SBA loans are cheap by small business standards, which is exactly why they are hard to get. A lender has to approve you under its own credit policy, SBA has to agree the business is eligible, and in 2026 every owner must be a U.S. citizen or national. For a business that is a few months old, with no tax returns and no collateral, one of those gates usually closes.
The Federal Reserve's 2026 Report on Employer Firms shows how common partial success is. Among firms that applied for financing, 42% got the full amount they wanted, 36% got some of it and 22% got nothing. This guide covers what startups use instead, what each option really costs, and which situations each one fits.
Why startups struggle with SBA loans
SBA does not lend directly or set a credit score floor, but the rules lenders apply favor businesses with a track record.
- Cash flow. Since March 1, 2026, a 7(a) loan of $350,000 or less needs a debt service coverage ratio of at least 1.10 on a historical or projected basis, plus a lender review of the last two months of operating account activity (SBA Procedural Notice 5000-876777). Projections are allowed, but a lender has to believe them.
- Credit. SBA's funding guide notes that loan eligibility for a new business "is typically based on its owner's personal credit score."
- Down payment on real estate. A 504 borrower that has operated two years or less must put in at least 15% of project cost instead of 10% (13 CFR 120.910).
- Ownership. Since March 1, 2026, all owners of a 7(a) or 504 borrower must be U.S. citizens or nationals living in the U.S., and SBA microloans followed on April 1, 2026.
Two corrections to older advice you may see: the SBA Express limit is $500,000, not $350,000, according to SBA's types of 7(a) loans page; and SBA no longer screens small 7(a) loans with the FICO SBSS score.
The alternatives at a glance
| Option | Typical size | How you repay | What to watch |
|---|---|---|---|
| Nonprofit microloan | Up to $50,000 (SBA microloans) | Monthly, up to 6 years | Collateral and personal guarantee often required |
| Kiva crowdfunded loan | $1,000 to $15,000 | Monthly, 0% interest | You must recruit 5 to 40 private lenders first |
| Online term loan | Varies by lender | Fixed daily, weekly or monthly payments | APR and origination fees |
| Business line of credit | Varies by lender | Interest on what you draw | Draw fees, renewal terms |
| Equipment financing | Tied to the equipment price | Monthly over the asset's life | Down payment, end-of-term terms |
| Revenue-based financing or MCA | Varies | Share of sales or fixed daily debits | Factor rates translate into very high APRs |
| Business credit card | Varies | Revolving | Rate after any intro period |
| Crowdfunding | Up to $5 million a year (Regulation Crowdfunding) | Rewards or equity, not loan payments | Platform fees, investor obligations |
| Grants | Program-specific | Not repaid | SBA does not give grants to start or expand a business |
Sizes come from SBA's microloan page, Kiva's borrower page and the SEC's Regulation Crowdfunding page.
Microloans from nonprofit lenders
Microloans are the cheapest borrowed money most startups can get. SBA's microloan page says SBA microloans go up to $50,000, average about $13,000, run up to six years, and generally carry rates of 8% to 13% (the page was last updated in April 2024, so confirm current rates with the lender). Nonprofit intermediaries make the credit decisions and set their own requirements. Proceeds can cover working capital, inventory, supplies, furniture, fixtures and equipment, but not existing debt or real estate.
What it costs: a $20,000 microloan over five years at 10% runs about $425 a month and $5,496 in total interest. At 13%, it is about $455 a month and $7,304 in interest.
Many nonprofit lenders also run their own loan programs outside SBA, with their own eligibility rules. Our microloans guide explains how to find one.
Kiva: 0% crowdfunded loans
Kiva's U.S. loans cost nothing in interest or fees, in exchange for some legwork. According to Kiva's borrower page, loans run from $1,000 to $15,000, carry 0% interest and no fees, need no collateral, and have no minimum credit score. Applicants who cannot provide official business documents may qualify only for $1,000 to $3,000. You must live in and run the business in the U.S., and businesses registered or mainly operating in Nevada or North Dakota are excluded.
The catch is the private fundraising period: up to 15 days to get 5 to 40 people you know, depending on loan size, to lend first. If you can do that, $15,000 at 0% beats almost anything else on this list.
Online term loans
Online lenders decide faster and accept younger businesses than banks, and they charge for it. Pricing varies widely by lender, so the only reliable comparison is the APR and the total dollars you repay. Ask each lender for both in writing, including any origination fee taken out of the loan amount.
For a sense of scale: a $50,000, 12-month loan at 25% APR costs about $4,752 a month and $7,027 in interest. The same loan from a lender quoting a factor rate instead of an APR can cost far more, as the cash advance example below shows. See our roundup of startup business loans for lender-by-lender terms.
Business lines of credit
A line of credit fits uneven cash needs better than a lump sum. You draw what you need, pay interest only on the balance, and draw again as you repay. It suits a business that has to cover payroll before customers pay or stock up ahead of a busy season. Ask about draw fees, maintenance fees and whether the lender can cut the limit at renewal.
Equipment financing
When the money is for a specific machine or vehicle, financing secured by that equipment can be easier for a young business to get, because the lender can take back an asset with resale value. The term is usually matched to the equipment's useful life. Compare the down payment, the rate, and what happens at the end of the term, and compare a loan against a lease.
Revenue-based financing and merchant cash advances
These products advance cash against future sales and are priced with a factor rate, which hides how expensive they are. A merchant cash advance provider buys a share of your future receivables and collects through a fixed daily debit or a percentage of card sales.
Here is the math on a typical-looking offer. You receive $50,000 at a factor rate of 1.35, so you owe $67,500. The provider collects it in equal debits over 126 business days, about six months: roughly $536 each business day.
- Cost of the money: $17,500
- Because you start repaying the next day and the balance shrinks every day, the effective annual rate works out to roughly 126% APR.
Compare that with the $7,027 of interest on the 12-month, 25% term loan above, for the same $50,000. Convert any factor rate offer to total dollars and APR, and read our merchant cash advance guide before signing.
Revenue-based financing tied to a true percentage of revenue flexes down when sales drop, which is a real advantage over fixed daily debits. Run the same total-cost math either way.
Business credit cards
A business card is often the first credit a new company can open, because approval typically depends on the owner's personal credit. Cards with an introductory 0% purchase APR can carry short-term costs at no interest if you repay before the promotional period ends; after that, the card's regular purchase rate applies, so check it before you rely on the card. Pick a card that reports to business credit bureaus if you want it to build the company's own file.
Crowdfunding and grants
Crowdfunding and grants bring in money you do not repay as a loan, but neither is quick or certain.
- Equity crowdfunding. Under Regulation Crowdfunding, a company can raise up to $5 million in a 12-month period, and every offering must run online through an SEC-registered broker-dealer or funding portal (SEC). Investors become owners, and the company takes on ongoing disclosure duties.
- Rewards crowdfunding. Pre-selling a product to backers works best for consumer goods that people can picture before they exist.
- Grants. SBA states plainly that it "does not provide grants for starting and expanding a business" (SBA grants page). Its grant money goes to research and development through the SBIR and STTR programs (sbir.gov) and to nonprofits that train business owners. Federal grant applications run through Grants.gov. Be wary of anyone selling access to "free government grants" for a startup.
How to choose
Match the option to the use and to how fast the money pays back.
- You need under $15,000 and can rally supporters: Kiva first.
- You need under $50,000 and have time: a nonprofit microloan.
- You are buying equipment: equipment financing.
- Cash flow is lumpy but the business is real: a line of credit, or a card with a 0% introductory period for short gaps.
- You need money this week: an online term loan, after you compare APRs. Treat a merchant cash advance as a last resort, and only for a use that clearly earns back the cost.
- You are building something investors want to own: equity crowdfunding.
Most startups end up layering two of these, such as a microloan plus a card. Repaying them on time builds the credit history that makes an SBA loan realistic later. When you want to compare actual offers, see what you qualify for on Loanistry. If you think you might already qualify for SBA, our SBA loan requirements guide shows what lenders check, and you can check your SBA and non-SBA options on Loanistry side by side.
Sources
- Federal Reserve Banks: 2026 Report on Employer Firms, checked November 2026
- SBA: Procedural Notice 5000-876777, Sunset of SBSS Score, checked November 2026
- SBA: Fund your business, checked November 2026
- SBA: Types of 7(a) loans, checked November 2026
- SBA: Microloans, checked November 2026
- SBA: Grants, checked November 2026
- Cornell LII: 13 CFR 120.910, checked November 2026
- Kiva: Apply for a Kiva US loan, checked November 2026
- SEC: Regulation Crowdfunding, checked November 2026