Young entrepreneurs usually can’t get a regular bank loan for a brand-new business. With little credit history, no revenue yet and student loans already on your credit report, you just don’t look like a safe bet to a loan officer.
Annoying? Sure. But fixable.
So the realistic path is different. Start with money you don’t have to pay back with interest, then look at an SBA microloan from a nonprofit lender, and save the bigger SBA 7(a) loans for once the business is up and running.
The short answer
- Your own savings and side income are the cheapest startup money there is.
- SBA microloans go up to $50,000, through nonprofit lenders, at rates generally between 8% and 13%.
- Kickstarter is all or nothing: miss your goal and no money changes hands.
- SCORE mentors are free and can help you get loan-ready.
Why banks say no to young founders
A lender wants to see two things: that you can repay and what happens if you can’t. A new business run by someone in their early twenties often has neither a track record nor assets to back the loan.
Student loans add to the problem, because they’re already part of your monthly debt.
None of that means you can’t start. It means you start smaller and build the record lenders want to see.
Your funding options, from cheapest to most expensive
| Option | How much | What it costs | The catch |
|---|---|---|---|
| Your savings and side income | Whatever you can put aside | Nothing | Slow, but you keep the whole business |
| Friends and family | Varies | Whatever you agree on | Put it in writing so it doesn’t wreck a relationship |
| Crowdfunding (Kickstarter) | Your funding goal | 5% Kickstarter fee plus about 3% to 5% for payment processing | All or nothing: miss the goal and you get nothing |
| SBA microloan | Up to $50,000 (average about $13,000) | Generally 8% to 13% | Can’t pay existing debts or buy real estate. Up to 7 years |
| SBA 7(a) loan | Up to $5 million | Set by the lender | Must be creditworthy and unable to get credit on reasonable terms elsewhere |
| Personal loans and credit cards | Your personal credit limit | Your personal rate | You owe it even if the business fails |
Start with money you don’t borrow
Every dollar you save before launch is a dollar you never pay interest on. A side gig while you test your idea can fund the first version of the business, and our list of gig economy jobs has options that fit around a day job.
Friends and family money can work too. Just treat it like a real loan.
Write down the amount, the repayment schedule and what happens if the business doesn’t make it.
And keep your first version cheap. Plenty of businesses start with nothing more than a website, which is why our guide on starting a blog on Bluehost walks through the actual costs.
SBA microloans: the best first loan for most young founders
The U.S. Small Business Administration doesn’t hand out these loans itself. It funds nonprofit community lenders, called intermediaries, and they make the credit decisions and set the terms.
- Loans go up to $50,000, and the average is about $13,000.
- Rates are generally between 8% and 13%, set by each lender.
- The longest repayment term is seven years.
- You can use the money for working capital, inventory, supplies, furniture, fixtures, machinery and equipment.
- You can’t use it to pay existing debts or buy real estate.
These lenders are nonprofits with experience in both lending and helping new owners, so ask what they want to see in a business plan before you apply.
Crowdfunding: good for products, risky for everything else
If you’re making something people can pre-order, Kickstarter lets your future customers fund the first run. You set a goal and a deadline, and both are locked once you launch.
Hit the goal and Kickstarter takes 5%, plus roughly 3% to 5% for payment processing. Miss it by a dollar and no money changes hands at all.
So set a goal you can actually reach.
SBA 7(a) loans, once you’re up and running
The 7(a) program offers loans up to $5 million through approved lenders. The business has to be operating, for-profit and in the U.S., creditworthy, and unable to get the money on reasonable terms elsewhere. That last rule is why a 7(a) loan is often the next step after you’ve been turned down by a regular bank.
SBA’s Lender Match tool connects you with SBA-approved lenders. If your business already has debt you’re struggling with, read how to get out of business debt first.
Get free help before you borrow
SCORE mentors give free advice on financing and business planning by email, phone or video. Women’s Business Centers offer free to low-cost counseling, and Small Business Development Centers help with business plans and access to capital. SBA’s resource partners page lists all of them.
Keep your student loans in the plan
Early on, your business may pay you very little. If that happens, don’t stop paying your federal student loans. The Repayment Assistance Plan (RAP) bases your payment on your adjusted gross income, and the minimum is $10 a month, which is a lot easier to carry than a default.
Forbearance can look like the easy way out, but interest keeps building on every loan type while you’re in it. Check what your payment would be in our RAP calculator, and see the full list of options in our student loan repayment plans guide.
Next stepNeed cash while the business gets going? Start with our guide to making money to pay off student loans
It’s hard with a regular bank. SBA microloans from nonprofit lenders are a better first stop: they go up to $50,000, and the lenders set their own credit rules. Savings, side income and friends and family money don’t need credit at all.
Up to $50,000. The average microloan is about $13,000, rates are generally between 8% and 13%, and the longest term is seven years.
Not for these loans. SBA microloans come from nonprofit intermediary lenders, and 7(a) loans come from approved lenders that SBA partly guarantees.
No money changes hands. Backers aren’t charged and you get nothing. If you hit the goal, Kickstarter takes 5% plus roughly 3% to 5% for payment processing.
Be careful. Interest builds up on all loans in forbearance. If your income is low, RAP bases your payment on your adjusted gross income, with a $10 minimum.
Sources (7)
We use primary sources wherever we can: Federal Student Aid, the U.S. Department of Education, the IRS, federal regulations and each company’s own site.
- U.S. Small Business Administration. Microloans. sba.gov. Accessed October 22, 2026.
- U.S. Small Business Administration. 7(a) loans. sba.gov. Accessed October 22, 2026.
- U.S. Small Business Administration. Loans. sba.gov. Accessed October 22, 2026.
- U.S. Small Business Administration. Resource partners. sba.gov. Accessed October 22, 2026.
- Kickstarter. Why is funding all-or-nothing?. help.kickstarter.com. Accessed October 22, 2026.
- Federal Student Aid. Income-Driven Repayment Plans. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Get Temporary Relief. studentaid.gov. Accessed October 22, 2026.
