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Business loans for young entrepreneurs

Ready to hit the market? Great — but how does a young, unproven entrepreneur get a business loan?

Here's the pitch: you're an entrepreneur with a great idea. You're ready to make your business real. But you need money.

It's tough for young, untested entrepreneurs looking to fund a startup. You can only get a business loan if you:

  • Have been running a business for at least 6 months.
  • Have an ABN or ACN.
  • Are generating revenue (typically around $50,000 a year).

If your business checks these boxes then you have a few options. If you're at more of the "young entrepreneur with big plans" stage then you'll have to get more creative.

Unsecured business loans for small startups

If your business is at an early stage but is already up and running — as in, you're an actual business with some revenue coming in — then an unsecured business loan could work.

You'll need the stuff we listed above (revenue, ABN, 6 months in business). But you won't need to provide any assets or property as security. Instead, the lender relies on your creditworthiness as a borrower.

It's a good idea to check your credit score before applying. The better your score, the lower your business loan interest rate will be.

Online business lenders for small businesses

Business loans from a bank or lender

Many young entrepreneurs will struggle to get a bank to approve a business loan unless they've been in business for a while.

Banks want to see tax records, profit and loss statements and a business plan.

If you have an asset that you can use as security then you could have an easier time getting a secured business loan.

Assets you can use include:

  • A car
  • A property
  • Some savings
  • Outstanding invoices

If you've got assets and a year or so under your belt as a business owner, this is an option.

It helps to have a plan

Some banks and lenders will give business loans to companies that have been operating for a short time. For example, Westpac offers startup loans to businesses that have operated for less than 2 years.

But you'll need to provide a detailed business plan that includes forecasted profit and loss, a detailed breakdown of your long-term plans and competitor analysis.

Tips for comparing business loan options

  • The lower the interest rate, the better. Shop around between lenders to get a better deal.
  • Watch out for upfront fees. Some lenders charge you a percentage of your total loan amount. Do the maths before you apply.
  • Choose your loan term carefully. The longer the loan term, the cheaper your monthly repayments will be. But you will pay more interest over a longer term too.
  • Improve your credit score. The lowest rates go to borrowers with the best credit scores.

More loan options for your entrepreneurs

If neither of those options fit your entrepreneurial enterprise, here are some other finance routes that might work:

  • Invoice financing. This is a form of business financing for existing businesses only. You can use your outstanding, unpaid invoices to get credit. The lender uses your unpaid invoices to assess how much cash you can access.
  • Business credit card. If your business is up and running and you want to cover multiple purchases and pay them off over time, you could look at a business credit card.
  • Peer-to-peer lending. Unlike traditional forms of credit, with peer-to-peer business lending the platform is just there to connect you to the borrower to people who want to lend money. Think of them as (anonymous) investors. The barrier to entry can be lower for peer-to-peer finance, but rates are higher. And you'll still need some info about your business, including an ABN and financials.

Startup funding options outside of a business loan

Now we've run out of business loan options. These are some alternative funding ideas for a young entrepreneur who simply isn't at the point to access any kind of business loan.

  • Incubators. You could apply to a startup incubator or accelerator. It's not a guarantee of funding, but entry could connect you to people who have money (or know people who do).
  • Grants. Look at small business and startup grants aimed at young entrepreneurs.
  • Investor funding. Start pitching to investors. Look on LinkedIn, go to conferences and scour your networks.
  • Crowdfunding. Using a crowdfunding platform can be a great approach if you're looking to sell a consumer product or something that can generate a lot of excitement from an online community.
  • Beg, borrow (don't), steal. Many entrepreneurs bootstrap their first business by borrowing from family and friends. This has all sorts of risks, as anything involving personal relationships and money does.

Ready to launch? Compare online business loans

Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Lumi Unsecured Business Loan
3 months to 3 years
2.5% establishment fee
Apply for up to $300,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.
Valiant Finance Business Loan Broker
3 months to 7 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 80 lenders. Loans between $5,000 and $20 million are available. Request a call – your loan can be funded in 1 business day.
ebroker Business Loan
1 month to 30 years
$0 application fee
Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.
ScotPac Boost Business Loan
3 months to 3 years
$0 application fee
A business loan for any industry. Borrow between $10,000 and $500,000, with approved loans funded within 24 hours. Minimum monthly turnover of $10,000 and 1 year of trading history required.
Prospa Business Loan
3 months to 3 years
3.5% origination fee
Small business loans are available from $5,000 - $500,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $5,000 is necessary.

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