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The Best Small Business Loans in 2023: Boost Your Company Quickly
You can have all the components of a great business - the product, drive, and business sense to make it to the top - but if you don’t have enough funding, your venture simply won’t succeed. Thankfully, there are plenty of options for businesses in this situation: Here are 2022’s best small-business loans to help you get your idea off the ground.
American Express Business BlueprintTM
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
American Express Business BlueprintTM is an excellent option if you’re looking for the best business loans for small-business owners. Not only does this company offer lines of credit, it’s also one of the few that offer monthly payment options instead of daily or weekly ones. Read Review
- •Great for people with fair credit scores
- •Straightforward online application process
- •No collateral required
Fast Capital 360
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Fast Capital 360 boasts multiple working capital loans that include term loans, both short- and medium-term loans, business lines of credit, merchant cash advances, equipment financing, and SBA loans. Read Review
- •Multiple loan types
- •Quick and easy application process
- •Low interest rates
Fundbox
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Term loans and lines of credit are the only loans that Fundbox offers, and these are some of the easiest ways for almost any kind of business to get funding. Read Review
- •Great interest rates
- •No prepayment penalties
- •Invoicing is kept completely private
BlueVine
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
This California-based lender focuses on lines of credit and invoice factoring. BlueVine is one of the best lenders for small-business loans if you’re looking for short-term help. Read Review
- •Great interest rates
- •No account-maintenance fees
- •No prepayment penalties
Currency
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Rather than a regular lender, Currency is a marketplace for lenders who specialize in different types of financial products, mainly equipment loans. If you need low-interest business loans, this is the right place for you. Read Review
- •Up to $2 million for equipment loans
- •Guarantee on purchased equipment
- •Lenders are easy to find
OnDeck
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
This New York-based lending institution is one of the best business-loan companies you can choose if you have a lower credit score and need a term loan or line of credit to get you going. Read Review
- •Great for people with low credit scores
- •Cheaper loans for returning customers
- •Helps you build up your credit score
Funding Circle
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
This online marketplace helps connect top business-loan lenders with SMEs for the best possible loan rates. Funding Circle offers term loans and equipment loans. Read Review
- •Up to $2 million for equipment loans
- •Guarantee on purchased equipment
- •Easy to find lenders you need
Credibility Capital
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Credibility Capital specializes in providing short- and medium-term loans for small and medium-sized enterprises. If you’re wondering how to get a small-business loan to fund your next business project, this could be the right option for you. Read Review
- •Flexible underwriting process
- •No prepayment fees
- •Easy and fast application process
Small Business Loan Lenders — Finding the Right One for You
Banks, online lenders, credit unions — there are many different ways to get a small-business loan. They all offer packages to help you get started, although you should always be wary of the fine print. Finding the right kind of small-business funding is challenging, to say the least, especially if you’re just starting out.
That’s why we’re here.
We’ve examined the best small-business loans to find the companies that are worth your time, won’t charge hidden rates, and set you back in the long run. Small-business owners usually have to fight for every cent to get their company up and running properly. Having the option to invest in the equipment and technology you need and conduct proper market research could mean the difference between staying in business for a long time or going bust within six months.
We’ve talked to lending institutions, performed thorough research, and tested everything to find America’s best loans. The legwork is done: All you need to do is pick a loan suited to your needs. We’ve also included a detailed description of the methodology we used to rank some lenders above others. Here’s everything we considered while looking for the best place to get small-business loans:
Eligibility Requirements
A loan won’t mean much to you if you can’t actually apply for it. Some lenders have insanely high standards that few people can meet, especially a struggling company that needs some cash to get back on its feet, or find them in the first place. That’s why we took these factors into account:
Credit score rating: Not everyone has a perfect credit score. Plenty of people struggle in this department, but that doesn’t mean they shouldn’t be given the chance to put their ideas to good use.
We wanted to find the best small-business loans for bad credit scores to show that funding is attainable, even if you’ve made mistakes in the past. Your credit score shouldn’t prevent you from developing your company, so even those with poor scores should know that they’ve still got plenty of options.
Minimum years in business: Lenders want to make safe bets. While this is perfectly understandable, startups are inherently risky and require lots of funding. If the lending company only gives loans to successful businesses that have been operating for a decade, you’re not very likely to meet their strict requirements.
Luckily, a lot of the lenders on our list offer excellent startup business loans; you can apply even if you’ve only been in business for as little as three months.
Minimum annual revenue: Some companies require you to earn a lot before approving you for any kind of loan. Those that demand $100,000 in yearly revenue before considering your application can offer some spectacular benefits, but let’s face it — not everyone’s business is that successful from the get-go.
Whether you’re a struggling entrepreneur who just needs a break, or a successful businessman with big ideas that require ample resources to pull off, we’ve got you covered.
Payment terms: Small-business lending usually requires automatic payments to be made every week or month. We’ve reviewed these requirements, because it’s essential to know how often you need to make your payments to stay on top of your finances.
Speed of Approval
Getting loans from organizations such as the Small Business Administration (SBA) can take a long time to get approved for a loan. Unless you’re ready to wait 60 to 90 days to get your funding, you’ll probably want to pick another option. To find the best loans for your small business, we’ve tracked down companies that can give you cash as quickly as possible.
For those who can’t wait around and don’t want to jump through dozens of hoops, there are plenty of organizations that make the approval process smooth, easy, and above all, quick.
Annual Percentage Rate (APR)
You’re looking at an ad for SMB loans; besides excellent benefits, you notice that the interest rate is only 6%. Sounds amazing, right? Sure, but look for the fine print. While the interest might be low, account fees and other costs could be exorbitant. Instead of paying 6% on your loan, you might end up paying 12% because of all of these unexpected expenses.
When applying for a new business loan, the figure you want to know is the APR — annual percentage rate. This takes every expense into account and gives you more accurate information. Lenders often advertise the interest rate only to make their product sound cheaper than it actually is. Fortunately, we’re here to help you decipher the fine print because we want you to know what you’re buying without the risk of being blindsided by unexpected costs.
Term Length
The best companies for small-business loans will give you good term lengths to repay your loan. These terms are a period over which you are expected to repay your loan, which usually involves monthly payments to the lender. At the end of the term, every single cent you owe should be fully repaid if you’re regular with your payments.
We only picked the companies that allowed enough time for a loan to be repaid with reasonable monthly installments to include on our best business loans for small businesses.
Term length matters because it affects your total interest costs. If you sign up for a five-year term, your monthly installments will be smaller than if you have to pay the loan back in one year, but you’ll have to pay the loan off over a longer period and accrue higher interest charges. If you pick a shorter term, you’ll have higher monthly installments, but you’ll pay everything off quicker, and the interest charges will be smaller.
Neither of these options is necessarily better or worse than the other. Pick longer terms if you don’t want your monthly cash flow to be affected too much, and pick shorter terms if you think you can pay off all your debts quickly and move on with your life.
Collateral and Guarantees
Some of the best banks for small-business loans require collateral before approving a loan, while others won’t need you to pay a cent. The same goes for credit unions and online lenders. Small-business assets are usually used as collateral to make sure the lender is covered.
Loans that use tangible assets as collateral are called secure loans, while those that don’t are called unsecured loans. Secured loans are usually better because they offer lower interest rates, but unsecured loans are an option for businesses that don’t have anything to put up just yet.
Small Business Loans for 2022: Our Top Picks
- American Express Business BlueprintTM - Great for people with fair credit scores
Fast Capital 360 - Multiple loan types
- Fundbox - No prepayment penalties
- BlueVine - Quick funding
- Currency - Up to $2 million for equipment loans
- OnDeck - Cheaper loans for return customers
- Funding Circle - Competitive interest rates
- Credibility Capital - Easy and fast application process
Best Small Business Loans - In-Depth Reviews
American Express Business BlueprintTM Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
American Express Business BlueprintTM is a great option if you’re looking for the best business loans for small business owners. This company is one of the rare ones that offer monthly payment options for their lines of credit.
Why American Express Business BlueprintTM is a Good Choice
Your business needs to be at least one year old for American Express Business BlueprintTM to consider your application, but you don’t have to put up any collateral. The qualification and application process is incredibly smooth, and American Express Business BlueprintTM’s helpful customer support workers will give you step-by-step guidance if you need it.
Often, businesses looking for small-business loans for bad credit don’t have a high revenue just yet, and American Express Business BlueprintTM is a great option here. Its income requirement is set fairly low for this niche, you need at least $3,000 per month.
American Express Business BlueprintTM is ideal for small businesses that need access to working capital. The application process is streamlined, and if approved, your account funding will be completed in just a few days.
What You Need to Watch Out For
American Express Business BlueprintTM won’t work with clients from the following industries: Firearms, gambling, marijuana, lending, and finance. Here is the list of the rest of criteria you will need to meet in order to get approved.
American Express Business BlueprintTM’s current BBB score indicates that it may no longer offer the best small-business loans found online: It seems to be suffering from some transparency issues as of late. Another downside is that the APR can be on the higher side.
Bottom Line
Despite its currently struggling reputation, American Express Business BlueprintTM has plenty of satisfied customers who left five-star reviews and praised their speediness and professional conduct. We recommend them to anyone having trouble finding a lending institution that will work with their business because of low earnings.
Fast Capital 360 Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
Fast Capital 360 is a small business lending marketplace located in Southampton, Pennsylvania, with a nationwide network of lenders and a client base of 35,000 businesses. The company offers a range of working capital loan products, including business lines of credit, merchant advances, SBA loans, and term loans. With a quick and easy application process, low interest rates that start at 7%, and large loan amounts available, Fast Capital 360 is a great option for small businesses in need of funding.
Why Fast Capital 360 Is a Good Choice
The company believes all businesses that can prove their overall health should have access to growth capital, regardless of industry type. Businesses that may not be traditionally eligible for funding, such as those with low credit scores, are welcome to apply. Depending on the loan type, Fast Capital 360 reviews your credit score and lets you borrow even if it is 500, which is below the average score for most small business loans.
You can apply for short- and medium-term loans if you need a lump sum of up to $500,000 upfront. You'll be able to repay the short-term loan within three to 18 months and the medium-term loan in one to five years. Those who want flexibility in both borrowing and repaying can apply for a business line of credit and draw funds of up to $250,000.
If you need to finance or lease equipment, Fast Capital 360 allows borrowing up to 100% of equipment value with an interest rate of 8%. SBA loans might be the best small business loans for those who’d like to pick up working capital of up to $500,000 with repayment terms of five to 10 years. Finally, if you have bad credit or need a quick infusion of cash, there's an option to get a Merchant Cash Advance of up to $500,000.
To apply, you simply fill in the online application form, which won't require a hard credit pull. If you like the offer, upload your six most recent bank statements. When approved, you'll receive the funds within one to seven days. As you have to be in business for at least four months and have $50,000 or more of annual revenue, startups won't be able to apply.
What You Need To Watch Out For
Fast Capital 360 might not be one of the best places to get small business loans if you're a startup or have an annual revenue below $50,000. Since the company functions as a matchmaker between businesses and lenders, the offers you receive will come with different terms and rates. You won't find a transparent fee structure, even though all the interest rates are clearly stated on the website. There's also no information on pre-payment penalties, which is something you should take into account when signing up for a loan.
Bottom Line
Fast Capital 360 is a reliable and reputable small business lending marketplace with an easy application process and quick funding turnarounds. With a range of diverse loan products available, Fast Capital 360 is a great option for businesses in need of working capital. However, startups and businesses with low annual revenue may want to look elsewhere for funding.
Fundbox Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
Lines of credit and term loans are what Fundbox offers, and the former is one of the easiest ways for almost any business to get funding. It has recently expanded its assortment to include the latter, too. The company has an A+ BBB score and is known to be reliable.
Why Fundbox is a Good Choice
This is the best place for small-business loans if you’re in a rush: The company approves applications fairly quickly, which is always a good thing.
If you want to apply for financing, you’ll need a minimum of $100,000 revenue and a six-month history of operation and bookkeeping.
Fundbox also allows you to repay all your lines of credit or term loans early, which saves you cash by lowering the APR of your loan.
What You Need to Watch Out For
Since it has relatively simple small-business loan requirements, almost anyone can apply. However, Fundbox does have a higher-than-average APR, and funding is capped at $150,000 for a loan. You should also bear in mind that applicants with a good credit score are more likely to get approved. The company’s APR for either type of loan can range anywhere from 10.1% to 79.8%.
Bottom Line
When it comes to business loans, we can compare Fundbox to BlueVine in case you like the terms but need to borrow more than $150,000. Overall, it’s a great option for a lot of businesses because it gives you a fighting chance, even if you have a bad credit score. Everything about Fundbox is aimed at offering people a lifeline to sustain their business.
BlueVine Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
This California-based lender focuses on lines of credit. BlueVine is one of the best lenders for small-business loans if you’re looking for short-term help. There is no termination fee if you want to stop using the company’s services. BlueVine is also fully BBB-accredited and has an A+ rating. Receiving a loan from this company is usually super easy and quick — you can get funding in as little as 24 hours after filling out an online application form.
Why BlueVine Is a Good Choice
If you opt to take a line of credit with BlueVine, you can expect it to go up to $250,000, which you can pay back over a period of between six and 12 months. The company also has an online dashboard that can be connected to a number of accounting applications. This makes it easy to withdraw funds whenever you need them. There are no payment penalties or monthly maintenance fees on lines of credit here.
BlueVine’s invoice factoring allows users to receive 85% to 95% of their total invoice amount up to $5 million. The company has the best interest rates for small-business loans compared to all other online lenders. Users are satisfied with the responsiveness of BlueVine’s customer service offers and their willingness to work with any applicants.
What You Need to Watch Out For
One of BlueVine’s biggest flaws is that it can be difficult to hunt down the exact APR of a loan, but this isn’t unusual with banks and online lenders.
Another issue with BlueVine is that, if your application is rejected, the company usually won’t give you a reason for doing so. This makes it hard to know what went wrong or what you could potentially fix in the future. You also usually can’t borrow more than $250,000. You can contact a BlueVine customer support officer to ask for a customized cap, but there’s no guarantee they’ll approve your line of credit.
Bottom Line
All in all, BlueVine offers some of the best small-business loans to help you secure the capital you need to operate your business smoothly. The company offers flexible payment terms, making it a great choice for young companies in need of a bigger loan.
Currency Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
Currency is a lending marketplace that connects you to other lenders that specialize primarily in equipment loans. If you need low-interest business loans, this is the right place for you. This way, you can easily find the kind of lender that suits your needs.
Why Currency Is a Good Choice
Since it offers loans of up to $2 million, Currency can fund almost any equipment piece that a small business might need, especially if you need to get it as quickly as possible. That said, it usually takes up to two weeks to get approved for a loan. You have to provide two years of bank statements, as well as basic info about the line of business you’re in, your revenues, and your monthly sales.
Equipment loans are the best alternative business loans for companies that need to buy large products, such as tractors, x-ray machines, delivery trucks, computer servers, or commercial printers. Approval is usually fast, and you get a response within minutes of applying, but sometimes the company will leave your status “pending,” which usually means you need to provide additional information.
One of the best things about Currency is that it offers a guarantee on the equipment you purchase. Before you close a purchase with whomever Currency matches you with, the company examines the asset to make sure it’s in perfect condition and that you’re getting what you asked for.
What You Need to Watch Out For
Currency does a soft pull on your credit to find your credit score and financial history as part of the underwriting process. Even the banks best known for small-business loans usually do a hard pull on credit to check your viability, which can knock your score down by a few points.
You don’t have to worry about that here, but bear in mind that Currency’s team also runs your business through a series of checks with Dun & Bradstreet and Tax Guard. These experts will look at your tax records and credit history.
Once Currency’s team members have finished their checks, they’ll make a profile for your company. The profile is then compared to a series of criteria that helps them match your business with a lender that can provide the services you need. They aim to find the best possible rates, so you’ll have an affordable option.
While Currency has excellent conditions and gives decent rates on business finance loans for equipment, it’s not the best choice for people with low credit scores or startups that just got into business. You need to be in business for at least two years and have annual revenue of at least $75,000 to be considered.
Bottom Line
Currency is reliable and helps you find the best possible deal to get the equipment you need.
OnDeck Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
This New York-based lending institution is one of the best business-loan companies you can choose if you have a lower credit score and need a term loan or a line of credit to get you going. With an A+ BBB score, OnDeck is a dependable ally in your quest to fund your business endeavours.
Why OnDeck Is a Good Choice
OnDeck has much looser restrictions than most banks. While banks often want applicants with credit scores of at least 720, OnDeck accepts those with a score of at least 600, though most applicants have scores between 680 and 720. You can also apply after just one year in business, while banks usually require between two and four years of operation records before even considering you.
OnDeck is one of the best business-loan providers because it offers cheaper loans to return customers. There’s an origination fee that ranges between 2.5% to 4%, but it drops down to between 1.25% and 3% for your second loan and between 0% and 3% on your third loan.
OnDeck is similar to American Express Business BlueprintTM in that they both have foolproof application processes and approve loans quickly. Getting a provider for one of OnDeck’s top business loans can also help you build your credit score. Since the company offers reports about your payment activity to business credit bureaus, you can boost your score by regularly making your payments.
What You Need to Watch Out For
OnDeck’s APR is pretty standard for the lending industry, though it can get expensive if you take out a term loan. When it comes to lines of credit, the APR starts at 35.9%, but it can always go up. OnDeck doesn’t have payment penalties, but paying early doesn’t save you any cash because you need to pay a fixed amount every month.
One thing to keep in mind is that, while OnDeck offers some of the best business loans and doesn’t require collateral, it requires a lien on all business assets. You’ll have to sign a personal guarantee that allows the company to take lien should you fail to repay your debt.
Bottom Line
We recommend OnDeck to businesses with yearly revenue between $100,000 and $5 million, except companies that do the following: Fortune-telling/horoscopes, gambling, drug dispensaries, religious and civic organizations, firearms, adult entertainment, car dealers, and money service businesses.
Funding Circle Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
This is another online marketplace that helps connect top business loan lenders with SMEs to give them the best possible loan rates. They offer term loans and equipment loans, so this is a great option if you need to hire new staff, purchase manufacturing equipment, or expand your business in other ways.
Why Funding Circle Is a Good Choice
Funding Circle can beat even the best bank for small-business loans, because it offers relatively competitive APR: It ranges from 11.29% to 30.12%. This isn’t quite as good as SBA loans, but if you’ve been rejected for an SBA loan, this company can step in.
Another great thing is that it usually doesn’t take more than one day to get approved and only three days to get your funding. Compared to SBA loans, which can take two or three months to come through, it’s a much better option if you need cash quickly.
Funding Circle’s small-business loan requirements are pretty transparent, and one of the brand’s unique selling points is its online resource center, which features tips and educational videos from financial experts. You can also contact the platform’s loan specialists during business hours for more in-depth advice.
What You Need to Watch Out For
Funding Circle isn’t for startups, but rather established businesses. While the minimum requirement is two years in business, the average Funding Circle client has been operating for 11 years. The company doesn’t have a minimal annual revenue requirement, though it primarily works with businesses that have established themselves as profitable.
Compared to other lenders on our list, Funding Circle has high application standards. It offers some of the best cash-flow loans for small businesses out there, but only works with experienced business owners with good revenue and growth trajectory.
The company also asks for a lien on all your business assets and doesn’t often approve of applicants with a personal credit score that’s lower than 660. You’ll have to sign a personal guarantee during the application process.
You should also be aware of Funding Circle’s one-time fee, which covers the cost of services for processing the loan. This cost ranges between 0.99% and 6.99% of the whole loan amount.
Bottom Line
Funding Circle is one of the most transparent finance and loan companies on the market. We recommend it because of its low interest rates, lack of predatory behavior, and professional team of customer service agents who go out of their way to help.
The ease of application is also a big bonus, as is the speed of approval. Overall, Funding Circle is a great choice for established companies looking to make their next big purchase or upgrade their business.
Credibility Capital Review
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Overview
Credibility Capital specializes in providing short and medium-term loans for small-to-medium enterprises. If you’re wondering how to get a small-business loan that will help you fund your next business project, Credibility Capital is a good choice because it offers decent rates coupled with high-quality service.
Why Credibility Capital Is a Good Choice
Credibility Capital offers some of the best small-business loans on the market because of the flexibility of its underwriting process. This company looks at the overall balance of your business instead of drawing hard lines and writing applications off because of a single business metric. There are also no prepayment fees, so you can reduce the APR if you pay off your loan early.
Besides the basics, like a copy of your driver’s license or ID card, you’ll have to show your bank statements for the past six months, two years of personal tax returns, two years of business tax returns, a voided business check, your most recent profit-and-loss statement, a recent balance sheet, and a business debt schedule.
Credibility Capital will do a soft pull of your credit and, if everything goes well, Credibility Capital will do a hard pull of your credit, then offer you some of the best business loans on the market. As you can see, the company will consider your application carefully, but you’ll get a quick response and can usually access your funds within a week.
What You Need to Watch Out For
The trickiest thing about borrowing from this company is that you’ll need to put a lot up as collateral. Every person who owns more than 25% of the business needs to sign a personal guarantee, and you’ll also need to make a UCC-1 filing and put forward your entire business as collateral.
Bottom Line
Credibility Capital is one of the best small-business loan lenders out there for high-credit score businesses. The company deals fairly and transparently with its customers, although its entry bar is quite high.
A Comprehensive Guide to Loans
Getting a loan is a big step in your life. Any loan you take out will be with you for several years as you spend the money, then slowly repay it. You need to know all of the options you have at your disposal, from government-funded loans and grants to online lenders. Let’s break it down.
Small Business Administration Loans
The SBA is one of the best places to get a business loan — as long as you have a great credit score. If you have bad credit, startup business loans with guaranteed approval are tough to come by in general, but the SBA is particularly rigorous about who it lends money to. To qualify, you need to provide proof of solid business financials, great personal credit, and adequate collateral. In some cases, you’ll also need to get a personal guarantee from every person who owns a significant share of the business.
However, if you meet the requirements and can afford to wait for 60 to 90 days to get your loan approved, then it’s one of your best options. It has incredibly low rates, is government-guaranteed, and offers great flexibility. You can buy equipment, real estate, inventory, or whatever else you might need. You can also use the loan for refinancing or extra working capital. All in all, you can borrow up to $5 million and pay it back in monthly installments that are easy to cover. However, it’s a highly competitive loan, and there’s no guarantee you’ll get approval. If you don’t want bank loans for your small business, study the requirements for an SBA loan carefully before applying.
SBA loan pros:
- Low interest and APR rates.
- Great payment terms.
- Worth up to $5 million.
- Government-guaranteed funding.
SBA loan cons:
- Requires an excellent credit score.
- Long and complicated application process.
- Low approval rate.
Term Loans
Term loans are the most common financing avenue, and the companies we’ve included on our list offer some of the best small-business loan rates. A term loan is simple: you get a lump sum of cash upfront, then pay it off in installments over time. The period is predetermined and usually cannot be extended. All sorts of organizations can offer term loans, but online lenders often offer faster funding than banks do.
The amount of money you can get depends on the company, but it’s usually up to $500,000 or $1 million.
Term loans usually require a substantial down payment or collateral to be approved, and sometimes companies also ask for a personal guarantee. These loans are also usually more expensive. They’re a good choice for people with high credit scores, because a term loan is the best small-business loan if you’re looking to expand and need quick access to capital.
Term loan pros:
- Quick funding with almost no waiting period.
- You can usually borrow up to $1 million.
- You get cash upfront.
Term loan cons:
- Usually requires collateral.
- Costs can vary depending on the company.
Invoice Factoring
Invoice factoring is perfect for businesses with customers whose bills have been due for 60 days or more. What if you have several customers who owe you money and won’t be paying it back soon? In those cases, you can opt for SME lenders who offer invoice factoring, which basically means you’ll get paid in advance for the bills you’re already owed.
This works by selling your invoices to a factoring company, and then they’re the ones who are responsible for collecting cash from the customer when the invoice is due. The company buys your invoices for a percentage of their total value, and then takes all responsibility for them.
Of course, this means you lose all control of how those invoices are dealt with and how the company collects them. It’s worth looking at invoice factoring from one of the best places for small-business loans if you need really quick cash and have bad credit, so you can’t get approved for other loans.
Invoice factoring pros:
- One of the quickest ways to get cash.
- Easy approval even if you have a bad credit score.
Invoice factoring cons:
- Really expensive compared to other options because you don’t get the total value of your invoice.
- You can’t control how those invoices are dealt with, which might damage your relationship with customers.
Invoice Financing
These are the best online small-business loans for businesses that want to use their invoices for some quick cash. It’s similar to invoice factoring, except that this way, your outstanding invoices are provided as collateral. You don’t sell them unless something goes wrong and you’re unable to pay off your debt.
This differs from invoice factoring in that your customers won’t be aware that their invoices are being financed, but you’ll still be responsible for collecting payments.
Invoice financing pros:
- Quick cash in a pinch.
- You still have control over your invoices.
- You won’t risk losing customers because they won’t know the invoices have been financed unless you can’t make a payment.
Invoice financing cons:
- This is quite a costly loan, and it’s probably best to use it only in emergencies.
Business Lines of Credit
Business lines of credit can be a great choice for small-business financing. They allow you to draw money against your predetermined credit limit, so you get to take money as you need it instead of immediately getting a lump sum of cash. You only pay interest on the amount of cash you draw.
This is usually used for short-term working capital, and it provides excellent flexibility and fairly easy repayment terms. You can finance unexpected costs or improve your company’s cash flow, but you’ll need a good credit score and substantial revenue to get approved.
This might not be one of the best small business loans for new businesses or those who need a lot of cash for a one-time purchase, such as heavy equipment. However, it’s excellent for those who need a smaller, constant influx of cash that comes in as often as you need it. It’s very similar to the way a credit card works.
Business lines of credit pros:
- Usually, no collateral or personal guarantees are required.
- You can draw cash quickly, easily, and repeatedly. No need to keep going through a long process of applying for a loan every time.
- You only need to pay back the money you withdrew, not the whole potential amount.
Business lines of credit cons:
- You need a strong credit score and a decent yearly revenue to be considered.
- You’ll have to pay maintenance and draw fees.
Equipment Loans
Small-business startup loans like this one are great for companies that need expensive equipment to get them going. One of the best things about this type of loan is that the only collateral you put forward is the equipment itself. There’s no need for personal guarantees or anything else. You could potentially use an equipment loan to buy semi-trucks, tractors, computer servers, restaurant ovens, x-ray machines, mixer trucks and cranes, or commercial printers.
You generally don’t need to submit as many documents as you would for other loans, and equipment loans are usually approved within a week. Interest rates typically fall between 6% and 9%, but small business owners with good credit tend to get better deals.
While most loans require you to have considerable revenue and operate for a certain amount of time before even considering you, equipment loans are some of the best small-business loans for startups. You will also need to provide a down payment that can range from 5% to 50%, depending on your credit score.
You can get equipment loans from your local bank, a dealer, or an SBA lender.
Equipment loans pros:
- It’s easy to apply for them.
- You own the equipment you buy because you have equity in it.
- No collateral required except for the equipment itself.
Equipment loans cons:
- There is usually a down payment required, and it can be pretty tricky for people to find the best small-business loans with bad credit.
- Your equipment can get outdated before you pay it off.
Merchant Cash Advances
This isn’t technically a loan. Here, the lending company gives you cash in advance, in exchange for a percentage of your daily credit card and debit card sales. So, instead of making monthly payments, you simply let the lender have a percentage of your sales.
Quick business loans like this are great for people with bad credit who can’t get any other kind of loan. If you’re just starting out, have little or no collateral, and generally have trouble meeting eligibility standards with companies, this could be the solution. However, keep this in mind — these loans are expensive. Borrowing costs can rise to 350% in some cases. These loans are usually approved very quickly, so this is the kind of solution you can use in a pinch.
Merchant cash advances pros:
- Fast cash.
- You can apply for this loan even with a bad credit history.
- This is usually an unsecured loan.
Merchant cash advances cons:
- Extremely high borrowing costs.
- Frequent payments could mess up your company’s cash flow.
Personal Loans
Some of the top small-business loans are actually personal loans. You can borrow money from an online lender, bank, or credit union and use it to fund your business needs. These are unsecured loans that usually don’t require collateral, and you pay them back just like you would most other loans — in fixed monthly installments.
To apply for this loan, you should first check with your lender and see whether they have any issues with you using a personal loan for business purposes. This can be one of the best small business startup loans because banks don’t like lending money to companies with no operating history, which could be an excellent solution for people who need starting capital.
In most cases, whether or not you get approved depends pretty much exclusively on your credit score.
Personal loans pros:
- Startups can qualify easily.
- You get cash quickly.
Personal loans cons:
- Impossible to qualify with bad credit history.
- High borrowing costs.
- You can only borrow small amounts, usually up to $50,000.
Business Credit Cards
These can be some of the best business loans for small businesses. These are lines of credit that can be used to finance ongoing operational costs. They won’t be helpful to companies that need starting capital or startup companies, but if you need cash for travel expenses, utilities, and office supplies, this is a really nice option.
As with any credit card, you’ll have a monthly limit, but if you make regular payments, you can actually get benefits such as cash back and discounts on certain goods. It’s also a great way to build up your credit score if you use it correctly.
Business credit cards pros:
- No collateral required; this is a credit card.
- Great for ongoing expenses.
Business credit cards cons:
- Not the best rates for small-business loans. This isn’t really a loan you get to kickstart your business. If you’re late with your monthly payments, it could mess up your credit score.
- Be careful of extra monthly banking fees.
Microloans
Microloans usually go up to $50,000. They are often offered by non-profit organizations, and the SBA also offers its own microloans. The process of getting one can be pretty quick — it usually takes around a month to get approved, compared to bigger loans that can take several months.
These might be the best type of small-business loans for disadvantaged communities as they are offered to people and businesses that traditional lenders usually wouldn’t work with. However, these kinds of loans can still be challenging to apply for because there’s a rigorous application process with a lot of paperwork involved.
Microloans pros:
- These kinds of loans are often accompanied by training and consulting for people who want to start a business.
- Low cost of borrowing.
- Could be a great option for people in disadvantaged living situations.
Microloans cons:
- Strict application process because these loans are in high demand.
- These are some of the best small-business working-capital loans, but they often have limitations. For example, you can’t use this loan to buy real estate, or pay back other debts.
FAQ
Are small-business loans hard to get?
This depends on a few factors: The kind of loan you apply for, how well you fill out the application, how many years you’ve been in business, and what your yearly revenue and your credit score are. It’s generally more difficult to get loans if you have a low credit score. The application process itself is usually straightforward. With most online lenders, it can be done within 15 minutes.
The best banks for small-business loans also give you fairly quick responses about whether they accept your application, but you might have to wait longer to get your funding.
Can I get a business loan with a 700 score?
Most likely. Anything between 670 and 739 is considered a good credit score, and most banks, online lenders, and credit unions will give you a loan.
What is the easiest business loan to get?
It’s generally easier to get a loan from an online lender than from a bank, but the best bank to give small-business loans is possibly Wells Fargo. Of the online lenders on our list, American Express Business BlueprintTM and OnDeck are your best bets because both institutions have a fairly easy application process and accept applicants with low credit scores.
What is a good interest rate for a small-business loan?
Interest rates can range from only a few percent to over 100%, depending on your credit score, whom you borrow from, and what kind of loan you get. SBA loans, which generally have some of the best interest rates, range between 7.5% to 10%. However, when you want to compare business loans, it’s a much better idea to look at the APR rather than interest rates only.
APR is the annual percentage rate, and it takes any kind of account maintenance fees and similar expenses into the equation. It gives you a clearer picture of how costly it will be to pay back your loan.
How do I qualify for a small-business startup loan?
It depends on the kind of loan you get, but here are some of the standard minimal requirements: At least one year in business, $50,000 – $75,000 in yearly revenue, a credit score of at least 620, and no bankruptcies filed in the past five years.
Bear in mind that our list will give you options for some of the best small-business funding you can find. Certain lenders, such as Funding Circle, have no minimum annual revenue required, while Fundbox has no minimum credit score requirements to apply.
Are there any grants for starting a small business?
There are plenty of grants available for starting a small business. You can apply for federal grants, but they are mostly open to businesses in the science, tech, and health industries. The Department of Energy, NASA, the Department of Defense, the National Institute of Food & Agriculture, and the Rural Energy for America Program are also some examples of government backers for business financing.
This is one of the best ways to get small-business loans for minorities and other disadvantaged groups. Each state also offers a special grant for its residents, and you can also apply for SBA grants, although the requirements are pretty high.
Do banks give loans to start a business?
They do, but it’s tricky. Banks are reluctant to invest in young companies and prefer giving business loans to established businesses. However, you can look at our list of best small-business loans to find something to suit your needs. If you want to go to a bank, you can use a personal loan to fund your startup, or present the bank with a good business model to convince them to invest in you.