Do banks loan money for business startups?

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Do banks loan money for business startups?

Most national banks, (Bank of America, Chase, Wells Fargo, etc.) do not loan money to startup businesses. A startup business can be classified as one of the following:

• Less than 2 years in business
• Less than 2 years in business
• Less than 2-3 years of business tax returns

Most startups think they can go to their national bank and get a loan, but those are not the lenders providing startup loans. It’s regional banks, & Community Development Financial Institutions (CDFIs).

Why lenders don’t like startups?

Most lenders don’t like startups because they are risky.  And since everyone goes to national banks for loans, national banks don’t need startups to sustain, and therefore do not take on the risk. According to Bank of America’s Newsroom, they have $12 million clients who own businesses, and in 2020 gave out $50 billion in small business loans.  Therefore, banks like this do not need to accommodate startups.

However, regional banks are fighting for the business that national banks turn away and many of them will fund startups. However, they won’t just fund any startup. Many of these banks like franchises because they are proven models. They may fund your independent shop but there’s a higher chance they will not.

What are the requirements to get a startup loan?

If you meet the 4 personal requirements required to get a startup loan:

1. Decent credit
2. Experience in your industry
3. 5-20% equity injection
4. Income to cover your personal expenses

Then your chances of being approved by a Community Financial Development Institution (CDFI) are high. But you will still need a business plan and financial projections that details the type of business you plan to start, how you plan to make it work, and when you will become profitable.

Final note...

We have 25 lenders that we work with across the country. We know which ones like your industry, and what they need to see from you to be approved.

To discuss your specific situation and how much you can be approved for in an SBA working capital loan for your business, request your free consult below.

Request Your Free Consult

Continue Your Startup Journey

If you need more startup loan help, make sure you check out these articles:

• What disqualifies you from getting a startup SBA loan?
• Why can’t startup businesses easily get financing from banks?
• Do you need a down payment for an SBA loan?
• How much income do I need for a startup business loan?

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