them. Individual lenders are approved by the SBA to offer loans as part of SBA programs.

There are several SBA loans, and one of the most popular is the 7(a) program we discussed earlier that offers loans up to $5 million. 

If you’re interested in an SBA loan to start a business, in the 2020 fiscal year 17% of the money lent to small businesses through the 7(a) loan program went to start-up businesses.

However, getting an SBA loan isn’t an easy or speedy process, though the SBA Express loan program (that generally loans up to $350,00) tries to speed the process up a bit. 

You also need to meet certain criteria, mainly acceptable credit. There is no minimum personal credit score required but 7(a) loans of $350,000 or less require a minimum FICO SBSS credit score of 155 to avoid a manual credit review.

This commercial credit score takes into account the personal credit of multiple owners along with the credit of the business and can range from 0-300.

SBA 7(a) loans for startups do tend to go to business owners who have experience within their industry. For example, doctors looking to start their own practice.

They also tend to favor those who purchase an existing business like a franchise. Still, the favorable terms mean it’s something worth exploring. 

As we have already mentioned, SBA 504 loans could be useful for businesses who are looking to buy real estate or equipment specifically. Meanwhile, SBA Export Loan programs are an option to consider for those participating in international trade. 

SBA Microloans: These loans are made by approved intermediaries such as Community Development Financial Institutions (CDFIs), and other non-profit organizations. The maximum loan amount is $50,000, while the average loan is about $14,000.

It is also a term loan, with a maximum term of 72 months and an average term of 40 months. You can use the funds for working capital, or the purchase of supplies and inventory, machinery or equipment, or even furniture and fixtures.

However, the SBA is not the only microlending option.

Other Microlenders: These are also non-profit organizations that help small businesses secure financing in smaller amounts. The most popular microlenders are:

Accion - They offer loans between $300 - $25,000 through their CFDI partners. They are usually flexible on credit requirements and even help you with the application process.

Kiva: Kiva operates on a mainly trust-driven and community-based platform. You can crowdfund business loans from philanthropic individuals up to $15,000.

Their loans have 0% APR and are usually provided to struggling entrepreneurs who have been unable to access other ways of building capital, have a network of potential lenders, and who have a business deemed to have a positive impact on their community.

Invoice Financing: If your customers pay you via invoices, this could be the option for you. It is different to invoice factoring however and can be costly, but it is also a convenient way to avoid cash flow issues that can often occur with long invoice cycles.

Plus, there is little paperwork involved. It is also a quick option too - you could have your financing in as little as a day.

Crowdfunding: Popular crowdfunding platforms could also be an option to raise money for your business venture. There are three types of crowdfunding that you could potentially make use of - rewards (for example, Kickstarter and Indiegogo), debt (Kiva), and equity (Wefunder). 

If you are interested in crowdfunding to obtain business capital, you will need to share your business goals and objectives with a large group of people in the hopes that they will fund your request.

These campaigns require a lot of marketing, but if you reach your goal you will have enough funding to get your business off the ground, and the group of people who helped you realize this dream could be potential future customers. 

Crowdfunding could be a more accessible funding option than angel funding or venture capital if you’re looking to raise up to £5 million.