Types of Small Business Loans
Small business loans are key in uplifting business success and maintaining good cash flow. They are vital in financing projects, purchasing equipment, and providing working capital. Some common small business loans types include:
Despite their immense benefits, it would be best for borrowers to familiarize themselves with small business loans and how they operate. This is important in financial decision-making and avoiding extra costs for your business.
Best Business Loan Lenders
Best All-Around Option: Fundera
Fundera is a great all-around option if you are looking to get a business loan. It will usually deal with companies that have been in business for at least a year and have a credit score of at least 600. The loan amounts vary nicely, starting at $5,000 and going as high as $5 million. There is a wide variety of different lending options available to you.
A loan specialist will be on hand to help you figure out which route is going to be most optimal for your needs. Added to that is the no fees and great network of lending partners, so it is hard to go wrong with Fundera.
Best for Smaller Businesses: National Funding
National Funding started off life as a small online-only operation in California. It has since expanded significantly in the more than two decades in which it has been in business. They’ve dealt with more than 40,000 businesses over the years and deal with companies that have monthly revenue of at least $20,000.
There is a good range of financing options, catering also to people with lower credit scores. The application process is very straightforward, so all types of business owners should feel at ease with the process.
Best for Fast Funding: Fora Financial
If you’re looking to get your hands on some funds for your business quickly, then Fora Financial could be the ideal option for you. After completing the application and getting approval, you will usually get your funds in less than 72 hours. This is a lot quicker than most competitors.
It also has favorable eligibility requirements for prospective borrowers. You only need to have been in business for at least six months and your credit score only needs to be 500 or more. The usual monthly revenue that Fora Financial looks for is $12,000 and it will offer loans of anywhere between $5,000 and $750,000.
What to Consider When Choosing a Small Business Loan Service?
Check out the Lender Better Business Bureau Rating
The Better Business Bureau (BBB) provides professional, unbiased reviews of businesses. They focus on each business’s transparency rather than their overall quality. So, they provide useful insights into whether business loan lenders are honest about their offers and how they respond to customer concerns and complaints.
If a business lender fails to meet its obligations, the BBB also offers a platform for business owners to lodge complaints. You can go to a lender’s BBB page to see how the BBB rates them, and you can view the correspondence between customers and lenders.
Find out How Flexible the Lender is
Business lenders can vary greatly in their flexibility. That’s why some find it useful to look into their contracts and customer reviews.
Some lenders set very strict rules and expect you to follow them thoroughly. Your experience with them will depend, amongst others, on these factors. For example, many lenders insist that you pay them back regularly for the entire loan term, and they will even sometimes charge an early repayment penalty if you want to pay the loan back early. If you don’t want to be surprised by factors like that, you can do some research into how flexible each business lender is.
Do Background Research on the Company
Broad background research can start with the abovementioned factors: the BBB and flexibility. But each business lender has its own history, leadership, and reputation.
Background research could potentially help you guess what your experience with a particular lender will be like. Factors such as their leadership and past media coverage will provide hints that enable you to make a more educated choice. Some business lenders are very obscure and have a poor history including lawsuits and extensive complaints. However, other lenders are well-known for honesty and innovation, and some background and media research should reveal that about them.
A business lender can easily appear reasonable. Their rates can even look great, but until you compare them to other options, you can’t know for sure.
You can compare lenders on Lendstart quickly and conveniently. We have reviews on many different lenders, where you can compare factors such as:
- Minimum borrower requirements
- Customer service
- Much more
Knowing which lender offers you the right products should usually require research. Browse our business loan reviews to start comparing lenders.
Which Lender Offers Exceptional Customer Service
Sometimes, the business lending process can be difficult or confusing. That’s why customer service is a critical aspect of lender-business relationships.
When a lender offers exceptional customer service, every part of the process becomes much easier. Most importantly, when there’s an issue you need to discuss with them, their customer service becomes the most important factor in doing business with them.
Most Important Requirements for Small Business Loans
If you’re new to shopping around for business loans, you should be aware of the qualifications that lenders use. Business lenders look at several factors to determine how safe or risky it is to lend you money. These are usually the most important factors for them.
Your credit score is used as the main metric of how risky it is to lend you money. Business lenders normally state a minimum credit score for potential applicants. The minimum score can vary greatly by the lender.
The higher your credit score is, the better. If your credit score greatly exceeds the minimum score set by the lender, you can normally get better interest rates.
Lenders use your total annual revenue as another indicator of how safe it is to lend you money. In most cases, it’s the main indicator of your business’s performance and thus of your ability to pay back a loan. That’s why many business lenders also set a minimum annual revenue requirement to be considered. The exact amount normally starts at a minimum of $50,000 but will vary depending on the lender, the loan type, and the loan amount.
Time In Business
Sometimes, business loan lenders are more comfortable lending money to businesses with more experience. A young business is viewed as riskier, as the business is normally less established in its market. So, lenders will normally set a minimum time in the business requirement, which typically varies from 6 to 24 months. Accordingly, in some cases, the more time your business has been operating, the more at ease lenders will feel about working with you.
Business Loan Benefits
Business loans can offer a few benefits for business owners.
Accessible and Convenient
You can shop around and discuss your needs with different business lenders to get the most accessible and convenient funding possible for you. Lenders normally offer different repayment options, and you can opt for the options that best suit you.
Lenders are often willing to work out a repayment plan that is compatible with your business’s cash flow. That way they can lend you money in a way that makes it easier for you to repay them without difficulty.
Business lenders offer a wide variety of loan products. As a business borrower, you have a lot of choices when it comes to loan size and repayment terms. You can also opt for a business line of credit if you need additional flexibility. On top of that, there are many specific loan types tailored to different business needs.
You have a lot of flexibility in terms of financing various short or long-term needs. For example, some collateralize an equipment loan with the purchased equipment or seek out loans that don’t require collateral.
No Collateral Required
You don’t necessarily need to submit collateral to access business loans. Generally, it’s easier to find a no-collateral business loan when you have higher borrower qualifications. In some cases, collateral isn’t an issue.
You can browse lenders on Lendstart to see which business lenders don’t require collateral.
This includes loans such as working capital loans meant to fill short-term financial gaps. Many businesses that face seasonal revenue fluctuations can exclusively shop for short-term loan options. Some may use these loans to help finance small business expansions or simply sustain cash flow. Some business loans come with terms as low as 3 months.
Reasonable Interest Rates
Business lenders of all institutional types can offer reasonable interest rates. Typically, stronger borrower qualifications enable businesses to access more competitive rates. If you aren’t happy with the rates one lender offers, you can often find several other lenders who will beat those rates.
When shopping for business loans, you can refer to the listed APR to compare interest rates and other costs. Many business leaders also don’t charge hidden fees while charging competitive and transparent rates. Access to educational resources online empowers business owners to make wiser choices and find reasonable interest rates.
Small business loans are widely available from many different lenders. This can make finding the best business loan for your business appears more difficult. However, it also means that borrowers have more choices and can find competitive business loans.
Finding the best business loans for your unique situation usually requires some research. Taking the time to find the best small business loan can save you money and enable you to grow your business or keep it operational when your cash flow slows down. We recommend using our business loan guide to gain deeper insights as you research further.
Comparing the best business lenders for the loan type you are looking for is often recommended.