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Best Small Business Loans

Small business loans are a type of financing business owners can use to pay for company-related expenses and operating costs. They are also a great tool for helping companies grow and thrive. The best business loans come with competitive rates and flexible terms.

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Compare The Best Business Loan Lenders

Editor's Choice
Fundera
  • Loan Amount: $5K-$5M
  • Time in Business: 12+ months
  • Monthly Revenue: $10000
  • Min Credit Score: 600
View details
Key facts

Qualifications

  • Credit Score:  600+
  • Age of business:  12+ months
  • Monthly revenue:  Varies
  • US citizenship:  Required for all owners
  • Term length:  Varies

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Pros: 

  • No fee to use Fundera’s services
  • Access to 30+ reputable lenders with one application
  • Fundera does not receive incentives to work with specific lenders
  • Wide variety of lending products
  • Work directly with a lending specialist to evaluate options

Cons: 

  • High rates/fees
  • Most fees in first few months, no incentive to repay loan early
Rapid Finance
  • Loan Amount: $10K-$1M
  • Time in Business: 2 years
  • Monthly Revenue: $18000
  • Min Credit Score: 550
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Key facts

Qualifications

  • Credit score: 550
  • Age of business: 18+ months
  • US citizenship: Required for all owners
  • Repayment terms: Varies
  • Term length: 3-60 months

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Pros: 

  • All types of financing offer next-day access to funds upon approval
  • A wide array of funding options
  • Access to a one-on-one consultation with a Rapid Finance lending expert

Cons: 

  • No interest rate information available on the website
  • Must go through pre-qualification process
Biz2Credit
  • Loan Amount: $25K-$6M
  • Time in Business: 6-18 months
  • Monthly Revenue: $21000
  • Min Credit Score: 575
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Key facts

Qualifications

  • Credit score:  575+
  • Min. time in business:  6/12 months
  • Min. monthly revenue: $21,000
  • US citizenship: required for most loans, but a green card is accepted for SBA loans
  • Loan term:  12-36 months

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Pros:

  • Directing funding available within 24 to 72 hours
  • Transparent terms and no registration or application fees
  • Easy approval process with great guidance throughout the entire financing process
  • Multiple forms of financing available, including small business loans, business lines of credit, and business acquisition loans

Cons:

  • Certain fees are in place.
  • The website does not provide a lot of information.
Lendio
  • Loan Amount: $1K-$5M
  • Time in Business: 12+ months
  • Monthly Revenue: $12000
  • Min Credit Score: 580
View details
Key facts

Qualifications

The following qualifications vary depending on the lender:

  • Credit score, age of business, annual revenue, repayment terms, term length.
  • Collateral is required for some lenders.

Read Review »

Pros

  • Flexible on credit score. Getting approved is based more on strong balances and revenue.
  • Variety of loan types available
  • Soft credit check for the initial application
  • Save time with offers from multiple lenders

Cons

  • Application process is a bit long for a marketplace because it requires 3 bank statements
  • Since Lendio is not a direct lender, the terms only become clear after applying for a loan
Fora Financial
  • Loan Amount: $5K-$1.4M
  • Time in Business: 6+ months
  • Monthly Revenue: $15000
  • Min Credit Score: 600
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Key facts

Qualifications

  • Age of business:  6+ months
  • Monthly revenue:  $14,000
  • US citizenship:  Required for all owners
  • Repayment terms: Up to 15 months for small business loan

Read Review »

Pros: 

  • High rating from customers on TrustPilot
  • Funding in as little as 72 hours
  • Early payoff discounts

Cons: 

  • No information on site about factor fees or interest rates
  • Only offers merchant cash advance or small business loan
  • Longest loan term is 15 months
OnDeck
  • Loan Amount: $5K-$250K
  • Time in Business: 12+ months
  • Monthly Revenue: $8000
  • Min Credit Score: 625
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Key facts

Qualifications

  • Credit score:  625
  • Age of business:  12+ months
  • Monthly revenue:  $8,000
  • Personal guarantee: Required
  • US citizenship:  Required, or permitted residency
  • Term length:  3-24 months

Read Review »

Pros

  • Funding is quick
  • Transparent about costs and fees
  • Looser qualifications than many banks

Cons

  • Application takes a bit longer than competitors—10 minutes
  • Application requires three months of bank statements
  • 0-4% origination fees
  • Only provide info on lowest APR not highest. You would need to submit an application to find out.
  • No incentive to prepay loans since there are fixed fees
Lending Club
  • Loan Amount: $5K-$500K
  • Time in Business: 12+ months
  • Monthly Revenue: $4200
  • Min Credit Score: 600
View details
Key facts

Qualifications

  • Credit score: Fair
  • Age of business: 12 months
  • Monthly revenue: $4,200
  • Personal guarantee: Required
  • US citizenship: US citizen, permanent resident, or long-term valid US visa
  • Repayment terms: 6 months – 5 years
  • Bankruptcy: No bankruptcies or tax liens

Read Review »

Pros

  • Initial application is quick and easy
  • Requirements aren’t strict compared to other lenders
  • Transparent about fees and restrictions
  • Funds in as little as 1-3 business days

Cons

  • Not a good option for new businesses
  • Origination fee of 3.49% – 7.99%
BlueVine
  • Loan Amount: $5K-$5M
  • Time in Business: 12+ months
  • Monthly Revenue: $24000
  • Min Credit Score: 690
View details
Key facts

Qualifications

  • Credit score: 690
  • Age of business: 2+ years
  • Monthly revenue: $42,000
  • Personal guarantee: Required
  • Repayment terms: 6 or 12 months

Read Review »

Pros

  • Quick and easy online application process
  • Transparent about costs and fees
  • Fast funding
  • No origination fees, prepayment penalties, or termination fees

Cons

  • No line of credit or term loans in ND or SD
  • Short repayment terms

How Do Small Business Loans Work?

Small business loans are loans meant to help cover the costs associated with running a business, particularly when it comes to development. You can get one of these loans from a bank, credit union, or private online lender. Or you can go through the U.S. Small Business Administration (SBA), which backs small business loans.

Like personal loans, business loans typically come in a lump sum payment that you can then use for specific business-related reasons. This includes:

  • Research and development
  • Product launch
  • Business growth or expansion
  • Startup costs
  • Everyday operations
  • Debt repayment
  • Equipment or real estate purchases
  • Other working capital costs
  • Cash flow management
  • Emergency expenses

Once you have a small business loan, you’ll need to start making payments on it — just like you would any other loan. These payments typically include interest charges and may come with additional lender fees.

Business loans also have their own repayment term, which can range from months to years. Generally, a longer term means a smaller monthly payment. However, it also means you’ll end up paying more in interest over the life of the loan.

How to Qualify for a Small Business Loan

The top small business loans depend on several factors, such as:

  • The borrower’s creditworthiness (credit score, debt-to-income ratio, etc.)
  • Amount needed
  • Reason for funding
  • Lender requirements, restrictions, and fees

Some types of business loans — such as working capital loans — can be harder to get than others. To improve your chances, make sure you know exactly why you need the loan and how you plan to repay it. This will show your lender that they’re making a good decision in issuing the funds.

Do your due diligence when choosing a lender. This involves carefully reviewing the interest rates, terms, fees, and eligibility requirements of any loan. This can take some time, but it can also help you find the best business loans possible.

Small Business Loan Types

Many types of small business loans exist, so it’s important to familiarize yourself with them. Here are the top small business loans:

  • SBA loans: Issued through lenders but backed by the SBA, these loans are meant for small, growing businesses. They often come with longer terms, lower interest rates, and faster funding times than other loans. The SBA guarantees up to 85% of these loans, making it easier to get funding.
  • Working capital loans: This is a catch-all term for different types of business loans. They’re a short-term funding option meant for things like everyday operations or emergency expenses.
  • Term loans: This is any business loan with a repayment term. They require monthly payments — usually fixed — that include interest.
  • Merchant cash advances: This is best for businesses that need immediate funds to cover short-term expenses. This could be things like a cash-flow shortage or emergency. It’s an expensive option.
  • Invoice factoring: Some lenders will buy your unpaid business invoices and pay you a percentage once it’s fulfilled (minus lender fees). This is a fast funding option.
  • Business Lines of credit: A form of borrowing that lets you access funds as you need them, up to a predetermined limit. Think of it like a credit card, but with more favorable terms and potentially higher limits. Instead of getting a lump sum upfront like you would with a traditional loan, you can draw from your line of credit whenever your business needs it. You’ll only pay interest on the amount you borrow.This is a revolving form of financing that business owners can repeatedly draw from to cover operating expenses. It doesn’t come with a specific term, but may need to be renewed every so often.
  • Equipment financing: You can use equipment financing to buy the equipment, machinery, or appliances you need to run your business. Whatever you buy is also collateral, meaning you could lose it if you fail to make payments. You may be able to get a loan from the SBA or a traditional lender.
  • Line of Credit: A line of credit is a flexible form of borrowing that lets you access funds as you need them, up to a predetermined limit. Think of it like a credit card, but with more favorable terms and potentially higher limits. Instead of getting a lump sum upfront like you would with a traditional loan, you can draw from your line of credit whenever you need to. You’ll only pay interest on the amount you borrow. It’s a convenient option for managing short-term cash flow needs or unexpected expenses.

How to Get a Small Business Loan

Every lender has its own application and underwriting process, but here’s what you can generally expect when applying:

  • Consider what you need. Lenders have different financing options, so determine the best business loans or loan for you. Calculate how much you need to borrow and why.
  • Review your credit. You’ll generally need good credit or better to qualify for financing as well as a good debt-to-income ratio. The better your credit score, the better your rates and terms. Some lenders will also require a business credit score.
  • Check the eligibility criteria. Requirements differ depending on the lender and loan type (see below).
  • Research several lenders. Choosing the best business loan also involves comparing lenders. See what rates, terms, and types of loans they offer. Also, check their online reputation to see what other people are saying about them.
  • Get your documents together. You’ll need certain personal, financial, credit, and business-related documents to apply. You might also need to provide a business plan and any legal documents for your company. Some lenders require 12+ months of business bank statements and business federal tax returns. They may also require a business plan, licensing information, business checking account information verifying cash flow, and other legal documents.
  • Apply for a loan. After narrowing down the top small business loans, choose a lender and apply. You can do this online or in person, depending on the lender. If possible, get prequalified first to see what you might qualify for without affecting your credit.
  • Wait for approval. It can take several days or weeks to hear back. But if you’re approved, you’ll receive the funds and can start using them.

When looking for the best business loans, here are some final things to consider:

  • Time to approval and funding
  • Lender’s online reputation
  • Eligibility requirements
  • Lender fees
  • Typical annual percentage rate (APR) and terms
  • Loan purpose and restrictions

Business Loans Eligibility Requirements

Eligibility criteria can vary from lender to lender, and it’s essential to understand what they’re looking for to increase your chances of approval. 

Below are some of the most important eligibility requirements to keep in mind when seeking a business loan:

  • Credit score: Lenders will typically look at your personal and/or business credit score to assess your creditworthiness. A higher credit score generally means you are more likely to be approved for a loan and may qualify for lower interest rates.
  • Annual revenue: Lenders may require that your business generates a certain amount of revenue to qualify for a loan. The amount may typically be at least $100,000/year to get a loan.
  • Time in business: Many lenders require that your business has been in operation for a certain period of time, typically at least 6 months to a year or two.
  • Collateral: Depending on the lender and loan type, you may need to provide collateral to secure the loan. This could be in the form of real estate, inventory, equipment, or other valuable assets.
  • Debt-to-income ratio: Lenders may also look at your debt-to-income ratio, which compares your monthly debt payments to your monthly income. A lower ratio indicates that you have more disposable income to put towards loan payments.
  • Purpose of the loan: Lenders may have specific requirements for the intended use of the loan, such as financing for equipment, inventory, or working capital.

Pros and Cons of Small Business Loans

Even the best business loans come with their share of pros and cons. Here are the main ones to consider.

Small Business Loans Pros

  • Can help you launch, scale, or protect your business during times of financial difficulties
  • Many options are unsecured, meaning you won’t have to worry about collateral or losing equity in the business
  • Flexible repayment options
  • Large loans may be available

Small Business Loans Cons

  • Good credit required
  • Time to funding can take a few weeks
  • Some financing options require collateral or an asset (like equity in the business)
  • Interest rates and other fees can be high

Should You Get a Small Business Loan?

You may want to get a small business loan if you:

  • Want to grow your business but need funds
  • Have good credit and cash flow
  • Can reliably repay what you borrow
  • Have been in business for at least six months (but ideally longer)
  • Make enough annual revenue to qualify
  • Know exactly how much you need and why

Being prepared can put you on the road to success and help your business thrive.

Average Small Business Loan Rates

Rates and terms vary by lender. However, here are some of the best business loans from reputable lenders:

Lender Typical APR (Fixed) Loan Term Loan Amount Recommended Minimum Time in Business Recommended Minimum Credit Score
Fundera 7% to 36% Varies $5,000 to $5M+ 1 year 600
Biz2credit 4% to 36% Up to 7 years $25,000 to $2M+ 6 months 575
Rapid Finance Undisclosed 6 to 24 months $5,000 to $1M 6 months 550
Fora Financial Varies Up to 15 months $5,000 to $1.4M 6 months 500
OnDeck Starting at 29.90% Up to 24 months $5,000 to $250,000 1 year 625
National Funding Varies 4 to 24 months $5,000 to $500,000 6 months 600

*Rates are subject to change

FAQs About Comparing Business Loans

What is collateral?

How is business loan eligibility calculated?

Is a business loan considered income?

How to get a good business loan?