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You can find $40,000 business loans with most types of lenders. But to qualify, your business must have the revenue to support repayments. While it’s possible to find $40,000 in startup financing, you generally need good or excellent credit to qualify for this amount — typically a credit score of at least 670. And it can help if you already have experience working in the industry.
You can find $40K business loans at banks, online lenders, community development financial institutions (CDFIs) and even some microlenders. Certain credit unions may also offer $40,000 loans, though not all offer business financing.
When it comes to bank loans, community banks and regional banks can be a particularly good choice for a $40,000 loan. Some large national banks have small business loan programs, but most prefer to fund larger amounts.
Before you apply for a $40,000 business loan, decide what type of financing your business needs. For example, a term loan can cover a one-time expense, while a line of credit can cover ongoing costs and emergencies.
To qualify for a $40K business loan, you’ll typically need to meet the following requirements.
From traditional term loans to more alternative forms of business financing, here are seven business loan types to consider.
One of the most common types of business loans, term loans are ideal to pay for large, one-time expenses. They’re offered by traditional banks and online lenders and disbursed in one lump sum. A term loan typically comes with a fixed interest rate, and you’ll repay it in equal monthly installments over months or years.
A business line of credit is a more flexible form of financing and works kind of like a credit card. The lender gives you access to a revolving line of credit that you can draw on, as needed, up to your approved limit. Lines of credit can be useful to fund ongoing projects or to cover cash flow gaps.
A type of installment loan, equipment financing allows you to buy vehicles, machinery or other types of equipment. The purchase acts as collateral for the loan, which means you may be able to get better rates. Like business term loans, equipment financing typically has fixed rates and equal repayments, although you may need to make a down payment on this type of loan.
Microloans are similar to small, term loans and are typically offered by the SBA, nonprofit or online lenders. These types of loans are usually capped at $50,000 and tend to have shorter loan terms. Microloans are often meant for women and minority-owned businesses or businesses in underserved or low-income communities.
If your business does a lot of credit card sales, a merchant cash advance (MCA) is a way to leverage those future sales in exchange for a lump sum now. How much you can borrow depends largely on your monthly sales volume. MCAs are one of the more expensive types of short-term financing, and the lender will typically require weekly or even daily repayments.
Invoice factoring is a type of short-term funding that leverages your unpaid invoices for cash. It works by selling your outstanding invoices to a factoring company that will then pay you a percentage of the invoices up front. As customers settle their invoices, you’ll get a portion of the remaining balance back minus the factoring fees, which can be steep.
Invoice financing is similar to invoice factoring, except you don’t sell your invoices. Instead, you borrow money based on the value of your outstanding invoices and repay it daily or weekly as your customers pay their bills. Like invoice factoring, invoice financing is an expensive type of short-term financing, but it does allow you to maintain a closer relationship with your customers.
The cost of a $40,000 loan depends on the APR and terms that you qualify for. Your terms may include an origination fee of 1% to 6%, or $400 to $2,400, which the lender either deducts from the loan amount or adds to your loan balance at closing.
Use our business loan calculator to get an estimate of your monthly payment and the total cost of a $40,000 loan.
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You may be able to get a $40K SBA loan through its 7(a) or microloan programs, which both offer loans of this size, although you may have better luck with the microloan program. However, requirements to qualify for SBA loans are generally strict, and the loan process can be lengthy.
Getting a $40,000 business loan with bad credit can be easier if you apply with an online lender or CDFI that accepts your credit score range. These types of lenders often offer options to people with credit scores below 580, which is considered bad or poor credit. You may also want to look into lenders that specialize in business loans for bad credit.
If your personal and business finances are otherwise in good shape, a community bank might also be willing to overlook a negative credit history.
You should be able to find a $40,000 loan through most business loan providers — even if your credit is less than perfect. To get one that best fits your business’s needs, compare business loans and check your rate with a few options before you apply.
How difficult it is to get a $40K business loan depends largely on your credit score, revenue and how long you’ve been in business. If all those factors are strong, getting a business loan should be easy. However, if you can’t meet the necessary requirements, you may need to seek alternative financing or offer collateral or a personal guarantee.
It can be harder to get a business loan when you’re just starting because you might not meet the minimum requirements to qualify. But, you might qualify for a personal loan for startup businesses to fund your new company.
If your credit is poor, you may need to consider types of business financing such as merchant cash advances or invoice factoring. These types of funding are more concerned with your business financials than your credit score, but they can be pricey.
Think sole proprietors can’t get loans? Think again — see how to fund your business today.
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