Loans

The government has sounded a warning to those who lie to secure home and car loans in South Africa. According to data from the South African Banking Risk Information Center (SABRIC), a non-profit organization made up of major South African banks, there has been a drastic increase in the number of fraudulent financial applications, reports Business Tech.

FRAUDULENT HOME AND CAR LOANS IN SOUTH AFRICA

Fraudsters and cybercriminals are exploiting banking applications. Image: iStock

Delving into fraud-related information provided by financial institutions associated with SABRIC (Capitec, Bidvest, Absa, Discovery Bank, FNB and Standard Bank), it says more fraudulent home and car loans are occurring in South Africa. Criminals are trying their luck to get large sums of money for South African home and car loans. Vehicle finance company Wesbank reports that the average value of financed cars is now R391,000 (from R387,000 last quarter).

And there has been one 53% increase in the number of fraudulent vehicle financing cases since the COVID-19 pandemic. The potential value of the loss of these criminal activities is valued at around R7.3 billion in the automotive industry. As The South African recently reported, a man was found guilty of fraudulently financing a Volkswagen Kombi through a reputable lender. Worse, the culprit was only given a R10,000 well A mere drop in the ocean compared to the vehicle’s value of almost 600,000 rubles.

HOW IS THIS HAPPENING?

Criminals pedaling dodgy loans are on the rise and banks are putting billions at risk. Image: File

Gauteng and KwaZulu-Natal (KZN) have seen the most uncertain South African home and car loans a 38% i 24% respectively. This represents more than half of the fraudulent applications reported nationally. Also, housing loan cases end up being very much around one million rand, as the average purchase price of a house is 972,000 R national, i R1.6 million in the Western Cape. Home loan fraud has increased 1.6%. Nearly 3,000 cases were reported with a potential loss factor rated at R3.4 trillion. The actual losses incurred were only R445 million. However, 12% of fraudulent home loan applications still went through. Once again, Gauteng and KZN were at the epicenter with 64% of the cases arising in these provinces.

IS THE ECONOMY SO BAD THAT SOME PEOPLE HAVE NO BUSINESS TO LIE?

Share your thoughts on the story below… Image: File

This guide highlights the top five loan companies in South Africa for 2025, focusing on providers that stand out for their competitive interest rates, adaptable repayment plans, and excellent customer service. 

Choosing the right loan provider can significantly impact your financial stability, whether you want to consolidate debt, fund a personal goal, or grow your venture. In South Africa, the need for reliable financial solutions continues to rise as individuals and businesses seek loan providers that offer competitive rates, flexible terms, and exceptional customer service.

TL/DR: Key takeaways from this article

Choosing a trustworthy loan provider can safeguard your financial health and ease your money worries.

Top lenders such as Capitec Bank, Nedbank, and African Bank stand out for their customized loan offerings.

To find the best fit, evaluate interest rates, repayment terms, and customer feedback.

Specialized options are available for bad credit and small businesses.

Read on for insights, comparisons, and tips to make informed financial decisions.

Top loan companies in South Africa for 2025

1. Capitec Bank [Best for personal loans]

FeatureDetailsYear established2001HeadquartersStellenbosch, South AfricaOwnershipPublicNumber of branches850+Countries1 (South Africa)Digital offeringsMobile app, online banking, SMS notificationsKey servicesSavings, fixed-term deposits, credit loansInnovative featuresFlexible fixed deposits, interest on transaction accountsWebsiteCapitec Bank

Capitec Bank, South Africa’s largest retail bank based on customers, is celebrated for its simplicity, affordability, and innovative approach to banking. Capitec offers personalized credit solutions of up to R500,000 at competitive interest rates, which you can use for several things, including financing a vehicle, funding medical procedures, and pursuing educational goals.

For budget-conscious individuals, Capitec stands out with its attractive savings accounts, fixed-term deposits, and even interest on transaction accounts. This unique feature allows customers to grow their wealth through daily balances, reinforcing Capitec’s reputation for excellent returns and financial accessibility.

Best for

Individuals seeking transparent and affordable personal loans tailored to their needs.

Key features

Personalized rates, starting from 13.25% per annum.

Minimum monthly income of R3,000 to qualify.

Credit insurance: mandatory insurance covering death, disability, retrenchment, and income loss.

Consolidate multiple loans into a single repayment for convenience.

Access up to R500,000 with repayment terms designed to fit your budget. Repayment terms are flexible, from 12 to 84 months.

Manage loans seamlessly using Capitec’s app.

How to apply for a loan

Steps to apply

Before you can apply, you get an estimate. Use the app to get pre-approved loan offers instantly. You can do this in three steps:

Step 1: Specify the amount you need.

Let the best of tech news come to you

Join 30,000 subscribers who receive Techpoint Digest, a fun week-daily 5-minute roundup of happenings in African and global tech, directly in your inbox, hours before everyone else.

Step 2: Provide your details.

Step 3: Verify your identity through simple security questions.

Application channels

Online or via the Capitec Mobile App.

Call Capitec at 0860 66 77 89.

Visit any Capitec branch.

Eligibility criteria

Loan approval depends on affordability and credit profile.

A minimum monthly income of R3,000.

Banking and credit history, income, and expenses to determine the loan amount.

Required documents

Original ID (applicant must be 18 years or older).

Latest salary slip.

Bank statements showing the last three consecutive salary deposits (for non-Capitec accounts).

Pros and cons

Pros:

Low-interest personal loans with fixed monthly repayments.

Simple and fast online application process.

Personalized interest rates to match customer profiles.

Cons:

Limited options for business loans.

Approval may require a good credit score.

Why choose Capitec Bank?

Accessibility: transparent loan terms with no hidden fees.

Tailored solutions: Loan offers personalized to your affordability and credit profile.

Convenience: Apply online, via the app, or at a branch, with instant approvals and funds available immediately.

2. African Bank [Best for borrowers with no or poor credit history]

FeatureDetailsYear established1975HeadquartersJohannesburg, South AfricaOwnershipPublicNumber of branchesN/ACountriesSouth AfricaDigital offeringsOnline loan applications, mobile-friendly platformKey servicesSavings accounts, personal and consolidation loansInnovative featuresTech deals (add devices to loans), loan calculatorWebsiteAfrican Bank

African Bank is a trusted financial partner, providing innovative financial solutions tailored to diverse needs. The bank simplifies the borrowing experience with competitive rates and user-friendly options for individuals looking to consolidate debts, access personal loans, or even bundle a device with their loan.

Known for accommodating borrowers with various credit histories, including those with poor credit, African Bank makes financial inclusion a reality.

Best for

Borrowers with varying credit histories, including individuals with bad credit, seek flexible loan options and fair repayment terms.

Types of loans 

1. Personal loan: Borrow between R2,000 and R350,000 with fixed repayment terms of 7 to 72 months.

2. Consolidation loan: Simplify finances by consolidating multiple debts into a monthly payment.

3. 12% loan: low-interest loans (12%) up to R50,000 with repayment terms of 18 to 24 months.

4. Tech deals: Add devices like cellphones, tablets, or laptops to your loan.

Key features:

Loan calculator: Easily estimate repayment terms and monthly installments.

Credit life insurance: Covers your loan repayments in case of death, disability, or unemployment.

Flexible repayment options: Set up payroll deductions, debit orders, or stop orders based on your pay date.

How to apply for a loan

Application steps

Step 1: Submit personal details, including your South African ID, title, name, surname, phone number, and email.

Step 2: Enter your financial details, such as your information about income.

Step 3: Receive and verify your identity with a one-time pin (OTP).

Step 4: Get your personalized loan offer.

Step 5: Upon approval, funds are transferred directly to your account.

Application channels

Online: Through the African Bank website or mobile platform.

Phone: Contact the customer service team.

Branch: Visit the nearest African Bank branch for in-person assistance.

Loan repayment details

Your repayment dates are highlighted on the front page of your agreement.

The first repayment is due seven days after receiving the loan.

Subsequent repayments are due on the first of each month.

Payments can be automated through payroll deductions, debit orders, or stop orders.

Pros and cons

Pros:

Flexible loan options for various needs.

Quick disbursement of funds.

There are no penalties for early repayment.

Loans available up to R350,000.

Cons:

Interest rates can be high for borrowers with low credit scores.

Strict credit checks may apply.

Higher-risk borrowers may face steeper rates.

Why choose Africa Bank?

African Bank stands out for its inclusivity and innovative offerings, making it an ideal choice for borrowers seeking flexibility and accessibility.

3. Nedbank (Best for students)

FeatureDetailsYear established1888HeadquartersSandton, South AfricaOwnershipPublicNumber of branches700+Countries6Digital offeringsMoney Apps, online banking, Pay-As-You-GoKey servicesStudent accounts, loans, savings toolsInnovative featuresCareer support, gadget discounts, lifestyle dealsWebsiteNedbank 

Nedbank is a member of South Africa’s Big Five banks, distinguished by its focus on sustainability and cutting-edge innovations. The bank caters to a diverse audience, with notable offerings for high earners and students.

Nedbank offers personal loans up to R400,000, flexible repayment terms, and competitive interest rates. Customers even earn cashback for timely repayments when loans are paid from a Nedbank account. Unlocked.Me Student Account empowers young South Africans with financial literacy tools, career support, and exclusive lifestyle perks. 

In 2022, Nedbank’s partnership with Africarare, Africa’s first metaverse platform, showcased its commitment to adopting next-generation digital technologies.

Best for

High earners seek larger loan amounts.

Students looking for tailored banking and lifestyle solutions.

Key Features:

Access a loan between R2,000 and R400,000.

Choose terms that suit your financial profile.

Earn R200 monthly cashback when repayments are made from a Nedbank account.

Save on interest by merging multiple debts into a single loan with a fixed interest rate.

Apply for loans directly via the Money App or Online Banking.

Access pre-approved loan offers for Nedbank account holders.

Before you apply

Eligibility criteria:

South African residents aged 18–65.

Minimum income of R5,000, paid electronically into a bank account.

Open to employed, self-employed, and retired individuals with valid proof of income.

Documents required:

Valid South African ID or identity document.

Latest payslip or proof of pension payment.

Stamped bank statements for the past three months.

How to get a personal loan in 3 easy ways

Online application: Complete an online form, upload your documents (ID, bank statements, payslip/pension proof), and receive an instant quotation.

Request a callback: Share your contact details, and a consultant will assist you over the phone. Finalize the application by emailing the required documents.

Through the Money App or online banking, existing clients can access and accept pre-approved loan offers in just a few clicks.

Pros and cons

Pros:

Loans up to R400,000 with competitive rates for qualifying clients.

User-friendly digital platforms for applications and loan management.

Cashback rewards and lifestyle perks.

Cons:

Strict qualification criteria may exclude low-income earners.

Extensive documentation is required during the approval process.

Why choose a Nedbank loan?

Nedbank seamlessly blends innovation, sustainability, and personalized banking solutions, making it an excellent choice for high earners and the younger demographic. Its comprehensive loan products and student-focused offerings ensure accessibility, while digital platforms streamline customer experiences.

4. Lulalend [Best for business]

FeatureDetailsYear established2014HeadquartersSouth AfricaOwnershipPrivateNumber of branchesFully digital; no physical branchesCountriesSouth AfricaDigital offeringsOnline applications, account managementKey servicesBusiness loans, working capital solutionsInnovative featuresRevolving Capital Facility, fast approvalsWebsiteLulalend 

Lulalend is a financial service provider designed exclusively for small and medium enterprises (SMEs) in South Africa. Founded in 2014, it offers two core funding solutions: the Revolving Capital Facility and the Capital Advance, designed to provide businesses with quick, accessible, and flexible funding options.

Lulalend’s fully digital approach eliminates the need for branch visits, offering a seamless application process and faster funding than traditional banks. With funding limits of up to R5 million, it’s the go-to option for SMEs seeking reliable short-term financing.

In 2023, the South African fintech startup raised $35 million in a Series B round to launch new products and expand its loan book.

Best for

Small businesses in need of short-term funding with minimal administrative requirements.

Loan types 

1. Revolving Capital Facility: A flexible funding option that works like a revolving loan but with added benefits.

No monthly account or admin fees.

Only pay for what you use.

Instant access to working capital when needed.

2. Capital Advance: A one-time lump sum designed for fixed-term repayment.

Repayment periods of 3, 6, 9, or 12 months.

Fixed fees and terms.

There are no penalties for early repayment.

Key features

Quick funding: Access up to R5 million in business funding with fast approvals and disbursements.

Digital platform: Fully online, allowing any business to open an account within minutes without branch visits.

Tailored for SMEs: minimal eligibility requirements compared to traditional banks.

 Eligibility criteria

Lulalend keeps its qualification requirements simple:

Time in business: Minimum of one year.

Annual revenue: at least R500,000.

Location: Must be based in South Africa.

How to apply

Create an online account: Visit the Lulalend website and register.

Submit your details: Provide basic business information and documents, including financial records.

Receive approval: Funds can be disbursed quickly to your account once approved.

Pros and cons

Pros:

Fast and hassle-free approval process.

Designed specifically for SMEs.

Flexible loan repayment options with no penalties for early repayment.

Cons:

Not suitable for personal loans.

Loans are capped at R1.5 million for some business types.

Why choose a Lulalend loan?

Lulalend simplifies business financing with clear pricing, flexible repayment terms, and quick disbursement. Its innovative solutions, such as the Revolving Capital Facility, ensure that SMEs can access working capital when they need it most, without unnecessary delays or excessive requirements.

5. Standard Bank 

FeatureDetailsYear Established1862HeadquartersJohannesburg, South AfricaOwnershipPublicNumber of Branches1,200+Countries20Digital offeringsMobile app, online banking, SnapScanTotal asset worth$170 billionKey servicesPrivate banking, home loans, savingsInnovative featuresReal-time forex trading, Tap-to-Pay techWebsiteStandard Bank 

Standard Bank, founded in 1862, is Africa’s largest bank by assets, boasting a total asset worth of $170 billion. Headquartered in Johannesburg, South Africa, it operates in 20 countries. 

With a legacy of financial excellence, Standard Bank offers innovative solutions like real-time forex trading and advanced app security features. Its digital platforms include a mobile app, online banking, and SnapScan, ensuring convenience for modern banking needs.

In August 2024, the bank launched an advanced security feature on its mobile banking app to alert customers to potential vishing threats, including suspicious calls. 

Best for

Individuals and businesses seeking comprehensive financial solutions.

Loan offerings from Standard Bank

1. Term loan: fixed monthly repayments over a flexible term of up to 84 months.

Eligibility: Minimum monthly income of R3,000.

Loan amount: Up to R300,000.

Interest rate: Personalised.

Repayment term: 12 to 84 months.

2. Revolving loan: Access funds on demand by repaying at least 15% of the loan amount.

Eligibility: Minimum monthly income of R8,000.

Loan amount: Up to R300,000.

Interest rate: Personalised.

Repayment term: up to 72 months.

3. Overdraft: Instant access to additional funds as needed.

Eligibility: Minimum monthly income of R8,000.

Loan amount: Up to R250,000.

Repayment term: recurring.

Interest rate: Personalised.

4. Solar loan: financing for solar systems and installations with competitive interest rates.

Eligibility: Minimum monthly income of R8,000.

Loan amount: Up to R300,000.

Interest rate: Prime + 2.5%.

Repayment term: 12 to 60 months.

5. Investment-backed lending: Leverage investment portfolios for lower interest rates on loans.

Eligibility: The loan amount starts from R50,000.

Loan amount: Up to 50% of portfolio value.

Repayment term: flexible.

Interest rate: Personalised.

6. Student loan: tailored loans for educational needs, including tuition and laptops.

Interest rate: 11.25% (terms and conditions apply).

Features: Easy payouts, online application, and direct payments to relevant parties.

Loan application process

For Standard Bank customers

Log in to the Standard Bank App or Internet Banking.

Select a suitable loan type.

Follow the prompts to apply.

Upon approval, funds are transferred to your account.

For non-Standard Bank customers

Required Documents:

Valid South African ID.

Proof of residence (not older than three months).

One month’s payslip.

Three months’ recent bank statements.

Steps:

Start the application online and submit a “Call Me Back” form.

Alternatively, visit the nearest branch with the required documents.

Pros and cons

Pros:

Diverse loan options cater to different financial needs.

Flexible repayment terms and digital application processes.

Interest rates are tailored to individual credit profiles.

Cons:

Processing times can be lengthy for some loans.

Service fees of R69 per month apply to all loans.

Heavily reliant on credit score for interest rates.

Why choose Standard Bank?

Standard Bank combines a legacy of trust with modern banking innovations to offer comprehensive financial solutions. 

How to choose the best loan company in South Africa

1. Financial stability

Working with a reputable lender protects you from hidden fees, excessively high interest rates, and predatory lending practices. A reliable loan company ensures you can access funds without compromising your financial security or falling into a debt spiral.

2. Loan terms and conditions

Favorable loan terms can make a significant difference. Competitive interest rates, flexible repayment schedules, and transparent agreements reduce financial stress and help you plan your finances better. Understanding your obligations upfront is key to avoiding surprises later.

3. Accessibility

The best loan providers prioritize convenience with user-friendly platforms, mobile apps, and efficient customer support. Seamless access builds trust and simplifies your financial management.

4. Customer support

Outstanding customer service can make the loan process less intimidating. A lender with knowledgeable, responsive, and supportive staff ensures that your questions are answered promptly and any issues are resolved efficiently, giving you confidence throughout your borrowing journey.

Why choosing the right loan company matters

Finding the right loan provider is about safeguarding your financial well-being and ensuring a smooth borrowing experience. 

Here are key reasons why this decision matters:

1. Financial stability

Working with a reputable lender protects you from hidden fees, excessively high interest rates, and predatory lending practices. A reliable loan company ensures you can access funds without compromising your financial security or falling into a debt spiral.

2. Loan terms and conditions

Favorable loan terms, such as competitive interest rates and flexible repayment schedules, save you money and reduce financial stress. Understanding your obligations upfront is key to avoiding surprises later.

3. Accessibility

The best loan providers prioritize convenience with user-friendly platforms, mobile apps, and efficient customer support. From checking your balance and applying for a loan to tracking repayments, seamless access builds trust and simplifies financial management.

FAQs about the best loan company in South Africa

Which loan company offers the lowest interest rates in South Africa?

Capitec Bank and African Bank are often recognized for their competitive interest rates. However, the exact rate you receive will depend on factors like your credit score, loan amount, and repayment terms.

What is the best loan option for small businesses?

Lenders such as Lulalend and Standard Bank provide tailored loan solutions for small and medium-sized enterprises, offering flexibility and support to help businesses grow.

Can I get a loan with bad credit in South Africa?

Yes, securing a loan with bad credit is possible. Lenders like African Bank and other specialized financial institutions cater to individuals with poor credit histories. However, be prepared for potentially higher interest rates.

What are the top ten loan companies in South Africa?

The following are some of the most trusted loan providers in the country:

Capitec Bank

African Bank

Nedbank

Lulalend

Standard Bank

First National Bank

Absa Bank

Old Mutual

SA Home Loans

Finbond Mutual Bank

Conclusion

Choosing the best loan company in South Africa requires careful evaluation of your financial needs, interest rates, and loan terms. This guide provides a starting point for making informed decisions, from individuals applying for a personal loan to a business owner exploring funding options. 

Explore these loan companies today to find the one that best suits your needs. Don’t forget to read customer reviews and compare your options to secure a reliable financial partner for 2025 and beyond.

Disclaimer!

This publication, review, or article (“Content”) is based on our independent evaluation and is subjective, reflecting our opinions, which may differ from others’ perspectives or experiences. We do not guarantee the accuracy or completeness of the Content and disclaim responsibility for any errors or omissions it may contain.

The information provided is not investment advice and should not be treated as such, as products or services may change after publication. By engaging with our content, you acknowledge its subjective nature and agree not to hold us liable for any losses or damages arising from your reliance on the information provided.

Always conduct your research and consult professionals where necessary.

The formula for taking your new business from startup to scale-up is simple: you need a good idea, time, and money. But simple doesn’t necessarily mean easy: Securing a startup business loan for a new venture is harder than borrowing for an established company, but it can be done.

Ahead, learn the top startup business loans and financing options for funding your startup.

What is a startup business loan?

Startup business loans aren’t a specific type of loan. Instead, they are any loan used to open a new business. Entrepreneurs can use the money to develop products or services, hire employees, lease space or equipment, establish a marketing strategy, and buy inventory.

Lenders don’t expect new companies to demonstrate business credit or high revenue, but they might look to owners’ personal credit and industry experience to determine loan eligibility and financing terms. 

Get funding to run your business with Shopify Capital

Shopify Capital makes it easy to get funding quickly and use it for inventory, marketing, and more. Automatically make payments as a percentage of your daily sales. No compounding interest. No schedules. No surprises.

Explore Shopify Capital

Four reasons to get a startup loan

There are plenty of circumstances that call for financing. Here are a handful of reasons to seek a loan: 

Buying inventory: With a startup loan, you can keep bestsellers in stock, lock in bulk discounts, explore new product lines, and optimize your supply chain.

Marketing: You can use a startup loan to invest in search engine optimization (SEO), collaborate with influencers, launch a rewards or referral program, or invest in paid search or social marketing.

Product development: Develop prototypes, conduct market research, and launch new collections with a financial boost. 

Talent acquisition: Onboard experts and contractors, compete for top candidates, promote your best employees, and foster your team’s professional growth.

12 types of startup business loans to consider

Self-financing
Financing from friends and family
Small Business Administration (SBA) loans
Local business financing
Crowdfunding
Small business grants
Asset-based financing
Business line of credit
Online term loans
Equipment financing
Invoice financing
Business credit card

1. Self-financing

Many new small business owners take out personal loans or dip into their savings to finance their businesses. If you’re having trouble qualifying for a small business loan, alternatives may include an unsecured loan, a business credit card, a second mortgage, or borrowing against retirement accounts.

These options can be helpful if you want to be the sole owner of your business rather than selling part of it to an investor. However, you may also risk personal savings and assets since you—not your business—will be liable for the loan.

2. Financing from friends and family

Some startups raise money from friends and family members, repaying them with ownership interest or shares.

Friends and family might not ask for a credit check and could offer better terms than outside lenders. But you must consider the consequences to your relationships if your business fails and you can’t repay the debt.

3. Small Business Administration loans

The US Small Business Administration (SBA) partially guarantees SBA loans from participating lenders. Loan types vary depending on your business and how you plan to use the funds. 

The application and approval process can be long, and you’ll need to meet these SBA loan requirements first, but the SBA guarantee can make it easier to secure a substantial loan on favorable terms, even if you don’t have great credit.

The SBA 7(a) loan program is one of the most popular, offering up to $5 million in funding.
The SBA 504 loan program funds land, manufacturing facilities, and equipment investments.
The 7(a) Working Capital Pilot Program serves businesses at least 12 months old.
The SBA microloan program offers up to $50,000 to start or expand a business.

The SBA also offers a lender matching tool you can use to find participating lenders and compare loan offers.

4. Local business financing

You could also look for traditional business financing options from local credit unions, community banks, and nonprofits. 

Rates, terms, and requirements vary by lender, but often, smaller lenders are more willing to consider past business experience than large banks or online institutions when approving loans. Some lenders participate in local or statewide loan guarantee programs similar to the SBA programs.

5. Crowdfunding

Online crowdfunding platforms can help you raise money. There are several types of crowdfunding, but the most useful for new businesses are rewards-based and equity crowdfunding.

With rewards-based crowdfunding, entrepreneurs offer perks like first access to new items or hefty discounts on upcoming products in exchange for funds. With equity crowdfunding, businesses trade stakes in the company for financial investments. 

💰 Success story: How these founders turned $900 into an 8-figure brand

Skin care brand Bushbalm launched with a mere $900 investment from its three founders. They then funded their massive growth through crowdfunding and pitching investors.

Find out how

6. Small business grants

Corporate, local, state, and federal grants for small business owners are attractive sources of free money—that’s right, you don’t need to repay them. However, your business must align grant goals, and undergo a competitive application process. 

Grants.gov can help you find federal small business grants. You can also visit your local Small Business Development Center for advice on grants and financing.

7. Asset-based financing

Existing business assets can serve as collateral for a loan. This type of lending is useful if you don’t have robust financials but do have assets like real estate, accounts receivable, or inventory. The loan amount is often a percentage of the appraised value of the assets. 

For example, a lender might offer a loan amounting to 70% of your equipment value and 80% of your accounts receivable. You can use the funds to cover immediate costs and repay the loan as you fulfill orders. 

8. Business line of credit

A business line of credit can provide continuous startup funding. Unlike a loan, you won’t receive the entire amount upfront. Instead, you may draw money from your line of credit as needed until you hit its limit. This gives more flexibility than a term loan because you pay interest on the amount borrowed, not the total available.

Several online lenders offer lines of credit to startups as young as three months.

9. Online term loans

Online business loans are often term loans, which means you receive the entire amount when you accept the loan and then make monthly payments for a predefined term until you’ve repaid it. Here are two examples

Secured business loans require collateral, such as real estate, inventory, or equipment. If you default on the loan, the lender can seize these assets to recover its losses. This type of business loan for startups tends to have favorable terms because the collateral reduces the lender’s risk.

Unsecured business loans don’t require collateral. Lenders assess eligibility based on creditworthiness, financial stability, and affordability. This type of startup loan tends to have higher interest rates to reflect its higher lender risks. 

Online lender applications are easier and faster than traditional ones thanks to modern techniques (such as digitally connecting to and analyzing your bank account to determine if you qualify). 

10. Equipment financing

Equipment financing is a loan designed to help businesses acquire equipment or machinery. 

The lender typically provides funds to purchase equipment outright, which then serves as collateral for the loan. If the borrower defaults, the lender can seize the equipment to recoup its losses. This type of financing helps startups procure assets without tying up working capital. 

11. Invoice financing

Invoice financing, or accounts receivable financing, lets startups access working capital by leveraging their unpaid invoices. The lender advances a percentage of the value of outstanding invoices to the business. Once the customer pays the invoice, the lender releases the remaining balance minus fees.

Customer payment timelines usually determine repayment terms for invoice financing, although details can vary. Once customers pay their invoices, the lender deducts the advanced amount—and fees—from the total collected.

12. Business credit card

The main difference between personal and business credit cards is that business credit cards are for business use. Businesses can use pay-in-full cards like Shopify Credit to make purchases, track expenses, and access revolving credit lines to cover cash flow gaps.

Business credit cards make it easier to separate personal and business expenses and to benefit from rewards programs tailored to business spending categories.

Earn cashback rewards with Shopify Credit

Get up to 3% cashback on your eligible marketing spend, including on TikTok, Meta, and Google, using Shopify Credit—the business card designed for Shopify entrepreneurs. No fees, no interest, no credit checks.

Explore Shopify Credit

Interest rates and fees for startup business loans

Origination fees and closing costs

Origination fees are one-time upfront fees lenders charge to process a loan application. Also known as closing costs, they cover administrative tasks like evaluating eligibility, underwriting the loan agreement, and transferring funds.

Origination fees typically range from 0.5% to 8% of the loan total or principal and depend on factors like credit history. They are non-refundable and typically deducted from the loan principal or paid at the time of issue.

Interest rates

The average small business bank loan annual percentage rate (APR) ranges between 6.42% and 12.41%, per NerdWallet. However, this percentage fluctuates dramatically, depending on your credit score, loan term length, business credit history, and loan type.

Here are NerdWallet’s reported APR ranges by loan type:

Online term loans: 6% to 99%

Business line of credit: 10% to 99%

Merchant cash advance: 40% to 350%

Invoice financing: 10% to 79%

SBA variable loans: 10.25% to 14.25% 

SBA fixed loans: 12.75% to 15.75%

Prepayment penalties

Paying off your loan early means paying less interest. Since lenders do not find this attractive, most add charges to prevent early payment and ensure their profit.

Some small business lenders will let you pay a small percentage of your loan back without penalties. For example, you may be able to pay up to 10% of the loan principal without penalties. Be sure you understand prepayment penalties and other terms before signing.

How to get a startup business loan

You may need multiple rounds of funding to get your idea off the ground, but the basics of securing a startup business loan are the same each time: prepare your business plan, review your qualifications, determine what’s available, and apply.

Create a business plan
Evaluate your personal credit
Build business credit
Compare different types of loans
Apply for a startup loan

1. Create a business plan

Lenders want you to demonstrate you’ve considered the challenges and opportunities your new venture presents, and a business plan can do that.

A business plan is a strategic document that outlines your company’s goals, strategies, and timelines for accomplishing them. It should include relevant information about your experience running a business or working in the industry.

This guide to writing a business plan has all the details, but for now, here’s a quick overview of what to include in yours: 

Executive summary
Company description
Market analysis
Organization and management details
Product or service line details
Marketing and sales strategy
Funding requests
Financial projections

2. Evaluate your personal credit

Your personal credit may factor into whether you qualify for financing and influence the rates and terms you receive. Many free apps and financial accounts let you check your credit score for free. See where you stand and how to improve it, if necessary.

If you spot inaccuracies or red flags on your credit report, take steps to correct them or mitigate their impact. Dispute errors, pay off debts, or negotiate settlements with creditors. If you’re not already in the practice of paying your bills on time, start now, keeping credit card balances low, and avoiding unnecessary credit accounts.

3. Build business credit

Establishing a separate credit profile for your business can improve your credibility with lenders and r access to financing. 

The first step is registering your business and getting an employer identification number (EIN). Then, you can open bank accounts or get a credit card under your business name.

4. Compare different types of loans

Once you’ve assessed your funding options, it’s time to find a lender. To determine your shortlist, consider how much money you need, when you need it, and how much you can afford to repay.

5. Apply for a startup loan

Now you’re ready to apply! It’s helpful to gather financial statements, tax returns, and business licenses so you have them handy for your applications. 

Review the eligibility and application requirements and apply to several lenders or organizations. Compare the offers you receive to determine which suits you best. At this stage, you can negotiate for better terms. 

Startup business loans FAQ

How can I get a loan to open my own business?

Generally, these five actions can help you get a loan for your business:

Create a business plan
Evaluate your personal credit
Build business credit
Compare different types of loans
Apply for a startup loan

Is it possible to get a loan for a startup business?

Yes, there are numerous funding options available for startups, but it might be challenging to secure one if you haven’t established a credit history or track record. Options include traditional bank loans, SBA loans, alternative lenders, and investor funding.

Which loan is best for a startup business?

The best loan for a startup depends on your business’s industry, funding needs, credit history, and repayment ability. Options include SBA loans, which offer flexible terms and government-backed guarantees, or alternative lenders, which may provide faster, but more expensive funding with less stringent eligibility criteria.

Is it difficult to get a business startup loan?

Getting a business startup loan can be difficult without a proven track record. Lenders typically assess factors such as borrower credit history, business plan, collateral, and industry viability — information startups don’t always have.

Which bank is best for startup business loans?

Some banks that are best for startup loans include:

Wells Fargo
PNC Bank
Huntington National Bank
Bank of America
TD Bank Business

What credit score do you need for a startup business loan?

Generally, a good personal credit score above 670 can improve your chances of qualifying for favorable loan terms and rates. However, alternative lenders and financing options are available to borrowers who don’t meet minimum credit score requirements or who have limited credit history.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.