Running a small business is incredibly rewarding, but it also comes with unique challenges. You might need extra cash to purchase new inventory, cover unexpected expenses, or take advantage of a sudden growth opportunity.
That’s where small business loans come in – they provide a vital lifeline, giving you the funds to overcome obstacles and propel your business forward.
Best Business Loans:
- National Funding: Known for fast funding and flexible repayment options.
- Fora Financial: Specializing in merchant cash advances and short-term loans for quick business boosts.
- OnDeck: Offers term loans and lines of credit focusing on speed and accessibility.
- Fundbox: Provides business lines of credit with a streamlined application process.
- Blue Bridge Financial: Best for small business equipment financing.
National Funding
National Funding is an established provider of small business loans and equipment financing. It’s recognized for its quick application process and rapid funding, with the potential for businesses to receive funds within 24 hours of approval.
Potential borrowers should be mindful of the costs associated with National Funding’s loans, as interest rates and fees may be higher compared to traditional bank loans, and frequent repayments are typically required.
Offerings:
- Business Loans: Short-term loans ranging from $5,000 to $500,000 for a variety of business needs.
- Equipment Financing: Up to $150,000 available for purchasing or leasing business equipment.
- Repayment Terms: Flexible terms from 6 to 15 months for business loans, and 2 to 5 years for equipment financing.
Borrowing Requirements:
- Credit Score: A minimum credit score of 600 is generally required.
- Time in Business: At least 6 months for most funding options, making it accessible to relatively new businesses.
- Annual Revenue: Typically, a minimum of $250,000 annual revenue is necessary.
- Business Checking Account: Applicants need to have a U.S.-based business checking account.
Quick application and funding process.
Accessible to newer businesses.
No collateral needed for unsecured loans.
Funding for businesses with lower credit scores.
Pros:
Potentially high borrowing costs.
Limited transparency on fees prior to applying.
Loan amounts may not meet the needs of larger businesses.
Cons:
Fora Financial
For small business owners exploring loan options, Fora Financial could be a standout choice. It specializes in quick, direct lending and offers a variety of financing solutions, including merchant cash advances and short-term loans, aimed at helping businesses grow.
Known for fast funding, clear fee structures, and an uncomplicated qualification process, Fora Financial makes securing necessary capital both accessible and flexible. With funding possible within just a few days and no strict collateral requirements, Fora Financial is well-suited for businesses looking for an efficient financial boost to meet their goals.
Offerings:
- Merchant Cash Advances (MCA): This product operates by purchasing a percentage of future credit card sales. The repayment is made through a daily holdback of a percentage of card sales, with the flexibility of weekly payment plans in addition to daily ones. Unlike traditional loans, MCAs use a one-time factor rate for repayment calculation.
- Short-Term Loans (STL): Offered with a term length typically less than a year, these loans also use a flat fee rather than an interest rate and require daily or weekly repayments. Fora Financial provides a discount for early repayment, which can lower the overall cost of the loan.
Rates and Fees:
- Borrowing Amount: Ranges from $5,000 to $1.5 million.
- Term Length: For STLs, it’s 4 to 15 months, whereas MCAs have no fixed term length due to their repayment mechanism.
- Interest Rates: Generally range from 15% to 40%, reflecting the short-term nature and higher risk associated with these loans. The actual cost can be high, but Fora Financial compensates with fast funding and ease of qualification.
- Borrowing Fee: A one-time fee ranging from 10% to 30% of the borrowing amount.
- Origination Fee: Between 1% and 4% of the borrowing amount.
- Collateral: Not required for either product type.
Borrowing Requirements:
- Minimum Time in Business: At least 6 months.
- Business Revenue: A minimum of $15,000 in monthly gross sales for general qualifications.
- Credit Score: A minimum credit score is not prominently advertised, but past information suggests a requirement as low as 500 for consideration.
Fast Funding: Access funds within 24 to 72 hours.
Flexible Products: Merchant cash advances and short-term loans cater to different needs.
No Collateral Required: Loans and advances available without needing collateral.
Simple Qualification Process: Transparent fee structure and straightforward qualification criteria.
Pros:
Higher Costs: Interest rates can reach up to 40%, making borrowing expensive.
Revenue Requirement: Minimum of $15,000 monthly gross sales needed to qualify.
Origination Fee: Charges between 1% and 4% of the loan amount upfront.
Cons:
OnDeck
OnDeck offers loan options primarily for small- to medium-sized businesses, with a focus on term loans and lines of credit.
OnDeck could be a viable option for businesses in need of quick funding and those who might not meet the stringent requirements of traditional banks. However, the high APRs and additional fees are important factors to consider before proceeding
Offerings:
Term Loans
- Loan Amounts: $5,000 to $250,000
- Estimated APR Range: 35.4% to 99.9%
- Fees: Origination fee of 0% to 4% of the loan amount
- Repayment Schedule: Daily or weekly
- Term Length: Up to 24 months
- Funding Speed: Same day for loans up to $100,000 under certain conditions
Lines of Credit
- Loan Amounts: $6,000 to $100,000
- Estimated APR Range: 39.9% to 77.9%
- Fees: $20 monthly maintenance fee (can be waived under certain conditions)
- Repayment Schedule: Weekly or monthly
- Draw Term Length: 12, 18, or 24 months
- Funding Speed: As fast as the same day, with instant funding available for withdrawals between $1,000 and $10,000
Borrower Requirements:
- Minimum Credit Score: 625 or higher
- Minimum Time in Business: 12 months
- Annual Revenue: $100,000 or more
- Other: Business checking account required
Other Considerations:
- OnDeck does not lend to businesses in certain industries and states, including Nevada, North Dakota, and South Dakota.
- They require a UCC-1 blanket lien and personal guarantee for term loans.
- OnDeck may be more suitable for established businesses rather than new startups, as the latter might not get favorable terms due to less robust financial histories.
Quick application and funding process.
Minimum credit score requirement of 625.
Reports to credit bureaus, aiding in credit building.
Offers term loans and lines of credit.
Pros:
High APRs can be costly.
Short repayment terms, up to 24 months.
Origination and maintenance fees.
Not available to some industries and states.
Cons:
Fundbox
Fundbox is an online lending platform that specializes in offering business lines of credit.
Fundbox is known for its fast application process and the ability to make quick funding decisions, often within minutes. Funds can typically be deposited as soon as the next business day after approval.
However, it’s important for potential borrowers to consider the higher APRs and frequent repayment schedule when deciding if Fundbox’s services align with their financing needs.
Offerings:
- Business Lines of Credit: Fundbox provides revolving lines of credit that function similarly to credit cards, allowing multiple draws up to a set credit limit.
- Loan Amounts: Credit lines range from $1,000 to $150,000, catering to various small business needs.
- Repayment Terms: Borrowers can choose between 12- and 24-week repayment periods, with weekly payments.
- Fundbox Plus: A subscription-based model offering lower-priced loans and the option for extended repayment terms of up to 52 weeks for a $99 monthly fee.
Borrowing Requirements:
- Credit Score: A minimum personal credit score of 600 is required, making it accessible to those with fair credit.
- Time in Business: Businesses must be operational for at least 6 months, which is favorable for newer businesses.
- Annual Revenue: A minimum of $100,000 in annual revenue is needed to qualify for a line of credit.
- Business Checking Account: Applicants must have a business checking account in the U.S.
- Industries: While Fundbox serves various industries, certain types are restricted, including adult entertainment, firearms sales, and gambling, among others.
Simple same-day application and decision process.
Accepts credit scores as low as 600.
Offers 12 or 24-week repayment terms.
No fees for origination, maintenance, or early repayment.
Pros:
Higher APRs, between 10% and 80%.
Does not report to credit bureaus for credit building.
Weekly repayments can be burdensome.
Restricted industries and short-term repayment.
Credit line capped at $150,000, may not meet larger needs.
Cons:
Tips For Comparing Small Business Loans
Look Mainly at the APR When Comparing
The APR, or Annual Percentage Rate, is the most important thing to compare because it includes all the different costs associated with the loan.
Interest rates, service charges, origination fees and other costs are all taken into account when calculating the APR. That makes it possible to directly compare the loan in question to another loan.
Prequalify if Possible
Many lenders have a pre-qualification process, which allows you to share your business details, business plan, revenue, and other relevant information with the lender.
They then do a soft credit check, which does not affect your credit score, and you learn which loan amount, terms, and rates you qualify for.
If possible, always prequalify.
A Shorter Loan Term Usually Means a Cheaper Loan
The longer the loan term, the longer time the interest rate can compound, making your loan more expensive.
For that reason, your loan term should be as short as you can afford. So get clear on how much money you can put towards the monthly payment.
Make a Budget and Plan
You shouldn’t take out a business loan unless you really need it. You must have a clear idea and plan for what you are going to achieve with the money.
Doing so will allow you to know exactly how much money you need to borrow and use the money more effectively.
You can use our budgeting tool to account for your business expenses and income.
Frequently Asked Questions About Business Loans
Can I Take Out a Business Loan if I Have Bad Credit?
How Much Income Do I Need to Take Out a Small Business Loan?
Does My Personal Credit Score Matter for a Business Loan?
What Can I Use a Business Loan For?
- Expanding operations or purchasing inventory
- Acquiring equipment or technology
- Hiring additional staff or covering payroll
- Refinancing existing debt
- Improving cash flow or working capital
- Investing in marketing or sales efforts
- Renovating or purchasing real estate for business use
Can I Take Out a Business Loan With No Revenue?
How to save $619.00 on your loan
The price difference for a $500.00 loan in 90 days is $619.00.
Different Types of Small Business Loans
Business Lines of Credit
A business line of credit (LOC) provides business owners with a revolving credit facility that can be used as needed. You repay what you owe, plus interest, which then becomes available to your business to borrow again.
💡 Tip: This is a great option if you need a constant flow of working capital without having to reapply for another loan.
SBA Loans
SBA loans are backed by the US Small Business Administration (SBA) and they come with longer terms, smaller down payments, and lower interest rates.
This may sound very attractive, but there are very specific requirements that you have to meet to qualify for an SBA loan.
Your business needs to fit the definition of a small business and had to be rejected for private funding, among others. Applying for an SBA loan can take some time, but it can be worthwhile.
There are different types of SBA loans and these include 7(a) loans, microloans, CSC/504 loans, and more. SBA 7(a) loans are the most popular for working capital of up to $5 million.
SBA microloans are loans for amounts up to $50,000 and they typically don’t require a down payment. What makes these loans tricky is that they are not guaranteed by the SBA and you’ll need to offer some collateral to secure funding.
Business lines of credit are a great option to handle short-term cash flow problems and they tend to come with lower interest rates than credit cards.
The drawback is that they may come with stricter credit history requirements and in some cases, they also require a personal guarantee, which leaves the business owner responsible for the debt.
Business Credit Cards
A business credit card is another form of revolving credit for businesses, as lenders let you use the funds you need, pay it back with interest (in most cases), and make it available to you again.
The benefit of a business credit card is that it is accepted almost everywhere and it gives you a quick solution to short-term cash flow.
Business credit cards are best used for smaller expenses that you can quickly repay. This will save you on interest and help you build a good credit history.
Equipment Financing
As the name implies, equipment financing gives you the finance you need to lease additional equipment for your business.
With this financing option, the term “equipment” is quite broad and it can cover anything from construction equipment to office furniture and software.
Because the equipment serves as collateral for the loan, even businesses with bad credit can qualify for equipment financing, although you’ll get much better interest rates with a good credit history.
Commercial Real Estate Loans
Commercial real estate loans allow businesses to buy real estate. There are different types of real estate loans but most of them come with long repayment terms (up to 30 years) and fixed interest rates.
When you take out a commercial real estate loan, the real estate itself will serve as collateral. That’s why aspects like the location of the property and its usability will affect the type of deal you will be offered.
Keep in mind that these loans have a long funding wait time and often have strict requirements.
Cash Flow Loans
Cash flow loans come in various types and they are designed to help out with short-term cash flow. An example is when you are waiting for a client to pay their invoice but you have bills that are due.
A cash flow loan can help you get quick cash to pay your bills while you wait for payments to come in.
Cash flow loans can come in the form of invoice financing, lines of credit, and merchant cash advances.
Microloans
A microloan is similar to a term loan but smaller. Microloans generally come in amounts of $50,000 or less ($13,000 is the average SBA microloan) and they are easier to obtain than large new business loans.
Microloans usually have higher interest rates and they offer a good opportunity to build your credit profile. The process is fairly quick and you can get a microloan approved in about two weeks.
Requirements by Loan Type
There are many different types of small business loans that are fit for different purposes and have different requirements.
Use the table below to figure out what type of loan is best for your business.
Note that the table shows the general requirements for each type of business loan. The exact requirements, loan amounts, and APR range will vary from lender to lender.
| Business Loan Type | Description | Requirements | Loan Amounts | APR Range | Best For |
|---|---|---|---|---|---|
| SBA Loans | Small-business loans partially guaranteed by the SBA, offering low interest rates and long repayment terms for a variety of business expenses. | Good personal credit (690+), strong finances, multiple years in business, ability to wait for funds | $30,000 to $5 million | 11.5% to 15% | Large one-time and longer-term investments |
| Bank Loans | Traditional small-business financing provided by banks, which could include term loans, SBA loans, and lines of credit. | Strong personal credit (700s), several years in business, solid business finances, possible collateral | $10,000 to $1 million | 5.89% to 12.23% | Working capital, expanding business |
| Business Term Loans | Loans from online lenders for fixed periods, with short-term and long-term repayment options, often used for specific purposes like equipment or inventory. | Varies by lender | Up to $500,000 | 6% to 99% | Large one-time investments |
| Business Lines of Credit | Flexible cash access similar to a credit card, where a certain amount of credit is available but interest is charged only when funds are used. | Varies by lender | $1,000 to $250,000 | 10% to 99% | Managing cash flow, unexpected expenses |
| Equipment Financing | Asset-based financing where the equipment itself serves as collateral. Some lenders may also cover soft costs associated with the equipment. | Varies by lender, equipment serves as collateral | Up to 100% of equipment value + soft costs | 4% to 45% | Purchasing machinery and equipment |
| Commercial Real Estate Loans | Loans for buying or renovating commercial properties, functioning like traditional term loans with the property itself as collateral. | Self-collateralizing, LTV ratio, down payment | LTVs ranging from 65% to 85% | 4% to 15% | Purchasing/renovating commercial properties |
| Business Auto Loans | Similar to consumer auto loans, these are used to purchase or refinance vehicles for the company, with the vehicle acting as collateral. | Varies by lender, vehicle serves as collateral | Up to 100% of purchase price | 4% to 45% | Purchasing/refinancing cars, vans, trucks |
Each Requirement Explained
- Business Insurance: Depending on the type of business and loan, proof of insurance may be necessary.
- Business Plan: Some loans, especially those from traditional banks or the SBA, might require a detailed business plan outlining the company’s strategy, financial projections, and market analysis.
- Business Revenue and Financials: Proof of stable and sufficient revenue is critical. Lenders often require financial statements, such as profit and loss statements, balance sheets, and cash flow statements.
- Bank Statements: Lenders often review several months of personal and business bank statements to assess cash flow and financial health.
- Cash Flow: A review of the inflow and outflow of cash to evaluate a business’s liquidity and its capacity to maintain operations and handle debts. Positive cash flow is crucial for loan approval.
- Collateral: Some loans, like equipment financing or commercial real estate loans, require collateral which serves as security for the loan.
- Credit Score: A strong personal credit score is often essential, with many lenders preferring scores in the high 600s or above. Business credit scores may also be evaluated for more established businesses.
- Debt-to-Income Ratio: This measures how much debt you have compared to your income, helping lenders assess your ability to manage and repay additional debt.
- Down Payment: For certain types of loans, such as commercial real estate, a down payment of up to 20-30% may be required.
- Existing Debt: Lenders will consider the amount of existing debt the business has and its repayment history.
- Fixed Charge Coverage Ratio (FCCR): This ratio determines a business’s ability to pay its fixed charges (like debt payments and leases) with its operating income.
- Guarantees: Personal guarantees from business owners may be necessary, especially for new or small businesses without substantial collateral.
- Industry Type: Certain industries may be considered higher risk than others, influencing eligibility and terms.
- Legal Documents: This may include business licenses, articles of incorporation, commercial leases, or franchise agreements.
- LTV Ratio: For loans like commercial real estate loans, the loan-to-value ratio is important as it dictates the maximum loan amount relative to the property’s value.
- Owner’s Equity: Lenders may require business owners to have invested a certain amount of their own money into the business.
- Tax Returns: Both personal and business tax returns for the previous two to three years may be required to verify income and tax compliance.
- Time in Business: Lenders usually require that a business has been operational for a certain period, often a minimum of one to two years.
- Use of Funds: Lenders may specify how the loan can be used, requiring a clear outline of how the funds will be deployed.
- Working Capital: Lenders assess if current assets exceed current liabilities to ensure the business can cover short-term obligations.
