What Qualifies as a Startup?
Startup vs. Established Business
The distinction between an established business and a startup is very important to identify. There are 3 general rules to distinguish between a startup and an established business:
Rule 1: If a business has less than $5,000 per month revenue, then they would automatically be considered a Startup.
Rule 2: If a business has been making revenue for less than 3 months no matter the amount of revenue, that also means they are a startup.
Rule 3: If a business owner uses the term "Pre-revenue" that typically means they have no revenue right now, which will also mean they are a startup.
Startup Growth Statistics
5.04M
New businesses in 2015
2.8M
New businesses in 2022
90%
Startup failure rate
How Startup Funding Works
Since we are working with a business that either has very little to no time in business and very little to no revenue, the criteria we look for are tied to the borrower themselves instead of the business.
Key Difference: Startup funding focuses on the entrepreneur's personal qualifications rather than business metrics, since there's limited business history to evaluate. Learn more about qualifying for startup funding here.
The Four Main Startup Funding Options
Pre-Funding Checklist
Personal Financial Preparation:
- Check and improve personal credit score (aim for 650+) - Get professional credit monitoring
- Gather 2 years of tax returns
- Document steady W-2 income of $50k+ (if applicable)
- Pay down personal debt to improve debt-to-income ratio
- Establish business bank account
- Obtain business license and permits
- Register business entity (LLC, Corp, etc.)
- Get Federal EIN number
Business Foundation:
- Develop comprehensive business plan
- Create detailed financial projections
- Identify specific funding needs and uses
- Research target market and competition
- Establish business credit profile
- Set up professional business address
- Create business website and online presence
- Open business bank account
Documentation Needed:
- Personal identification (Driver's license, passport)
- Social Security card
- Personal tax returns (2 years)
- Bank statements (3-6 months)
- Proof of income (pay stubs, 1099s)
- Business formation documents
- Business license and permits
- Business plan and financial projections
Application Process Checklist
SLOC Application Requirements:
- Personal credit score 650+ preferred
- Low debt-to-income ratio
- No recent bankruptcies or foreclosures
- Stable residential history
- Valid identification and SSN
Need to improve your credit first? Professional credit repair services can help optimize your score.
Personal/Business Term Loan Requirements:
- 2 years of tax returns showing $50k+ income
- Good credit history
- Stable employment or business income
- Low existing debt obligations
- Professional business setup
Application Steps:
- Complete pre-qualification questionnaire
- Submit required documentation
- Undergo credit and background check
- Review and negotiate loan terms
- Sign loan agreements and disclosures
- Receive funding (typically 3-14 days)
- Set up payment schedule and account management
- Begin building positive payment history
Startup Funding FAQ
Q. Can you get startup funding in Canada or internationally?
A. No, startup funding is only available within the USA
Q. Does the client need to have an LLC?
A. No, the client does not need to have a business setup or even a business plan in place. As long as they have good credit they would be a good fit to apply.
Q. Why was my client declined if they have a 700+ credit score?
A. The underwriting for startup funding looks at many factors outside of just the number. These include number of open accounts, number of inquiries, date of most recent account and more. Because of this you may still have a client that has a great credit score but their account is missing certain aspects that would make them a good fit.
Q. Can a business get startup funding as well?
A. Yes, it's a great option to offer a business that is looking for some additional capital that comes at a very low interest rate. This is not always the ideal product for a business owner but it certainly has its place for established businesses as well.
Q. If a startup client needs more than $100k what are my options?
A. With startup funding it is difficult to acquire more than $100k unless the client is extremely well qualified with great credit and history and also great personal income. However even with great qualifications startup funding typically can only get a maximum of $150k. Because of this there is no way to get a startup more than that using the products and programs that we offer.
Alternative Startup Funding Sources
Bootstrapping Phase
Many companies start in the "bootstrapping" phase - establishing themselves without external help:
- Personal savings and investments
- Revenue from initial sales
- Part-time business development
- Lean operations and minimal expenses
Seed Funding Options
Once past bootstrapping, consider these seed funding sources:
Seed Funding Sources:
- Friends and family investments
- Angel investors and angel groups
- Seed-stage venture capital firms
- Crowdfunding platforms (Kickstarter, Indiegogo)
- Business plan competitions
- Government grants and programs
- Accelerator and incubator programs
- Revenue-based financing
If a startup doesn't have the plan, intention, or the scalability to turn into a business worth more than $50K, it is probably never going to get there. To build something worth this much, proper systems and a good team is needed.
Post-Funding Checklist
Immediate Actions After Funding:
- Set up automatic payment schedules
- Create detailed budget for fund usage
- Track all business expenses carefully
- Maintain separate business and personal accounts
- Monitor credit scores and reports monthly
- Build positive payment history immediately
- Keep detailed financial records
- Plan for next funding round if needed
Long-term Success Strategies:
- Focus on revenue generation and growth
- Build strong business credit profile
- Maintain excellent personal credit
- Network with other entrepreneurs and investors
- Track key performance metrics
- Prepare for Series A funding when ready
- Build relationships with lenders and investors
- Consider transitioning to business-only funding
Common Mistakes to Avoid
Funding Mistakes That Can Hurt Your Future:
- Using funding for personal expenses
- Missing payment deadlines
- Not tracking business expenses
- Applying to too many lenders at once
- Not reading loan terms carefully
- Failing to build business credit alongside personal funding
- Not having a clear plan for fund usage
- Overlooking the importance of cash flow management
Remember: Startup funding is designed to bridge the gap between your business idea and profitability. Use it wisely to build a foundation for long-term success and future funding opportunities. Ready to apply for startup funding? Get started here.