Financing a young business that already has revenue
Newer businesses with real sales do have options. Here is what's realistic and what to watch out for.
Updated First published Published by BizLoan.now
Many lenders want two years in business before they'll consider a loan. If you've been open six months to two years and you already have steady sales, you have more options than a brand-new startup, but fewer than an established business. Here's what's realistic.
What lenders check for newer businesses
- Bank deposits. Several months of steady deposits often matter more than time in business.
- Personal credit. With a short business history, lenders lean on the owners' credit.
- What the money is for. Financing tied to an asset, like equipment, is easier to get than unsecured working capital.
- Existing debt. Lenders look at what you already pay each month, especially daily or weekly debits.
Options by time in business
| Option | Time in business lenders often want | Notes |
|---|---|---|
| Equipment financing | Some lenders work with businesses under a year | The equipment secures the loan |
| SBA microloan | Varies by intermediary lender | Up to $50,000; can't buy real estate or pay existing debt |
| Business line of credit | Often 6 to 12 months or more | Based heavily on bank deposits |
| Term loan | Often a year or more | Online lenders tend to accept shorter histories than banks, at higher cost |
| SBA 7(a) loan | Most lenders want two years; startups can qualify | At least 10% owner equity for startups; every owner must be a U.S. citizen or U.S. national |
| Working-capital advance | Often a few months of card sales or deposits | Usually the most expensive option |
These are general patterns, not requirements. Each lender sets its own.
Start with financing tied to what you're buying
If you need a mixer, a truck or a lift, equipment financing is often the most realistic option for a young business, because the equipment itself reduces the lender's risk.
Build toward a line of credit
A business line of credit is the most useful tool for uneven cash flow, and many lenders consider businesses with six months to a year of steady deposits. Keeping your bank balance healthy and avoiding overdrafts helps.
Be careful with advances
Working-capital advances are easy to get early on, which is exactly why they're risky. They're usually priced with a factor rate, repaid by daily or weekly debits and cost far more than a loan. Read how a working capital loan compares with a term loan before you take one.
Things that help now
- Keep business and personal money separate, and keep books monthly.
- Open supplier accounts that report payments, to build business credit.
- Ask your bank what it would need to see to offer a line of credit in six months.