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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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Using Student Loans to Start a Business: Is It Worth the Risk?

Ever wondered if it's possible to use student loans for your new business? Read on to learn the pros and cons.

Chances are, you’ve heard stories of young adults using their student loans to pay for trendy clothes, international trips, fancy dinners—nearly everything except their education. Maybe you know a few of them yourself.

While “living the life” is alluring, what if you put those funds toward starting a business instead? You may be wondering: Is it possible? And more importantly, is it legal ?

Well, keep reading to find out.

Can You Use Student Loans for Your New Business?

Overestimating the cost of attending college happens more often than you think. But if you find yourself with funds left over from your student loans, are you allowed to do whatever you want with them?

Technically, it depends on the terms of the loan agreement you signed with your lender. Contracts for federal student loans typically have very explicit terms for what the money can be used for. On the other hand, the agreements for private loans are often more open-ended.

Of course, these legal documents haven’t stopped borrowers from using their private or federal loans for personal expenses. A 2019 survey from Student Loan Hero found that, over summer break, only 10% of student respondents used their loans strictly for tuition. Instead, many used the money for:

• Bills (38%)
• Clothes (26%)
• Traveling (20%)

Colleges and universities can’t track what recipients use the money for, so unless you borrow more than the cost of attendance, there’s usually no way for them to find out if you’re using the money for non-specified purposes.

But while it’s not outright illegal to use your student loan money to fund your startup, there’s still plenty of risk involved.

If they find out, lenders can terminate your contract and take the funds back, which also means you’ll need to repay any money you’ve already spent (ugh, more monthly payments). You may also face legal action from your lender and even the federal government—adding legal costs, fees, and penalties to your final bill.

Because of the far-reaching repercussions of this decision, it’s best to raise startup funds in other ways and use your student loans as a last resort. If you feel that there’s no other option available to you, read on for the pros and cons of using student loans for your new venture, plus some ways to help minimize your risk.

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Pros and Cons of Using Student Loans to Start a Business

• Many students will find it easier to qualify for student loans compared to traditional business financing options, as lenders are typically more lenient with their requirements for student loan borrowers.
• You may be able to get a better interest rate with student loans than with business loans, personal loans, or credit cards—especially if you haven’t built up your credit yet or don’t have the best credit score.
• Student loans allow you to pay back the amount over a much longer period of time, and you can adjust your repayment options if you need to. For instance, some allow for missed payments or temporary payment deferrals. Student loan payments generally start after graduation too, so you don’t have an immediate monthly payment to make like you do with credit cards.
• As mentioned earlier, using your student loans for your business is a risky move. Getting caught could expose you to a slew of financial and legal consequences.
• You’ll take on even more student debt—debt that may follow you for years after graduation (and endless monthly payments to budget for). Borrowing more money than you need to will also increase the total amount you owe over time, due to accruing interest.
• Compared to business loans, personal loans, and credit card debt, you can’t discharge student loan debt during bankruptcy. You’ll still be responsible for making payments on the debt even if you don’t have the means to repay.

4 Ways to Reduce the Risk of Using Student Loans for Your Business

1. determine how much you need to start your business.

Draw up a business plan to ensure you know exactly how much money you need to cover your startup costs. Some things to take into consideration include:

• Fees, licenses, and credentials needed to establish your business and authority
• Average marketing budget for startups in your niche
• Cost of producing or buying inventory
• Cost of setting up a website or online store
• Money to pay your employees or contractors
• Contingency budget for unexpected expenses
• Any other essential equipment, software, or resources needed to run your business

This exercise also has the added benefit of testing whether your idea is profitable enough to outweigh the risks of using student loans in the first place.

2. Cut Down on Your Living Expenses

Save money on textbooks, rent, food, and other expenses—and put that money toward your business—to reduce your total student debt. This comprehensive list offers college students 50 ways to save money and stretch their budget further.

Keep your cost of living down, cut back on impulse purchases, and sacrifice some of your enjoyment (and discretionary income) today so it pays off in a big way down the road.

3. Find a Business Partner

A business partner willing to finance your startup idea (or one who can access other means of funding thanks to a great credit score) can help lighten the load on your shoulders. The best business partners also carry a wealth of industry-specific expertise that can be even more valuable than the financial resources they bring to the table.

4. Look For Alternative Financing Options

The best way to minimize your risk with student loans is to avoid using them for your business altogether. But if you feel that it’s a necessary risk to take, consider using it as a supplement to other financing options so you use as little of your loan money as possible.

Here are some other ways to raise money for your business:

• Apply for a small business loan backed by the Small Business Administration for the most straightforward way to get business financing.
• Use a credit card to finance your business, since getting one is often easier than applying for a loan. Keep in mind, though, that credit cards typically carry higher interest rates than loans do.
• Look into online lenders. Many offer faster application processes than their brick-and-mortar counterparts, but they may also come with higher interest rates.
• Get a part-time job—or work full-time during the summer—and use the money you earn to fund your startup. Use this opportunity to learn what it takes to run a business and apply those lessons to your own company.

If you do siphon some of your student loan money for your startup, just make sure that all of your educational expenses are covered first. Otherwise, you’ll find yourself taking out even more student loans to cover the difference.

Is It Worth It to Use Student Loans for Your Business? The Decision Is Yours

If you’re a student with a business idea you’re excited about, funding your startup with your student loans might sound like the easiest way to get started. Even so, take some time to make sure that this is the best move for your personal finances too.

Student loan debt is a large financial burden that often sticks around for years—even decades—after you receive your diploma. Plus, there’s also the chance that you may get caught using the money for non-educational purposes.

Remember that student loans aren’t the only way to finance your business. Sure, the story of angel investors swooping in to save the day is nice, but keep in mind that many young entrepreneurs before you have started business empires with a shoestring budget. Think of this as your call to rise to the challenge too.

Written by Feli Oliveros , Freelance Contributor

Posted on March 16, 2022

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Got Student Loans? What Small Business Owners Need to Know

Although the student loan forgiveness plan came to a halt after the Supreme Court shot it down, there is still a path toward student loan forgiveness: the SAVE Repayment Plan . This plan is harder to challenge legally because it’s an adjustment to an already existing repayment plan. It could ease the burden of small business owners across the country who are struggling to pay off their debt and run their businesses. 

You can run — and fund — a small business even if you still have student loan debt. Here’s what you need to know about student loan forgiveness and managing your debt as a small business owner.

Get Personalized Loan Options For Your Business

Let our experts connect you to lenders based on your unique business data.

1. Apply for the SAVE Plan

The SAVE Plan stands for Saving on a Valuable Education and is a change from the previous REPAYE income-based repayment plans on federal student loans. For anyone who qualifies, it can significantly reduce your monthly payments and lower the amount you’ll pay in interest over time. In fact, you may qualify to pay $0 on your student loans — and interest won’t accumulate. 

Plus, if you’re borrowing less than $12,000, your loans will be forgiven after 10 years of regular payments (even if those payments are $0). For larger amounts, your loans can still be forgiven, but you’ll add one year for every additional $1,000 borrowed. You can apply for the SAVE Plan here.

If you’re not sure whether the SAVE Plan is right for you, use the Loan Simulator provided by FederalStudentAid.gov to walk through your repayment options before you apply.

2. Consider Other Repayment Plans for Federal Loans

If you don’t qualify for the SAVE Plan but you’re struggling to make payments each month, consider a different repayment plan. Federal loans are placed automatically on a 10-year standard plan. This plan may save you interest over time, so it’s a good idea to remain on it if you can afford it. But you may not have to stick with it if your payments are too high. 

Here are the other repayment options that you may qualify for:

Graduated repayment plan

• Who it’s for : Any federal student loan borrower.
• How it works : It increases loan payments over time, usually every two years. This plan gives borrowers time to earn a higher income that may match the payment increases.
• Length of repayment period : Must pay off loan in 10 years.

Extended repayment plan

• Who it’s for : Direct loan borrowers with more than $30,000 in loans.
• How it works : Borrowers can have fixed or graduated plans with more time to pay it back.
• Length of repayment period : Must pay off loan in 25 years, so the repayment period is longer than others.

Pay as you earn repayment plan (PAYE)

• Who it’s for : Any new borrower on or after October 1, 2007 that got a direct loan disbursement on or after October 1, 2011. Must prove you can’t afford payments. 
• How it works : You pay 10% of your discretionary income (but never more than the standard plan would charge). Each year, you must resubmit your income, even if nothing has changed.
• Length of repayment period : After 20 years of payments, your remaining undergraduate student loans are forgiven (it’s 25 years for graduate loans). 

Income-based repayment plan (IBR)

• Who it’s for : Borrowers who can prove they have high debt in relation to their income level. 
• How it works : You’ll pay either 10% or 15% of your discretionary income, depending on your loan start date (but never more than you would have paid with the standard plan). You have to resubmit your income each year even if your details stayed the same. Spouse’s income counts if you file joint taxes.
• Length of repayment period : Your remaining balance is forgiven after 20 or 25 years of making payments, depending on the start date of your loans. 

Income-contingent repayment plan (ICR)

• Who it’s for : Any borrower with qualifying loans.
• How it works : You’ll pay the lower amount of either 20% of your discretionary income or the total you would owe on a fixed 12-year payment plan that has been modified for your income level. Your spouse’s income is counted if you file joint taxes.
• Length of repayment period : After you make payments for 25 years, your balance will be forgiven. 

Income-sensitive repayment plan

• Who it’s for : Any borrower with FFEL Program loans.
• How it works : Your monthly payment depends on your annual income.
• Length of repayment period : Your loans will be completely paid off after 15 years.

Before signing up for any repayment plan, make sure you know what you’re required to pay each month. Also, check the interest you’ll be charged over time. The standard plan is typically the option that will charge the least interest long term.

3. Pay Close Attention to Your Loans

You’ll want to be aware of several aspects of your student loans, including due dates, how much you owe, and the interest on each one — especially with the changes coming. Student loan repayments will restart in October 2023. Put the due date on your calendar to make sure you have enough cash on hand.

Also, try to pay off the student loan with the highest interest rate first. You can see the details, including the interest rate, of each loan after logging into your account on your loan servicer’s website. Direct any extra payments toward the loan with the highest rate until it’s paid off.

4. Make On-Time Payments

Missing several payments can affect your personal credit score. A lower credit score may impact your ability to get the business credit cards and small business loans you need to grow your business, so make sure you pay on time. 

This is true even if that payment is $0. You may still need to sign up for automatic payments with a $0 payment — make sure to follow your lender’s instructions.

5. Combine Private Loans

If you have more than one private student loan, consider consolidating them into one, also called refinancing. Doing this may make monthly repayment easier and make you less likely to forget a payment — especially if you’re paying multiple companies or lenders every month. 

However, try to make sure you aren’t swapping a fixed-rate loan (where the interest rate never changes) for a variable-rate loan (where the interest rate can increase). And make sure you won’t lose certain benefits or access to income-based repayment plans before you refinance.

How Nav Can Help Your Small Business

Consider Nav your small business partner. Just like student loans don’t need to hold your business back, neither should a lack of funding. When you’re ready to make your next move, we’re here to guide you through the financing process. It’s quick and easy to use Nav today — just input your business details to see your best funding options instantly.

Compare your financing options with confidence

Spend more time crushing goals than crunching numbers. Instantly, compare your best financial options based on your unique business data. Know what business financing you can qualify for before you apply, with Nav.

This article was originally written on August 24, 2022 and updated on August 25, 2023.

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Tiffany Verbeck

Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.

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How to write a business plan

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Every business owner can benefit from writing a business plan, including those in the early stages of launching a business . A well-crafted business plan communicates the business’s strategy for growth to key leaders and investors. It’s also an important step to getting a business loan since many lenders require it.

Let’s walk through the steps and elements of writing your ideal business plan.

Key takeaways

• A business plan outlines how you plan to bring products or services to market
• Many lenders require a business plan be included with a loan application
• You can choose to write a lean or traditional business plan
• It covers everything from market research to your marketing and financial plan.

What is a business plan?

A business plan is a document that outlines a business’s strategy for bringing a product or service to market. It describes the company, product idea and goals or steps that the business will take to achieve growth. The document includes multiple sections that provide insight into each part of the strategy.

The business plan can be a simple document called a lean business plan or a more detailed traditional business plan. The lean business plan covers the basics of the company, product, target customers and how it will get revenue. It may only be one page with short descriptions for each part.

The traditional business plan includes more depth on the goals, measurements, research and marketing strategies to get the business where it’s going. Here are key differences in the information written for each type of business plan:

Although there’s no one-size-fits-all approach, follow these steps to create a strong business plan.

Write an executive summary

An executive summary is the introduction to a business plan, giving the key details about your business model and the product or service you’re offering. While there’s no strict formula for writing this section, you should include all the relevant details that you’d want a key partner or investor to know.

It should describe your product or service idea, target market and key objectives for growth within the next few years. It may also summarize your marketing and sources of revenue or funding.

You can adjust what to include based on the exact business you’re starting and its business model. Most business plans keep the executive summary to one to two pages.

Create a company description

The company description should overview important details about your company. It can state your company’s name, location and type of entity as well as describe its history. It should also clearly define the vision that you have for your company’s future in the form of a mission or vision statement.

You may also outline the structure for managing the business, listing key roles and responsibilities and the people filling those roles. Depending on the details you included in the executive summary, you might include information about your product or service.

Describe your value proposition

The value proposition is your chance to pitch what makes your business stand out. It identifies the customer’s problem or gap in the market for the product or service you’re offering. It then goes into detail about how your business will solve the problem.

The value proposition can also explain major barriers that customers have before making a decision and what your business will do to break through those barriers. It shows leaders and investors that you have a thoughtful purpose behind the business you’re creating.

State your business goals

The path to achieving success starts with knowing what success looks like. Many business plans state its main objectives in the company description. Others describe those goals in a separate part of the business plan to dive deeper into the specific goals.

You can also include key measurements you’ll use to gauge whether your business is achieving its goals. You would then use these goals in other business planning documents, further breaking them down into defined short-term steps that ladder up to the larger goals.

Outline your product and service

Next, you want to dive into the main product or service that your business is offering. Explain what the product is, how it works and the benefits that it brings to customers. If you’re planning to make multiple products, you can include a description of each product line. Show how this product or service is set apart from similar products from competitors.

You can also use this section to show how the product or service is produced, including cost of supplies and the price at which you plan to sell. Let the investors and stakeholders know if you have a trademark or patent for the products you’re creating.

Give a summary of market research

Next comes market research, the part of the plan where you do your due diligence to gather information and understand your target customers and competitors. First, you want to understand your target customers’ needs and any barriers they might have to buying your product.

You want to look for information about their demographics and how they might respond to the product you’re offering. This information will help you when designing your product and marketing it in a way that resonates with customers.

Then, you can look at the economy around your product, such as average pricing and sales revenue. This also includes research about your competitors, the market share that they hold and the barriers to entering your market. This section may include data from data research companies, surveys, focus groups and interviews.

According to the U.S. Small Business Administration , the questions you’re trying to answer include:

• Market size, or how many people may want to buy your product
• What people are willing to pay for your product
• Similar products already available
• Who your competitors are
• How your industry is doing
• Typical revenue gained by small businesses in your industry

Summarize a marketing strategy

Once you’ve clearly defined your product and who you’re selling to, you can come up with a strategy for how you’ll reach and sell to customers. In this section, you’ll include the different marketing channels you’ll use to promote your products and services.

These may include direct mailers, social media, traditional or online advertising or media events. The exact channels you use will depend on where you can easily find your target customers.

You can also describe the key messaging that you plan to use during marketing, which will pinpoint the value that it offers to customers. The marketing plan should also include the cost of marketing to different channels and your marketing budget. You can then outline the marketing goals and measurements you’ll use to see if you’re meeting those goals.

Create a logistics and operations plan

The logistics and operations section of your business plan is a detailed description of how your business will bring products and services to market. It explains how the business will run on a day-to-day basis. It should highlight your company’s management structure, give an overview of processes and describe the workflow from end to end. It can also include data on how many products you can make or how long it will take to make products or offer services.

Create a financial plan

Now that you’ve laid out the research, goals and planning, you can use that information to forecast revenue and build a financial plan. Use any past revenue or sales history as a starting point. Then, refer to your company’s recent growth and goals to calculate future financial growth.

If you’re a startup , you can use market research to estimate revenue for a startup in your industry. You can either forecast revenue manually or find software that projects revenue for you.

In your financial plan, you also want to create and track your business budget . You’ll track your estimated and actual revenue, updating regularly to keep the revenue forecast accurate and realistic. Next, you’ll list all expenses and their amounts, including one-time, variable, fixed or seasonal expenses. Here are some examples of different business expenses:

• One-time or capital expenses: Equipment, real estate, furniture, commercial vehicles, business licenses
• Variable expenses: Inventory, utilities, fuel, office supplies, shipping services, card processing fees
• Fixed expenses: Employee salaries and benefits, software, web hosting, office or equipment leases, business loan repayments

Business plan resources

Writing your business plan will take more than putting pen to paper. Try these resources to help you gather data, set up your finances and more:

• Business plan templates. Creating a business plan for the first time? Learn by looking up examples of other business plans or templates like these from Smartsheet .
• Software for accounting and financial planning. Many small businesses use Quickbooks, Xero or Netsuite to track revenue and expenses. These may also forecast revenue based on sales history.
• Business loan resources. To cover your funding needs, think through the types of business loans that would best serve your business. Once you’ve landed on a loan, compare features and interest rates to help you make a decision.
• Survey tools. For in-depth market research, you can build a survey and send to your target customers through a data research company like GWI.

Small business mentoring

Experienced mentors can guide you to making effective business decisions and unlock new potential for growth. Where to find small business mentors:

• SBA. You can find resources and free or low-cost mentors through the SBA’s local assistance tool .
• Small Business Development Centers. SBDCs provide specialized training programs in your local area covering specialized topics like marketing, data research and business management.
• Community Development Financial Institutions. CDFIs   are financial organizations like banks and credit unions that are built to develop the community. Alongside banking and lending services, CDFIs offer training programs and resources.
• SCORE. SCORE is an organization that partners with the SBA to bring resources to small business owners. Mentorship is at the core of what the organization does, and it can match you with a local mentor through its online locator tool.
• Local Chamber of Commerce. These local organizations are known for supporting business networking. They may help you find a mentorship program, or you may build a relationship with another successful entrepreneur through networking events.
• Nonprofit organizations. Some nonprofit organizations are dedicated to supporting small business owners with funding, trainings and mentorship programs. These are typically local programs. For example, NYPACE is a nonprofit that offers free consulting to underserved entrepreneurs in New York.

Bottom line

Your business plan should outline key information about your company, products and the strategy for getting those products in the hands of your customers. Every business plan looks different, but there is essential information to include in every plan, such as who your target customer is and your expected revenue. The business plan serves to help you get business funding and outline exact goals and steps to growing your company.

Frequently asked questions

Do i need a business plan to apply for a business loan, how do i write a simple business plan, what basic items should be included in a business plan.

Related Articles

How to get a business loan in 6 steps

How to create a business budget

What is the SBA line of credit?

What is a business line of credit and how does it work?

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How to Start a Business While Paying Off Student Loans

For many entrepreneurs, starting a business means more purpose, flexibility, freedom and control at work. But when student loans take up a big portion of your budget, that dream may be harder to achieve. The median monthly student loan bill among those in repayment is $222, according to data retrieved by Student Loan Hero. That doesn’t leave much room for financial risk-taking for those fresh out of college. In fact, the share of entrepreneurs between 20 and 34 years old decreased from 34% in 1996 to 24% in 2016, according to the Ewing Marion Kauffman Foundation’s most recent Startup Activity  report . With ingenuity and forethought, though, there’s no reason why young entrepreneurs should hold off trying to start a business while paying off student loans.

Start with an idea that is low-risk

If you’re currently working full time, consider starting a business on the side so you can keep any benefits you currently receive, like health care and access to an employer match on retirement savings. That will also help you evaluate the viability of your business idea without going all in. Make sure you secure any insurance, permits, licenses or certifications you might need for the business. Just because it’s a side hustle, doesn’t mean you can avoid red tape aimed at keeping clients, and yourself, safe. As a self-employed individual, you’ll also likely have to pay quarterly  estimated taxes  on side income, if federal and state income taxes aren’t automatically withheld from it. Alternatively, you can ask your primary employer if you’re still working full- or part-time for a separate company to take more tax out of your paycheck to avoid paying additional estimated tax.

Adjust your student loan payment

Reducing your bills, like those for student loans, can provide more freedom to fund and launch your business. Some options to consider are: Consolidation and refinancing:  If you have good credit — typically defined as a credit score of 670 or higher — or access to a creditworthy cosigner, you may be able to refinance student  loans to a lower interest  rate . This process is also referred to as private student loan consolidation. It’s an especially worthwhile option for high-interest private student loans. When you refinance federal loans, you’ll lose the ability to sign up for forgiveness programs and alternative payment plans. But private loans come with fewer payment-reduction options, so you have less to lose — and more to gain in interest savings, as their rates are often higher than federal loans’ rates. When you refinance, you may have the choice to stretch your repayment term over a longer period, which could lower your monthly payments. But when you make payments for a longer time, you’ll pay more in interest, which can cut into the overall savings refinancing provides. Forbearance and deferment:  It’s possible to postpone your student loan payments altogether through deferment or forbearance (depending on your circumstances) while you start your business. You can apply for deferment if you’re unemployed or are experiencing economic hardship. If you have federal subsidized or Perkins loans, interest will not accrue during the deferment period. You can request forbearance for a wider variety of financial reasons for up to 12 months at a time, and extend it if you need it. But unlike deferment, interest will accrue on all types of federal loans during forbearance. That means you may owe more once the forbearance period has ended. Contact your student loan servicer to discuss which option is best for you, and how much it would cost over time. Income-driven repayment plans:  If you have federal loans, consider signing up for an income-driven repayment plan. Your payments will be 10-20% of your discretionary income, depending on the plan, which can lower your bill significantly if you’re working less for an employer while starting a business. Your payments may not cover all the interest that accrues, which could mean a growing balance. Income-driven plans do provide forgiveness after 20 or 25 years, however, any forgiven amount may be taxed as income. The government’s repayment  estimator  tool can provide line of sight into how much you’ll pay overall — and potentially get forgiven — if you switch to one of these plans.

Work with a mentor

You don’t have to start a business all on your own. In fact, seeking the help of a mentor early can give you ideas for how to develop a business plan and get funding while keeping your own finances in shape. Use the U.S. Small Business Administration’s  local assistance tool  to find a small business development center or other free support in your area. You can also  request a mentor  through SCORE, a national nonprofit that pairs entrepreneurs with volunteer business experts. Finally, tap into your college’s alumni network to see if other entrepreneurs are interested in sharing their expertise. Ask the alumni services department if anyone comes to mind as a potential mentor for you, including professors and industry experts at the school. Or, search LinkedIn for entrepreneurs from your alma mater who may be willing to guide you.

Explore funding sources

Startup funding might feel like the biggest barrier to entrepreneurship when you have student loans. Banks and community organizations, for instance, offer loans backed by the U.S. Small Business Administration. But without a history of profitability as an established business, it can be hard to qualify. You may also not have a long personal credit history as a relatively recent graduate, which can be another barrier to getting traditional small business financing. Self-funding a business is an option, but with limited resources as a result of student loans, you may be tempted to rely on credit cards. This can be a viable method for some businesses, but your first priority should be to make all your student loan payments on time. Missed payments will negatively impact your credit score, affecting your ability to get business financing and even a mortgage or personal credit card in the future. If you use credit cards to start a business, make a plan to pay off the charges in a reasonable amount of time to avoid ballooning interest.

Consider these other methods of financing, too, which may be more accessible — even with existing debt to pay off. Crowdfunding:  Loans from friends and family give you the ability to set the terms, including how long you’ll have to pay them back and whether the loans will accrue interest. Have a candid conversation about your ability to repay others investing in your business, and keep the lines of communication open if you find it’s harder than expected to keep to the terms you agreed to. Crowdfunding, however, gives you the opportunity to raise money from a larger pool of investors than just friends and family — without having to repay the funds. Platforms including Kickstarter, Indiegogo and GoFundMe let you list a product or business others can contribute to, and you can offer rewards to investors in exchange for contributing. Check each site’s pricing page for details on how much they charge. You might see platform fees to list a campaign, transaction fees when a backer contributes to the campaign and transfer fees when funds move to your personal bank account. Lending circles:  Lending circles provide interest-free loans to low-income individuals and small businesses while helping borrowers improve their credit at the same time. In a lending circle, a group of community members pays into a central pot, and members take turns receiving a loan. Monthly payments into the fund are reported to the credit bureaus, helping participants build a credit profile. You’ll need to apply and take a financial education course in order to participate. But you can use the loan you receive to help with startup costs, and to build credit so you can apply for traditional funding in the future. Search for a lending circle through local community organizations using the nonprofit Mission Asset Fund’s  lookup tool . Online lenders:  You can search for funding from online-only lenders like OnDeck Capital or Kabbage to pay for a range of business expenses, including equipment and marketing. Online lenders generally offer faster application processes than traditional small business loans, and they may be easier to qualify for. The trade-off, however, lies in online loans’ interest rates. Without good personal credit, you could see interest rates much higher than typical rates for credit cards, for example. Taking on debt for your new venture on top of student loans can be risky, so compare online lenders carefully and borrow only as much as you know you’ll be able to repay. Paying off student loans can make financing a business difficult to start. But seeking advice from a mentor and making thoughtful decisions about how to launch it will move you closer to your vision of entrepreneurship.

Blog / Student Loans / How to Start a Business While Paying Off Student Loans

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How Students Can Launch And Fund Their Startup Ventures

From accelerators to venture funds, learn how to finance your student startup.

Advertiser Disclosure

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Many students enter university or MBA programs with the intention of starting their own businesses, and starting a company while still in college can provide valuable experience. Once you have an idea and plan for your business, looking for funding is the next step. This guide will help you find resources for students that can help you get your business off the ground. 

Why It’s a Good Time to Look for Funding

Choosing to create a startup business while still enrolled as a student can be an intimidating prospect, but there are significant benefits to embarking on this step. While students are still in school, they have the option of participating in programs designed for student entrepreneurs, which can provide invaluable opportunities to network, receive mentorship, refine a business plan, connect with funding sources, and create a strong pitch for potential investors. University funds, university-affiliated angel networks, and accelerator programs for students can provide assistance. 

Venture capital funds are thriving due to low interest rates, meaning that there is a large amount of funding available. Although it’s common for investors to focus on more established, profitable startups, funds focusing on student-run startups or early-stage startups are available for young entrepreneurs. Successful startups have been founded by students, and the experience of running your own startup while at college can provide crucial experience for future business ventures. 

How to Find Startup Funding

Startups often rely on their founders’ own savings and funds from family and friends, but there are multiple other sources of funding that can provide financial support to students as they start a business. Once you have decided on your business’s focus, it’s a good idea to start searching for funding sources. There may be resources available based on the type of business you plan to start—for example, businesses focusing on clean energy, education, tech, or solutions for social problems may be able to find specialized funding.  

Your university’s business and entrepreneurship programs are a good place to start networking and finding resources. Some venture funds employ student scouts who source promising entrepreneurs to invest in. 

Types of Startup Funding for Students

There are a number of types of funding for student startups. These include: 

Venture Funds and Grants Aimed at Students

Some venture funds and grants are aimed specifically at student-run startups, while others focus on early funding and may be appropriate for student ventures.

University Accelerator Programs

Accelerator programs can help students prepare startups for launch. These programs typically offer mentorship and training, opportunities to pitch to investors, and funding. University-affiliated accelerator programs are common, so it’s a good idea to check with your university’s entrepreneurship centers for opportunities. Large universities may have multiple accelerator programs. Some accelerator programs accept applicants from all universities. 

Some university accelerator programs include:

Accelerator programs that are open to founders from many universities include:

University-Backed Venture Funds

Some universities offer their own venture fund programs designed to invest in student startups. 

• Colorado State University CSU Ventures
• Cornell University BRV   
• Indiana University Innovate Indiana
• NYU Innovation Venture Fund
• Oregon State University Funding Opportunities
• Penn State University Garber Venture Capital Fund
• Portland State University Venture Venture Development Fund
• Stanford GSB Impact Fund
• UCLA Ventures
• University of Colorado Denver Rutt Bridges Venture Fund
• University of Minnesota Venture Center
• University of Rochester Simon School Venture Fund
• University of Tennessee Knoxville Boyd Venture Challenge

University Angel Networks

Some universities are connected with angel networks, often made up of alumni investors who will provide financial support to promising startup ideas. Regional networks may also be available. Online sources such as the Angel Capital Association directory can help you find sources.

• Baylor Angel Network  
• Berkeley Angel Network  
• Carolina Angel Network  
• Columbia Angels  
• Duke Angel Network
• Harvard Alumni Angels  
• MIT Alumni Angels  
• Stanford Angels and Entrepreneurs  
• University of Virginia Angels  
• Wharton Angel Network  
• Wharton Alumni Angels  

Additional Sources of Funding

Accelerator programs and investors are not the only places to find funding for your startup. It’s a good idea to investigate all possibilities as you plan your funding. Additional sources of funding include: 

Business Plan Competitions

If you have a strong business plan, entering a competition can be an excellent way to win more funding, and competitions may also offer networking opportunities that will assist your business. Some top business plan competitions include the following: 

• ClimateTech and Energy Prize MIT  
• Milken-Penn GSE Education Business Plan Competition
• NFTE National Investor Pitch Challenge
• Pear Competition
• Rice Business Plan Competition  
• Social Enterprise Conference Pitch Competition
• Startup World Cup
• University of Oregon New Venture Championship  
• Visa Everywhere Initiative

Small Business Loans

Students may have difficulty qualifying for bank loans since these loans typically require a high credit score, collateral, and strong ability to repay the loan. However, student startups may be eligible for small business loans or startup loans . The U.S. Small Business Administration’s loan programs can help small businesses get loans. 

• U.S. Small Business Administration Loans  

Crowdfunding

Crowdfunding allows many people to provide small amounts of money for projects that interest them, often in exchange for special perks. Crowdfunding websites such as Kickstarter, Indiegogo, and Fundable are popular options to fund projects. Although crowdfunding can be incredibly successful, there are many potential pitfalls, so it’s important to research thoroughly and make sure that this method of funding is a good fit for your project. 

Here are some important factors to consider before embarking on crowdfunding: 

• Crowdfunding projects are most successful when they offer a tangible end product, such as games, toys, or technological gadgets, or when they already have a strong fanbase to draw from.
• Crowdfunding websites may only allow you to keep funds if the project is fully funded, so you’ll need to set your goals wisely. Some websites allow flexible funding goals. 
• When you plan the rewards you will offer to your backers, it’s easy to overstretch yourself and promise rewards that will be difficult or impossible to deliver. Keep your plans realistic. 
• Make sure that you can complete your project with the amount of money you set as your goal. It’s easy for the scope of a project to increase over time, making it difficult to finish even with a fully funded crowdfunding goal. 

Government Grants

Government grants typically target specific types of businesses working in industries that benefit communities or solve public issues, and they may require businesses to be fully operational before applying. However, depending on the nature of your startup, you may be eligible for this type of funding, so it’s wise to search through the available grants. You can search for government grants through these websites:

• America’s Seed Fund
• Grants.gov  
• Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs

Regional Funding Opportunities

It’s a good idea to search for funding opportunities in your local area. Many states and cities offer grants or competitions for new businesses to encourage economic growth in their region. Regional angel networks and venture capital opportunities may be available as well. Here are a few examples: 

• Blackstone Entrepreneurs Network Colorado  
• California Crescent Fund  
• Southern Connection  
• University of Minnesota’s MN Cup for businesses in Minnesota  

University Resources

Many universities offer their own funding programs for student entrepreneurs, but even if there is no funding available from your school, universities can provide many opportunities for networking. Check with your university’s business school or entrepreneurship programs and talk to professors. They may be able to connect you with funding opportunities, mentorships, and organizations that can help you meet potential investors. 

Expert Commentary

AdvisorSmith spoke with the following experts to provide critical insight on startup funding for students.

Craig Ceccanti

• Professor of Entrepreneurship
• Rice University

Linda Dickerson Hartsock

• Executive Director
• Blackstone LaunchPad at Syracuse Unviersity

Rhonda Shrader

• Berkeley-Haas Entrepreneurship Program

• Assistant Professor of Entrepreneurship and Strategy
• Southern Illinois University Edwardsville

More Experts

Q. how should student startup founders determine that they are ready to seek funding.

Craig: Get as far down the racetrack as you can before you have to start asking for funding. It’s a good exercise to figure out how many resources you need prior to making the financial ask of someone else. Ask yourself, “Can I resource or bring on a co-founder to do the work ourselves to get to a working prototype before asking for funding that will take my equity down too early in the process?”

Linda: LaunchPad ventures at Syracuse University have raised more than $43 million in outside equity investment. That’s a pretty impressive amount for student startups. To get founders ready to approach funders we put them through an intensive “investment-ready” process that focuses on customer discovery and validation, along with product development and a business model roadmap.

We are a very mentor-driven program so the rigor of our process, along with the engagement of subject matter experts to help achieve key milestones, helps “de-risk” investments by funders. It gives founders a realistic sense of what will be expected by investors and gives funders the confidence that student startups are receiving the technical assistance and strategic advice they need to help them succeed.

To get founders ready we put them through campus, state, and national business competitions to refine their pitch and be ready to answer tough questions from funders. We help them test every assumption so they are approaching investors having done the hard work of research and external validation. We make sure they have both the hard and soft skills required to helm a startup. That means product and market expertise, but also the tough stuff that goes into being a student founder—team building and conflict resolution, decision-making and delegation, discipline, problem-solving, and resilience.

Rhonda: The same “funding readiness” rules apply to all startups—there must be evidence of product-market fit, preferably in the form of sales. Investors of all types are looking for this traction as evidence that the company has eliminated most of the risk and is ready to scale sales.

Yohan: Before seeking funding, student startup founders should identify target customers and validate the demand for their ideas. Students often come up with interesting entrepreneurial ideas, but they often become obsessed with the idea itself without a clear understanding of who their customers are and whether their ideas can really solve customers’ problems. Given that many startups fail because they make a product or service that customers do not want (i.e., a product/service that does not solve customers’ problems) (Eisenmann 2021), such customer discovery and market validation are crucial in the entrepreneurship process.

Indeed, investors tend to reject business proposals of inexperienced entrepreneurs like student founders due to their lack of ability to validate the market demand (Carpentier and Suret 2015). Thus, as suggested by mainstream innovation methods such as the lean startup method and design thinking, student founders should create a minimum viable product (MVP)—a prototype with core features—and show it off to potential customers who then provide valuable feedback on it. Based on such feedback, student founders can improve their product/service. Iterations of this process will help them create a product/service that solves customers’ problems and help them to be ready to seek funding.

Eisenmann, Tom. 2021. “Why Startups Fail.” Harvard Business Review. 2021. https://doi.org/10.1007/978-1-4302-4141-6.

Carpentier, Cécile, and Jean Marc Suret. 2015. “Angel Group Members’ Decision Process and Rejection Criteria: A Longitudinal Analysis.” Journal of Business Venturing 30 (6): 808–21. https://doi.org/10.1016/j.jbusvent.2015.04.002.

Q. What are the first or best places students should seek funding?

Craig: Normally, sweat equity should be first. A lot of investors want to see you put your own money into it. Then ask friends and family. They trust you, know you, have confidence in you, and can help you a tremendous amount. Then move into boutique PE firms or family funds before you go into larger VC or grander Series firms.

Q. How can student founders help their startups stand out when looking for funding?

Craig: Getting a solid prototype should be number one. In short order, you want to understand who your customers are and progressively, who they will be. You want your metrics memorized, like what your customer acquisition costs are. Know the ins and outs, breathe your business, inside, outside, and upside down. Know the business and know your numbers.

It’s important to have and recruit experienced talent on the team when you want to be taken seriously. Investors are investing in the industry as the vehicle based on information they may already know, and you are one driver of many, taking strides in that industry. To be the best, you want to be efficient, strategic, and competitively advantaged.

Q. What are investors looking for when they evaluate student startups?

Linda: It’s interesting how this has changed in the past few years. In the past, investors have been more focused on business plans and financial projections. Now, it’s rare to see an investor request a written business plan, although going through that strategic process is an important learning experience for a student founder.

Now, it’s all about the team and the market. Funders invest in people over ideas, so they are looking for core strengths in a founder. They are looking at the quality of the team and advisors. They are looking for work ethic as well as the quality of the work.

They are laser-focused on path to market. They want to see actual users and an impressive waitlist. They want to see traction, demonstrated market demand, and a solid MVP. We give student teams a very long list of questions they should be ready to answer to help pitch and to prepare for evaluation and the diligence process.

Rhonda: Student founders will be expected to leave school upon receiving any type of substantial funding. I know of three cases just this year (two undergraduate companies, one first-year MBA company). In these cases, investors cared more about the velocity of month-over-month growth than the experience of the team and didn’t hold their traction to a higher standard than for non-student founders. Student founders don’t necessarily get dinged for inexperience, but coachability is a “must-have.” Investors can usually replace the parts of a founding team they deem ineffective.

Craig: It always helps to have an advisor on board to supplement the experience for an investor. When an investor is working with a student, they may assume that the student hasn’t grown a company before, so there’s a lot to cut their teeth on.

Additionally, investors like to see that a student expresses a realistic understanding of what things cost to fund the business, and how to use the funds they are given. Too often, a student will undervalue certain costs and overvalue others. Use mentors, advisors, and your network at large to arrive at the best answer here.

Yohan: While investors may try to invest in startups with both a strong jockey (i.e., entrepreneur team) and horse (i.e., entrepreneurial idea), different investors may weigh one more heavily than the other. For instance, research shows that venture capitalists tend to place more weight on the entrepreneur team than the entrepreneurial idea and market (Gompers et al., 2020). Often, investors provide their investment decision criteria on their websites, so it is advisable for student founders to look at such information before seeking funding. There are several venture capital firms solely focused on investment in student-founded startups and major accelerators such as Y-Combinator often invest in student-founded startups.

Gompers, P.A., Gornall, W., Kaplan, S.N. and Strebulaev, I.A., 2020. How do venture capitalists make decisions?. Journal of Financial Economics, 135(1), pp.169-190.

Q. What are some common mistakes that students should avoid when looking for funding?

Craig: Going too early is a big mistake. You give away a lot of your company in the early stages when it’s worth nothing. Find a way to get a little further down the road to a prototype or even to your first paying customer (known as revenue-generating vs. pre-revenue before asking for investment).

Q. Is traditional venture capital still the best source of funding for student founders, or are there viable alternatives?

Linda: Student founders need to understand the entire capital continuum. Pre-seed investors have moved farther along the early stage continuum and want to see customers. That means student startups have to be extra resourceful about finding non-dilutive funding.

Early sources of capital typically include bootstrapping, sweat equity contributions from founders and team members, personal investment, financial support from family and friends, and winnings from business plan competitions. Mounting a successful crowdfunding campaign can help with funding and just as importantly demonstrate market enthusiasm.

Many campuses, like Syracuse University, offer funding programs to help student ventures with small grants for research, prototyping, legal incorporation, and patent work. Many places also offer grants through community-based incubators because they know that funding local student startups is a smart talent-retention strategy. We strongly advise students to apply for accelerator programs which are great avenues for networking and initial investment capital. We have a strong partnership here at Syracuse University with Techstars which has been an amazing collaborator.

In addition to traditional VC, we also encourage students to explore low-cost working capital SBA loans, as well as alternative lenders such as non-profit CDFI’s or banks. Finally, we really drill down on early sales because earned revenue is the most capital-efficient way to fund a startup. And sales make a startup most attractive to eventual venture investors.

Rhonda: There are multiple alternatives to venture capital for student startups—non-dilutive funding such as SBIR grants can be valuable resources. Each federal agency has a slightly different program (NSF, NASA, NIH, DOE, etc.). For example, NSF’s SBIR programs have three phases and offer up to $1.5 million in non-dilutive funding. Venturewell’s eTeam program is also an awesome student-focused resource—$5K for the first phase with $20K available for prototype development in the second phase.

Yohan: Viable alternatives to traditional venture capital exist. Among the alternatives such as angel investors, accelerators, crowdfunding, small business loans, and university entrepreneurship programs, great avenues for student founders specifically include accelerators and university entrepreneurship programs.

Unlike other alternatives, these programs help students not only obtain initial funding; they also help students learn how to validate the market demand—a crucial ability for inexperienced entrepreneurs like student founders. For instance, accelerators—fixed-term, cohort-based programs that include mentorship and educational components and culminate in a public pitch event—provide seed money and help startups rapidly move forward in the development life cycle (Hallen, Cohen, and Bingham, 2020). While such “accelerated” venture development helps entrepreneurs learn the value of their ideas (Cohen, Bingham, and Hallen 2018), it also leads less-promising startups to close down quickly (Yu 2019).

However, even if student founders end up failing quickly, an accelerator program may be a good opportunity for them to learn how to validate the market demand, expand their network (mentors, cohort entrepreneurs, and investors), and pivot to a better entrepreneurial idea.

University entrepreneurship programs are another viable alternative for early-stage student startups. Such programs often provide seed money for MVP development or customer discovery without requiring part ownership of the startup company. Further, they also often provide education on customer discovery and idea execution. Research shows that university entrepreneurship programs help students learn their ability as an entrepreneur and help increase the performance of student-founded startups (Eesley and Lee 2021).

Cohen, Susan L., Christopher B. Bingham, and Benjamin L. Hallen. 2018. “The Role of Accelerator Designs in Mitigating Bounded Rationality in New Ventures.” Administrative Science Quarterly . https://doi.org/10.1177/0001839218782131.

Cohen, S., Fehder, D.C., Hochberg, Y.V. and Murray, F., 2019. The design of startup accelerators. Research Policy, 48(7), pp.1781-1797

Eesley, Charles E., and Yong Suk Lee. 2021. “Do University Entrepreneurship Programs Promote Entrepreneurship?” Strategic Management Journal 42 (4): 833–61. https://doi.org/10.1002/smj.3246.

Hallen, B.L., Cohen, S.L. and Bingham, C.B., 2020. Do accelerators work? If so, how?. Organization Science, 31(2), pp.378-414.

Yu, Sandy. 2019. “How Do Accelerators Impact the Performance of High-Technology Ventures?” Management Science , October, mnsc.2018.3256. https://doi.org/10.1287/mnsc.2018.3256.

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Student Loan Repayment Options: Find the Best Plan For You

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If you want to pay less interest

If you want lower monthly payments and student loan forgiveness, if income-driven repayment doesn't make sense with your salary, if you don't want payments tied to your income, if you want to pay off your loans more quickly, if you need to temporarily pause payments, if you qualify for public service loan forgiveness, have private student loans.

Borrowers can choose from four types of federal student loan repayment plans. But the best one for you will likely be the standard repayment plan or an income-driven repayment plan, depending on your goals.

Standard repayment lasts 10 years and is the best one to stick with to pay less in interest over time.

Income-driven repayment (IDR) options tie the amount you pay to a portion of your income and extend the length of time you're in repayment to 20 or 25 years. When the term is over, you can get income-driven loan forgiveness for your remaining debt. IDR is best if you're having difficulty meeting your monthly payment and need something more manageable. There are four types of IDR plans.

Graduated repayment lowers your monthly payments and then increases the amount you pay every two years for a total of 10 years.

Extended repayment starts payment amounts low and then increases every two years for a total of 25 years. Or you can choose a fixed version which splits payment amounts evenly over 25 years.

Before changing student loan repayment plans , plug your information into the Education Department's Loan Simulator to see what you’ll owe on each plan. Any option that decreases your monthly payments will likely result in you paying more interest overall.

Here's how to decide which payment plan is right for you:

Best repayment option: standard repayment.

On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you’ll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

How to enroll in this plan: You’re automatically placed in the standard plan when you enter repayment.

Best repayment option: income-driven repayment.

The government offers four IDR plans: income-based repayment , income-contingent repayment , Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE). These options are best if your income is too low to afford the standard repayment.

Income-driven plans set monthly payments between 10% and 20% of your discretionary income . Payments can be as small as $0 if you're unemployed or underemployed and can change annually. Income-driven plans extend your loan term to 20 or 25 years, depending on the type of debt you have. At the end of that term, you get IDR student loan forgiveness on your remaining debt — but you may pay taxes on the forgiven amount.

The Education Department has announced another new IDR plan option that would cut payments by at least half and forgive some borrowers' debt after 10 years, instead of 20 or 25. It's not yet finalized or available to borrowers; rollout will begin at the end of 2023.

How to enroll in these plans: You can apply for income-driven repayment with your federal student loan servicer or at studentaid.gov . When you apply, you can choose which plan you want or opt for the lowest payment. Taking the lowest payment is best in most cases, though you may want to examine your options if your tax filing status is married filing jointly.

» MORE: Which income-driven repayment plan is right for you?

Best repayment option: graduated student loan repayment plan.

If your income is high, but you want lower payments, a graduated plan may make sense for you.

Graduated repayment decreases your payments at first — potentially to as little as the interest accruing on your loan — then increases them every two years to finish repayment in 10 years.

If your income is high compared with your debt, you may initially pay less under graduated repayment than an income-driven plan. This could free up money in the short term for a different goal, like a down payment on a home, without costing you as much interest as an income-driven plan. You would still pay more interest than under standard repayment.

Initial payments on the graduated plan can eventually triple in size. You need to be confident you’ll be able to make the larger payments if you choose this plan. Generally speaking, it’s best to stick with the standard plan if you can afford it.

How to enroll in these plans: Your federal student loan servicer can change your repayment plan to graduated repayment.

Best repayment option: extended student loan repayment plan.

The extended plan lowers payments by stretching your repayment period to as long as 25 years. You must owe more than $30,000 in federal student loans to qualify for extended repayment.

You can choose to pay the same amount each month over that new loan term — like under the standard repayment plan — or you can opt for graduated payments. Whether you choose equal or graduated extended payments, you’ll have a good idea of what you’ll pay each month in the future.

Extended repayment does not offer loan forgiveness like income-driven repayment plans do; you will pay off the loan completely by the end of the repayment term.

How to enroll in these plans: Your federal student loan servicer can change your repayment plan to extended repayment.

To get rid of your debt sooner than your monthly payments allow, you can prepay loans. This will save you interest with any repayment plan, but the impact will be greatest under standard repayment. Just be sure to tell your student loan servicer to apply the extra payment to your principal balance instead of toward your next monthly payment.

» MORE: How to pay off student loans fast

You may be able to temporarily postpone repayment altogether with deferment or forbearance . Some loans accrue interest during deferment, and all accrue interest during normal forbearance periods. This increases the amount you owe.

If your financial struggles are pay-related, income-driven repayment is a better option. Income-driven repayment plans can reduce payments to $0 — and those payments count toward forgiveness.

Public Service Loan Forgiveness is a federal program available to government, public school teachers and certain nonprofit employees. If you’re eligible, your remaining loan balance could be forgiven tax-free after you make 120 qualifying loan payments.

Only payments made under the standard repayment plan or an income-driven repayment plan qualify for PSLF. To benefit, you need to make most of the 120 payments on an income-driven plan. On the standard plan, you would pay off the loan before it’s eligible for forgiveness.

How to enroll in these plans: You can apply for income-driven repayment with your servicer or at studentaid.gov .

Private student loans don’t qualify for income-driven repayment, though some lenders offer student loan repayment options that temporarily reduce payments. If you’re struggling to repay private student loans , call your lender and ask about your options.

If you have a credit score in at least the high-600s — or a cosigner who does — there’s little downside to refinancing private student loans at a lower interest rate. Dozens of lenders offer student loan refinancing; compare your options before you apply to get the lowest possible rate.

How much could refinancing save you?

Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.

Step 4 : Compare NerdWallet's top-rated student loan refi lenders .

Private lenders also refinance federal student loans , which can save you money if you qualify for a lower interest rate. But refinancing federal student loans is risky because you lose access to benefits like income-driven repayment plans and loan forgiveness. Refinance federal loans only if you’re comfortable giving up those options.

On a similar note...

• Share full article

There’s a Program to Cancel Private Student Debt. Most Don’t Know About It.

A nonprofit group is publicizing the relief program that Navient, a large lender, created for students who attended for-profit schools that misled them.

Danielle Maynard took both federal and private loans to attend the New England Institute of Art. Credit... Simon Simard for The New York Times

Supported by

By Stacy Cowley

• May 30, 2024

More than a million borrowers who were defrauded by for-profit schools have had billions of dollars in federal student loans eliminated through a government aid program. But people with private loans have generally been excluded from any relief — until recently.

Navient, a large owner of private student loan debt, has created, but not publicized, a program that allows borrowers to apply to have their loans forgiven. Some who succeeded have jubilantly shared their stories in chat groups and other forums.

“I cried, a lot,” said Danielle Maynard, who recently received notice from Navient that nearly $40,000 in private loans she owed for her studies at the New England Institute of Art in Brookline, Mass., would be wiped out.

Navient, based in Wilmington, Del., has not publicized the discharge program that helped Ms. Maynard. Other borrowers have complained on social media about difficulties getting an application form. When asked about the program and the criticisms, a company spokesman said, “Borrowers may contact us at any time, and our advocates can assist.”

So a nonprofit group of lawyers has stepped in to ease the process: On Thursday, the Project on Predatory Student Lending , an advocacy group in Boston, published Navient’s application form and an instruction guide for borrowers with private loans who are seeking relief on the grounds that their school lied to them.

“We want to level the playing field and let people know, instead of having it be this closely held secret,” said Eileen Connor, the group’s director.

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• Best Private Student Loan Refinance Companies of 2024
• Laurel Road
• Splash Financial
• Citizens Bank
• College Ave
• Why You Should Trust Us

Best Student Loan Refinance Companies of June 2024

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate student loans to write unbiased product reviews.

You may want to refinance your student loan for a variety of reasons. Perhaps you're looking to pay less in interest, switch from a variable-rate to a fixed-rate loan, or to change up your payment term length.

The Best Private Student Loan Refinance Companies of 2024

Earnest student loan refinancing, sofi student loan refinancing, penfed student loan refinancing, laurel road student loan refinancing, splash financial student loan refinancing, citizens bank student loan refinancing, lendkey student loan marketplace, college ave student loan refinancing, compare the top student loan refinance lenders.

You should be very cautious about refinancing if you have federal loans, as you can lose key protections and repayment options (and forgiveness) if you switch to private loans. Before you refinance, you need to decide if the process is right for you. If you choose to turn to a private lender to refinance your loans, here are several of the best places to begin your search.

0.25% discount on regular rates with AutoPay

5.89% - 9.74% variable and 4.99% - 9.74% fixed (with AutoPay discount)

$5,000 to $500,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No origination fee or prepayment penalty
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No late fees
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum interest rate
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Skip a payment option
• con icon Two crossed lines that form an 'X'. No mobile app
• con icon Two crossed lines that form an 'X'. No weekend customer support

Earnest is a strong lender with competitive rates and a variety of term lengths. If you fall on financial hardship, you can skip a payment once per year — though that payment will extend the length of your loan term later.

• Customer service available via phone, live chat, email, and standard mail
• Five, seven, 10, 15, and 20-year repayment term lengths available
• Loan amount range between $5,000 to $500,000
• Skip a payment feature allows you to forgo making one payment every year
• Loans are originated by Earnest Operations LLC
• This is an advertisement. You are not required to make any payment or take any other action in response to this offer.

Earnest has some of the most competitive starting rates of any of the best lenders on our list, so if you have excellent credit, it could be a good choice for you. 

Like Earnest's undergraduate and graduate new loans, its refinanced loans have a special perk: the ability to skip one payment every year. You can ask for your first skip once you've made at least six months of consecutive on-time, full principal and interest payments, as long as your loan is in good standing. However, interest will accrue during this time, and the lender will extend the final payoff date of your loan by the length of the skipped payment period. 

Look out for:  Higher maximum interest rates. Earnest eagerly shares its minimum rates, but the company doesn't disclose those on the maximum end anywhere. If you have a shakier credit history, you may end up paying more interest than you initially expected.

Read Insider's full review of Earnest student loans .

0.25% AutoPay interest rate discount and a 0.25% direct deposit interest rate discount

Variable: 6.24% - 9.99%, Fixed: 5.24% - 9.99% (with AutoPay)

Undisclosed

$5,000 to full balance

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No maximum balance you can refinance
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Autopay discount
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Unemployment protection
• con icon Two crossed lines that form an 'X'. Third-party loan servicer

SoFi is an excellent lender for borrowers who want competitive APRs and a safety net in the case of a job loss. It's also a great lender for those who don't want to worry about fees.

• 0.25% AutoPay discount
• Apply through your computer or mobile device
• Customer service available via phone, mail, and social media
• Loan amount from $5,000 to full balance
• Term lengths of five, seven, 10, 15, and 20 years
• Unemployment Protection provides up to 12 months of loan forbearance for eligible borrowers who lose their job through no fault of their own
• Loans are serviced through third-party affiliate MOHELA

SoFi offers a unique feature called unemployment protection: Eligible borrowers are able to suspend payments on your loans if you lose your job through no fault of your own, for up to 12 months.

In addition to suspending payments for up to 12 months in the event of a jobs loss, SoFi will provide job payment assistance as part of its unemployment protection plan. However, interest will continue to accrue during this forbearance period and will be added to your principle. 

Watch out for: Third-party loan servicing. Once your loan is funded, your loan servicer will be MOHELA, SoFi's third-party loan provider. If you prefer a direct relationship with your lender, this might not be the best choice for you.

Read Insider's full review of SoFi student loans .

It will only take about 15 minutes to apply, allowing you to get your rate quickly.

Fixed: 7.74% - 9.93%

late fee of 20% of the interest owed, with a minimum of $5 and a maximum of $25

$7,500 to $500,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Cosigners allowed
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Fast application process
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High maximum loan amount
• con icon Two crossed lines that form an 'X'. Membership required
• con icon Two crossed lines that form an 'X'. Undisclosed timeline on approval process
• con icon Two crossed lines that form an 'X'. No variable rate loans
• con icon Two crossed lines that form an 'X'. Late fees

PenFed is a solid lender for borrowers who want to refinance a large amount of student loan debt. However, the credit union charges late fees, and it doesn't offer variable-rate loans.

• Members of the military and employees of qualifying organizations will automatically qualify for a membership, but anyone can become a member by opening a savings account with a $5 minimum deposit
• PenFed doesn't disclose the length of its approval process
• Five, eight, 10, and 15 year repayment term lengths

PenFed offers the lowest maximum fixed refinance rates of any lender on our list. If you have poorer credit and are still able to qualify for a PenFed refinanced loan, you might get a better deal with it than elsewhere. 

You need to be a member of the credit union to get your loan. If you've served in the military or work at qualifying associations or organizations, you'll qualify. If that doesn't apply, you can easily join by opening a savings account with a $5 minimum deposit.

Watch out for: Doesn't offer variable-rate loans, which often start at lower rates than fixed-rate loans — although it can overtake a fixed loan over time. If you want a variable loan, you won't be able to get one with PenFed.

Read Insider's full review of PenFed student loans .

0.25% three-month introductory discount when you open a checking account with Laurel Road, then 0.25% discount for $2,500-$7,499 in monthly direct deposits, 0.55% discount for $7,500+. Additional 0.25% discount with auto pay.

Variable: 4.47% - 10.89%, Fixed: 4.72% - 10.99% (with AutoPay discount)

Late fee or $38 or 5% of payment, whichever is less

$5,000 with no max

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low fixed rates
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Customer service seven days a week
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Mobile app
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Multiple repayment terms
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Interest rate discounts
• con icon Two crossed lines that form an 'X'. Variable rates are slightly higher than competitors

Laurel Road is an excellent choice to refinance your student loans, as the company offers good APRs on its fixed-rate loans and a multitude of repayment options. However, its variable rates start slightly higher than the competition.

• Customer service available via phone, live chat, and email
• $5,000 loan minimum, with no maximum
• Late fee of 5% of the late payment or $28, whichever is less
• .25% three-month introductory discount when you open a checking account with Laurel Road, then .25% discount for $2,500-$7,499 in monthly direct deposits, .55% discount for $7,500+
• Loans are offered by KeyBank, member FDIC

Laurel Road offers some of the best fixed rates of all of our lenders, but keep in mind that only 11% of applicants who applied between July 2019 and June 2021 qualified for Laurel Road's top rate, according to the company's website. Don't bank on getting it unless you have excellent credit. 

If you sign up for a Laurel Road checking account , you'll receive an interest rate discount on your refinanced loan. 

Look out for:  Late fees. Laurel Road's late fee is $38 or 5% of your payment, whichever is less. If you fall behind on payments, the total cost of your loan will add up. 

Read Insider's full review of Laurel Road student loan refinancing .

No application fees, no origination fees and no pre-payment penalties.

Variable: 4.99% - 10.89% with AutoPay, Fixed: 4.96% - 10.99% with AutoPay

Depends on lender

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No origination fees
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment penalties
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum rates
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers all in one place
• con icon Two crossed lines that form an 'X'. High maximum rates

Splash Financial Student Loan Refinancing is a great option to refinance student loans, as it comes with no origination fees or prepayment penalties.

• Contact customer support by phone or email
• Depending on the lender, the loan amount range is $5,000 with no max
• Splash Financial operates through a network of lending partners

Splash Financial is a student loan marketplace, not a direct lender. A marketplace allows you to compare loan offers from multiple lenders at once. The marketplace allows you to check your rates with no impact on your credit score. 

As a result, it's tricky to nail down the exact terms you'll receive with Splash Financial. For instance, some of the company's lending partners have no maximum amount you can refinance, while other have a cap. You may like Splash Financial if you want to compare a bunch of different companies all at once with one application.

Watch out for: Splash Financial doesn't underwrite its own loans. As a result, you'll be dealing with whatever partner lender you choose and may have a different experience with them managing your loan than the one you expected.

Read Insider's full review of Splash Financial student loan refinancing .

0.50% rate discount if you or your cosigner have a qualifying Citizens Bank account at the time you submit a complete application and you sign up for automatic payments

Variable: 7.04% - 12.43%, Fixed: 6.50% - 10.99%

Late fee of 5% of the loan payment amount

$10,000 to $750,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Rate discounts
• con icon Two crossed lines that form an 'X'. Late fee
• con icon Two crossed lines that form an 'X'. High minimum loan amount

Citizens Bank may be a good student loan lender if you have a strong credit score, especially if you want the convenience of submitting just one application to secure funds for multiple school years.

• Repayment terms of five, seven, 10, 15 and 20 years
• .50% rate discount if you or your cosigner have a qualifying Citizens Bank account at the time you submit a complete application and you sign up for automatic payments
• Loan amount range from $10,000 to $750,000
• Loans are originated by Citizens Bank, N.A.

Citizens Bank's top loan amount of $750,000 is the most of any of the lenders we compiled that disclose a maximum loan amount.

Citizens Bank is also the only brick-and-mortar bank we have listed, which may be a good option for those who are more comfortable with traditional banking. 

Watch out for:  High minimum loan amount. Citizens Bank's minimum of $10,000 is the highest of any lender on our list. If you have a small amount of debt, you might find that another lender is a better fit for you. 

Read Insider's full review of Citizens Bank student loan refinancing .

Student Loan Origination: Variable: 5.27% - 8.18%, Fixed: 5.24% - 10.68% with AutoPay; Student Loan Refinance: Variable: 5.27% - 8.18%, Fixed: 5.49% - 9.75% with AutoPay

$5,000 to $250,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. AutoPay discount
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low maximum variable rate
• con icon Two crossed lines that form an 'X'. Low maximum loan amount
• con icon Two crossed lines that form an 'X'. High minimum variable APR

LendKey is a student loan marketplace that partners with community banks and credit unions to offer solid rates for borrowers with good credit scores. It's one of our picks for the best student loan refinance companies.

• Loan amount between $5,000 to $250,000
• AutoPay discount of 0.25%
• Term lengths range between five to 20 years
• LendKey operates through a network of partner credit unions and community banks

LendKey is a marketplace, not a direct lender. A student loan marketplace allows you to compare loan offers from multiple lenders at once. The marketplace allows you to check your rates with no impact on your credit score. 

LendKey partners with credit unions and community banks, so you may get a more personalized level of service than you would with a Splash Financial partner.

Watch out for: Low maximum loan amount. LendKey has the lowest maximum refinance amount of any of the best lenders on the list. This probably won't be an issue unless you have a significant amount of loan debt. 

Read Insider's full review of LendKey student loans .

6.99% - 13.99% variable and 6.99% - 13.99% fixed (with AutoPay discount, varies by program)

Late fee of $25 or 5% of payment, whichever is less

$5,000 to $300,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low maximum interest rate
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No origination fee
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment penalty
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Many repayment term lengths
• con icon Two crossed lines that form an 'X'. Lower maximum refinancing amount
• con icon Two crossed lines that form an 'X'. High minimum interest rate

College Ave is a great lender for borrowers who want multiple options for repayment term lengths and are after a low APR. College Ave also offers many options for contacting customer support.

• Eleven different term lengths, from five to 15 years
• Loan amount range between $5,000 to $300,000
• Contact customer support by text, email, phone, live chat, or physical mail
• Loans made through Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC

College Ave offers 11 repayment term lengths, making it among the most flexible student loan lenders with regards to loan terms.  

You're able to take out a loan for five to 15 years with College Ave. Many other lenders limit your selection to four or five options — though some others do offer 20-year term lengths (which College Ave does not).

Watch out for: Lower maximum refinancing amount. If you have a truly significant amount of debt (we're talking hundreds of thousands of dollars), you may not be able to refinance all your debt with College Ave. This won't be the case for the vast majority of borrowers, but it bears noting.

Read Insider's full review of College Ave student loans .

Student loan refinancing vs. consolidation

The difference between student loan refinancing and consolidation can be confusing, especially because people sometimes use the terms interchangeably. However, these are two different processes, and depending on your financial goals, one may be better for you than the other. 

Refinancing involves restructuring your current loan or loans and getting a new one with updated terms. You'll make a single monthly payment. You can refinance private and federal loans into one combined loan. When you refinance federal loans with a private lender, you'll lose some key borrower protections. 

Consolidation is the process of combining multiple loans into one. You'll make a single monthly payment after consolidation. When you consolidate loans, your new loan consolidation rate is the weighted average of your old loans' rates, rounded up to the nearest eighth of a percent.

When to Refinance Student Loans?

If you can get a lower interest rate on your loan, it might pay off to refinance. However, federal loans have some unique benefits, so only refinance after assessing all of your options.

You don't have anything to lose by refinancing a private loan if you can get a better rate and save money. You won't forgo any federal protections such as income-driven repayment plans,  deferment, or forbearance.

Which Student Loan Refinancing Lender Is the Most Trustworthy?

The Better Business Bureau, a non-profit organization focused on consumer protection and trust, measures businesses using information like their responsiveness to consumer complaints, truthfulness in advertising, and transparency about business practices. Here is each company's score:

All of our picks are rated A or higher by the BBB, with the exception Splash Financial. Splash Financial received a B+ rating  because of eight complaints filed against the business. 

It's important to note that a good BBB grade doesn't guarantee you'll have a good relationship with your lender. Ask family and friends about their firsthand experience with the company before signing on the dotted line, or read online customer reviews. 

The best time to refinance student loans may be after you've recently improved your credit score. That way, you'll be more likely qualify for a lower rate and save on the overall cost of your loan.

There's no set limit on how often you can refinance your student loans.

There is no minimum credit score you need to refinance your student loans, however, you'll likely get a better rate with a higher credit score.

Your credit and credit history is the biggest factor in your approval chances. If you have a poor credit score , it'll be harder for you to get the green light for a new loan, but you may be able to enlist a cosigner to boost your likelihood of approval with one of the best companies.

No, student loans cannot be forgiven if you refinance.

Be careful before choosing to refinance federal student loans. You'll lose key protections such as federal loan relief programs like Public Service Loan Forgiveness . You also won't be eligible for specific repayment options like income-driven repayment plans , which take your specific income and family size into account when determining monthly payments.

Why You Should Trust Us: How We Chose the Best Student Loan Refinancing Companies

Personal Finance Insider's mission is to help you make the best, most informed decisions with your money. To do that, we combed through companies, comparing interest rates, terms, and fine print so you don't have to. We also compared our findings to other personal finance sites. We looked for several factors in determining the best companies, including: 

• Interest: We looked for lenders offering competitively low interest rates, and we prioritized lenders with the lowest interest on both fixed and variable loans. 
• Nationwide availability: We searched for loans available in all or most US states. 
• Variety of term lengths : We picked lenders that offered term lengths that fit many borrowers' different situations. 
• No or few fees:  We prioritized lenders that didn't charge fees, like origination fees or prepayment penalties. Some of our lenders still charge late fees, however. 
• High maximum loan amount : We prioritized lenders that offer high maximum loan amounts to ensure you're able to refinance your loans with the same company. 
• Better Business Bureau rating : We chose lenders that were given high marks by the BBB as a part of our screening method for trustworthiness. 

See our full ratings methodology for student loans >>

Notice: SoFi's Refinance Loan is a private student loan. Understand that when you refinance federal loans, you forfeit all flexible federal repayment options that are or may become available to federal student loan borrowers. If you expect to incur financial hardship that would affect your ability to repay, you should consider federal consolidation loan options. Notice: Though SoFi offers an Unemployment Protection Program and career services, SoFi's Refinance loan is a private loan. Understand that when you refinance federal loans, you forfeit certain flexible repayment options that are or may become available. If you expect to incur financial hardship that would affect your ability to repay, you should consider federal consolidation loan options. *NOTICE: If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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• Best Personal Loans

Best Small Business Loans of June 2024

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Small business loans can be a great way to get necessary funding for your business. However, there are a lot of factors that go into picking the best loan, from the rates and fees to the repayment structure. In this guide, we'll discuss the different types of business loans and what to look for when comparing options. We'll also provide some of our top picks to help you start your search.

Best for businesses with high incomes but low credit scores

Credibly offers a variety of loan types to businesses that may not otherwise qualify with another lender.

• Loans available to business owners with less-than-perfect credit scores
• Loan officers that emphasize the importance of only borrowing what you need
• Five specific types of loans offered
• Fast approval and funding
• Daily, weekly, and monthly payment options
• High annual income requirement
• Startups typically don't qualify for funding
• Risk of losing collateral

Best for SBA loans and businesses that need in-person assistance

First citizens bank.

First Citizens Bank is an excellent small business lender with a wide variety of loan types, including all of the major SBA loans as well as some proprietary small business loan products. It has excellent customer service through its vast branch network, and could be a great fit for businesses located within the states where the bank operates.

• Variety of loan products
• Large branch network
• Highly rated customer service
• Application isn't fully online
• Branches are available in fewer than half of U.S. states

Best for established business owners with average credit who can't find cheaper financing

OnDeck offers short-term loans to established business owners with at least average credit, provided they can meet the revenue requirement. Repayment terms cap at 24 months and APRs are very high, so these loans are best for owners without cheaper options who can repay the loan quickly.

• Multiple loan types
• Accepts average credit scores
• No prepayment fee
• APRs are extremely high
• High revenue requirement
• Personal guarantee required

Best for well-qualified, established businesses

Funding circle.

Funding Circle pairs businesses that have been in business for at least two years with individual investors for term loans, lines of credit, and SBA loans. Eligible business must have at least fair credit, with a minimum accepted credit score of 660.

• Competitive rates for highly qualified borrowers
• Funding in as little as two business days
• Costly origination fees
• Businesses must be in operation for a minimum of two years
• Requires a lien on business
• Minimum credit score may be higher than some competitors

Best for business lines of credit

Bluevine specializes in business lines of credit that are easy to apply for, and also offers term loans through banking partners. It can be a great choice for businesses that can meet Bluevine's income requirements and want access to working capital as needed.

• Quick access to funds
• Easy application process
• Up to $250,000 in funding
• Short repayment terms
• Not for newer businesses

What is a business loan?

A business loan is an agreement between your business -- or you, as the owner of that business -- and a lender for an agreed-upon amount. The lender will give you the money, and in return, you agree to repay that money at specific intervals. You will likely also need to pay additional interest fees, based on an APR (annual percentage rate) disclosed during the application process.

Types of small-business loans

There are a variety of small business loan options depending on your needs and qualifications.

1. Term loan

The simplest form of small business loan is a term loan. Think of this as similar to a basic personal loan. You'll receive a set amount of money, and you'll need to repay it in regular, equal installments. Your interest rate will be set at the time of disbursement and your payments won't change for the duration of the loan. Once you repay the loan, you're done and the account is closed.

2. Line of credit

A line of credit is sort of like a reusable term loan, or perhaps like a credit card. You can draw on the line of credit, then repay the amount borrowed to free up funds. You can then draw on the line of credit again at a future date. Exactly how often or how much you can draw at a given time will vary by loan and lender.

3. SBA (Small Business Administration) loan

An SBA loan is a term loan guaranteed by the Small Business Administration and offered by various banks and lenders. SBA loans are good for lenders because the guarantee from the SBA reduces the risk; if you default on the loan, the lender doesn't lose as much money. SBA loans are also good for borrowers, since the reduced risk allows lenders to offer better rates, lower down payments, and more flexible requirements.

4. Equipment loan

Business owners who specifically need a loan to purchase new equipment may want to look into dedicated equipment loans. These loans are typically structured like a regular term loan, except the equipment you buy will act as collateral for the loan . This often means lower rates and fees, though a down payment may still be required in some cases.

How to choose a small business loan

Here are a few factors to consider when deciding on a business loan:

• Structure: Do you want a one-time loan or a recurring line of credit? What type of collateral, if any, do you want to put up? Are you willing to personally guarantee the loan? All of these questions will factor into which type of business loan you choose.
• Repayment: Each loan and lender will have its own repayment structure. You may need to make daily or weekly payments, or get away with monthly ones. Consider how often you want to make payments before choosing a loan.
• Cost: Interest rates and other fees can all impact the cost of a loan. These costs will depend not only on the type of loan you choose, but on the specific lender, your credit history, and even your business's revenue. It's best to compare multiple loan offers to ensure you get the most affordable loan.
• Timing: When you urgently need a loan, you may be more concerned with how quickly you can get funding over other factors. Just make sure you aren't letting haste lead you into a bad deal.

Alternative business funding options

If a small business loan isn't right for your company, consider these other ways to finance your business.

Small business credit cards

I love using small business credit cards as a source of short-term funding for three reasons:

• It can be free. If you pay off your balance in full before the due date, most cards won't charge you interest. If you need to carry a balance, you can get a card with an intro 0% APR deal to avoid interest fees on that balance, too.
• They're reusable. Credit cards are like a line of credit; as long as you keep paying them off, you can use them again and again. In fact, using and paying off your card on time every month is a great way to build credit.
• You can earn rewards. When the business budget is tight, earning that 2% to 5% cash back on your big expenses can go a long way.

Check out our best small business credit cards to find the right fit for your business.

Outside investors

Many businesses grow with the help of financing from investors. This could be as simple as taking on a business partner, or as complex as finding an angel investor or venture capitalist. Just keep in mind that most investors will want some sort of say in how your business is run. At the very least, you'll need to repay your investors with regular dividends or a percentage of your revenue.

Fundraising and crowdsourcing

Plenty of small businesses get off the ground with a little help from friends and family. (If you're not going to pay that help back, then they're donors, not investors.) In today's digital age, you can also look for donations from the world at large on a crowdsourcing platform like Kickstarter or Indiegogo.

Personal loans

If your business revenue isn't great but your personal credit is , you could potentially qualify for a personal loan even if a small business loan isn't an option. Most personal loans are term loans that typically range from 24 to 60 months, though shorter and longer loans are available. Interest rates will depend heavily on your credit and income.

Merchant cash advance (MCA)

A merchant cash advance is very similar to a personal cash advance. It's an extremely expensive type of short-term financing that promises a portion of your sales revenue as repayment. The pro of this type of financing is that your personal credit isn't much of a factor. The downside is that your interest rates can easily hit triple digits. This should be considered last-resort funding, and only if you have absolutely zero other options.

Fees and terms you can typically expect

The terms and fees you get with your loan will depend on a lot of factors. However, here are some general points to consider when comparing your options.

Fees to watch out for

• Origination fee: Many loans, especially term loans, come with an origination fee . It's generally considered to be for the administrative costs of the loan. Not all loans charge this fee.
• Interest fee: The main fee you'll pay on any loan is the interest fee. This will depend on your interest rate. The higher the interest rate, the more fees you'll pay.
• Factor rate: Some financing products, like MCAs, don't provide an interest rate. Instead, they provide the factor rate. Multiplying the factor rate with the principal amount tells you the total you'll need to pay back. From there, you (or an online calculator) can determine your APR.
• Prepayment fee: Some lenders may charge you a penalty fee for paying off your loan early. That's because paying your loan off early usually cuts down on how much interest you pay overall.
• Application fee: This isn't a super common fee, but a few lenders may charge a fee just to apply for a loan. (I'd personally avoid these lenders.)

Figuring out your repayment terms

Broadly, the loan terms are all the terms and conditions that apply to your loan agreement. More specifically, we usually use the phrase to refer to the repayment terms, including the APR and payment frequency.

How long you have to repay your loan will vary based on a lot of factors, starting with the type of loan. An SBA loan could have a long repayment term of 10 years or more. Many small business term loans will have shorter repayment periods of around two years. A line of credit could have an even shorter repayment period of a year or less.

Your business loan agreement will spell out all of the repayment terms. Be sure to read through it carefully. You want to pay attention not just to your payments or how long the loan will last, but also to your total overall payment and your total interest.

What you need to apply for a small business loan

The specifics of a loan application will depend on the kind of loan. In general, though, you'll need this information:

• Owners' personal information: If you're the only business owner, then you just need your personal info. If there are multiple owners, the lender may want everyone on the application. In many cases, the owner will need to undergo a personal credit check.
• Business tax ID number: Depending on the structure of your business, this may be your EIN (Employer Identification Number) or your personal Social Security number (if you're a sole proprietor).
• Business checking account info: The money you borrow will need to be deposited into a business checking account . Most lenders will also require payments to be made via debit card or ACH transfer from a small business bank account.

Business banking statements: You may need at least three months' worth of bank statements to prove your company's annual revenue. Depending on your business and the lender, you may require more in-depth profit-and-loss documentation.

Top picks for best small business loans

• Businesses with high incomes but low credit scores: Credibly
• SBA loans and businesses that need in-person assistance: First Citizens Bank
• Established business owners with average credit who can't find cheaper financing: OnDeck
• Well-qualified, established businesses: Funding Circle
• Business lines of credit: Bluevine

Brittney started her writing career in the world of science, putting her physics degree to good use. Her journey into finance started with building her personal credit, but soon grew into a borderline obsession with credit cards and travel rewards. For the last 7 years, she has enjoyed the ability to share her expertise with readers, as well as the opportunity to interview companies and individuals making an impact on our financial lives. She wholly believe most problems can be solved with the right research -- and a good spreadsheet -- and she specializes in translating complex financial topics into actionable advice to help educate and empower readers.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

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More From Forbes

Private student loan forgiveness application is now available, but few may be aware.

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Boston, MA - March 18: US Senator Elizabeth Warren cheering after a teachers testimonial of their ... [+] student loan forgiveness during American Federation of Teachers roundtable discussion. (Photo by Matthew J. Lee/The Boston Globe via Getty Images)

Borrowers with privately-owned school debt have a new option for student loan forgiveness. A major national private student loan lender has quietly released a new application that provides a limited, but very real, pathway to potential relief.

Typically, only federal student loans qualify for debt cancellation. Indeed, all of the student loan forgiveness initiatives that the Biden administration is in the process of implementing are only available to federally owned or federally backed student loans. Private student loan borrowers, which represent a relatively small but not insignificant share of total student debt, have been left out of this relief.

But Navient, one of the nation’s largest private student loan lenders , has a new loan forgiveness application for private student loans. Here are the details on who may qualify, and what borrowers should expect.

Student Loan Forgiveness Usually Is Limited To Federal Debt

The Biden administration has enacted close to $170 billion in student loan forgiveness, according to recent Education Department data. At least 4.75 million borrowers have benefited.

But this sweeping debt cancellation has only applied to federal student loans. The administration has focused on expanding relief under several existing federal loan forgiveness programs such as Income-Driven Repayment, Public Service Loan Forgiveness, and disability discharges. The results have been unprecedented — but only federal student loans qualify.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024.

Purely private student loans are ineligible for federal student loan repayment and forgiveness programs, and they can’t be consolidated or converted into a federal loan. Private loans aren’t established or funded by Congress and are not subject to executive authority in the same way that federal student loans are, leaving President Joe Biden with few legal options for providing relief to private loan borrowers. Typically, these types of loans have more limited repayment options, and they may also have much higher interest rates than their federal counterparts.

New Private Student Loan Forgiveness Application For Defrauded Borrowers

Without any formal announcement or statement, Navient has released a private student loan forgiveness application for borrowers who have been defrauded by their schools.

“Navient began quietly sending its new application to a select few borrowers,” said the Project on Predatory Student Lending, a legal and advocacy organization for student loan borrowers, in a statement last week launching an “awareness campaign” about the initiative. “The application allows borrowers who experienced misconduct at their school to apply directly for discharge of private loans, marking a long overdue recognition of borrower rights.”

The application appears to closely mirror Borrower Defense to Repayment, a program under federal law that allow borrowers to request a discharge of federal student debt if their school made misrepresentations or false promises about central elements of the underlying educational program. These can include lies, omissions, or exaggerations about admissions selectivity, career services, potential employment earnings, accreditation, or transferability of credits to another institution.

Navient has not publicized the availability of the new private student loan forgiveness application. However, a company spokesperson told The New York Times last week that borrowers “may contact us at any time,” and customer service agents will provide assistance.

Meanwhile, the Project on Predatory Student Lending took steps last week to alert the public more broadly.

“Today we are making a concerted effort to illuminate the pathways to cancellation available to student borrowers with private loans who were cheated by their schools. Private student loans have always carried basic consumer protections like borrower defense, yet lenders and servicers have obstructed borrower efforts to realize them, individually or at scale,” said Eileen Connor, President and Executive Director of PPSL, in its statement last Thursday. “This Navient application is an opportunity for borrowers who experienced misconduct to finally seek relief for their private loans and is a direct result of our clients’ persistence.”

Senator Elizabeth Warren (D-Mass.) offered tempered praise to Navient for releasing the application but criticized the company for not making the process clear or easy for those who have been harmed by school misconduct. “Navient has admitted responsibility for canceling their predatory loans but set up a process for cancellation that’s impossibly confusing for borrowers,” she said in a statement. “I won’t let Navient get away with cheating defrauded student loan borrowers out of the relief they deserve.”

Relief Through New Private Student Loan Forgiveness Application Is Limited But Very Real

Borrowers should be aware that this private student loan forgiveness opportunity is fairly limited. Private student debt is still ineligible for loan forgiveness based on borrowers’ employment with public service organizations, repayment of their loans based on income, or financial hardships (outside of bankruptcy).

The Navient debt relief program is specifically for borrowers who allege that their school engaged in certain kinds of misconduct. Other problems borrowers may be experiencing, such as difficulty affording their payments, are not a basis for loan forgiveness under this program. Unlike the similar federal Borrower Defense to Repayment program, the Navient application requires that borrowers include supporting documentation with their application.

And this application is only available to borrowers with Navient private student loans. Other private student loan lenders do not have this same application option. “PPSL is not aware of any similar private student loan cancellation process for private student loan holders besides Navient,” said the group in its statement. Nevertheless, PPSL encouraged borrowers with other kinds of private student loans to contact their servicer.

Still, the new program appears to be legitimate and is actually resulting in relief. According to the PPSL and the New York Times , at least some borrowers have received student loan forgiveness from Navient through this new application process, sometimes just weeks after applying. In contrast, it can take years for borrowers to receive decisions under the federal Borrower Defense to Repayment program.

Other Federal Student Loan Forgiveness Approvals Coming

The new Navient private student loan forgiveness pathway is independent of the numerous federal student loan forgiveness initiatives being implemented by the Biden administration.

Last month, the administration approved another $7.7 billion in student loan forgiveness for 160,000 borrowers. Borrowers received relief through the PSLF program, the IDR Account Adjustment (the administration recently extended a key deadline for that program to the end of June), and the new SAVE plan.

The Biden administration is also finalizing a new mass student loan forgiveness plan that could provide partial or complete debt cancellation to more than 25 million federal loan borrowers . The new program is expected to debut this September or October, but will likely face legal challenges.

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