The best small business loans can give you the money you need to move forward with your goals whether that requires new equipment, furnishings, the costs of licensing or any other expense that a company might need.
A small business loan can be an essential element in a brand new start-up, businesses or an established business that is looking to expand. In this review, I've ranked the best business loans.
In This Guide
The Best Small Business Loan Lenders: Our Top Picks
- Interest Rates: 8-32%
- Loan Amounts: $5,000-300,000
- Min Credit Score: 620
- Easy and quick application process
- Typically perform soft credit checks
- Client advisors available without automated phone menus
- Competitive fixed rates for good credit
- 1-5 year repayment terms
- Rates are not as competitive for lower credit borrowers
Lending Club is among the largest online lending marketplaces available, connecting a community of borrowers and investors. They have a fast application process, claiming to give you a quote within minutes without affecting your credit score. Once you select an offer, you can watch as you receive funding commitments from investors. With peer to peer and community investing loans like Lending Club, higher credit borrowers are favored. The most competitive rates are generally available to those with a good credit and a solid business history. Lending Club also doesn't charge early repayment fees, which means you can pay back your loan early and limit money paid in interest without having to pay a fee.
- Interest Rates: 5.99-98%
- Loan Amounts: $5,000-500,000
- Min Credit Score: 500
- Easy application process
- Innovative qualification methods
- Fixed payments
- Funding within as fast as 24 hours
- May be overall more expensive than bank loans
OnDeck is another excellent online lender with an intuitive application process and cutting edge technology. They focus solely on business loans and were started expressly for the purpose of giving businesses better financing options. They also favor short term loans between 3 and 12 months but they also have options for up to 36 months. They claim to use smart application tools to weigh companies by their business history and performance in their market rather than just a credit score. This allegedly translates into OnDeck having the ability to approve more loans. This application technology also makes for smooth processing and allows you to get funding in as little as 24 hours.
- Interest Rates: 5.49-20.99%
- Loan Amounts: $25,000-500,000
- Min Credit Score: 620
Funding Circle Review
- Competitive interest rates
- Quick approval process
- High loan amounts available
- No hidden fees
- Shorter terms only (1-5 years)
- Interest rates higher for borrowers with lower credit
Funding Circle is another lending company founded out of dissatisfaction with the system of typical bank lending for small businesses. Their goal to revolutionize a process they considered outdated pushed them to create a better process for small business owners to receive funding. Like other online lending platforms, Funding Circle is not a direct lender. Instead they connect a community of small business owners to interested investors. Their application process is said to take only ten minutes and an account representative helps you through the process. After approval, you can receive funding within two weeks. The company focuses on short term business loans of 1-5 years and the most valuable interest rates are reserved for higher credit borrowers.
Key Considerations When Finding a Small Business Loan
The Best Small Business Loans
- Lending Club – 8-32% interest rates, $5,000-300,000 loan amounts, 620 min credit score
- OnDeck – 5.99-98% interest rates, $5,000-500,000 loan amounts, 500 min credit score
- Funding Circle – 5.49-20.99% interest rates, $25,000-500,000 loan amounts, 620 min credit score
- Dealstruck – 10.99-27.99% interest rates, $25,000-250,000 loan amounts, 600 min credit score
- CAN Capital – 12.90-24.90% interest rates, $2,500-250,000 loan amounts, 680 min credit score
There is a lot that goes into a big financial decision like taking out a loan. First, you need to make sure you have a plan to repay the loan before you take it out. A well thought out loan can boost your company's finances and give you the right nudge towards success but a hasty decision can wind up hurting your finances in the future.
In 2012, 43% of businesses were unable to get funding when they needed it. Today, online lenders are making it easier.
Before you begin looking for the small business loan that's right for you, there are some important things that you should consider first.
Compare Small Business Loan Rates
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Where to Get a Small Business Loan
Loans are necessary for almost any business to get started and, from there, to prosper. When you are looking for the best place to get a small business loan, there are a few different avenues to consider.
Here are some options I've found you have for acquiring the best business loans.
In 2012, 43% of business were unable to get funding when they needed it. It's even more difficult if you have a brand new start up that you are trying to fund. Today, online lenders are making it easier.
1. Acquire SBA Small Business Grants for Start Up Business Loans
Loans from the Small business Administration (SBA) are the ones people tend turn to when they're unsuccessful at getting a loan with a bank. The administration specifically exists to support small and local businesses, funded by the government to nurture potential entrepreneurs.
They offer two types of loans. The 7(a) guarantee small business loan is the most common. You apply for this type of loan at a bank that's involved in the process, even though you're not lending directly from that bank. However, these loans usually require a strong history of delivering on promises, so it might not work for those seeking start up business loans.
People like that might want to seek the 504 fixed-asset small business finance program. Taking 60 to 90 days to get approved, they're typically distributed in increments of at least $150,000. If you're looking for less than that and weren't able to secure a loan from a bank, you will most likely need to move on to the next option for start up small business loans.
The SBA also offers small business loans for women specifically
2. Go to Banks for Small Business Start Up Loans
Usually, the best-case scenario is for banks to handle your start up business loans. The best banks for small business usually offer stability and most importantly, banks also offer lower interest rates.
This sounds nice (and it is!), but those low-interest rates mean that they are very selective about who they give start up business loans to. Most new businesses fail, so they have to be very conservative with which startups they lend money to.
The best chance you have to get loans from there as a new business is if you have a pre-established history of some sort and to not stop trying when the first (or fifth) bank turns you down. Keep pushing and you have a shot. However, once you've exhausted your options, you will have to look to other ways to acquire those start up business loans.
3. Online Lenders are Growing in Popularity
Online lenders are growing as a resource for small businesses and many business owners are turning to them for their capital needs. They are even lowering their rates to levels that are below the market average. Plus, they often offer technology driven services that streamline the application, making payments and customer service.
Take advantage of the many resources available on our site, and hopefully, you'll find a trustworthy lender that will turn your startup into something spectacular.
How to Get a Small Business Loan
Small business lenders each have their own forms and formulas for loan applications, but much of the information they require is the same, whether it's a bank, credit union or online lender. I researched that Before you apply for a start up loan for your small business, prepare the basic documentation.
Today's online lenders, some of whom are peer-to-peer lenders, are known for their inventive and streamlined qualification process. This opens the door for those with lower credit scores. Lending Club offers a streamlined application process, while Kabbage has an innovative qualification process. Here are my findings of what you Here's what you might need:
- Be ready to provide personal background information, including education, previous addresses, and any criminal record. You'll need a resume of pertinent professional experience too.
- Lenders will look at your personal credit history. Prior to applying, obtain a copy of your credit report from the three major credit reporting bureaus, to see if there are any inaccuracies that need to be addressed. Once you correct any problems, you improve your chances for loan approval.
- If you have a history in small business, expect to submit a business credit report as well as a personal report. Again, be sure to review your business credit report prior to applying for a loan.
- Likewise, lenders will ask to see several years of personal and business tax returns as part of your loan application.
- Some loan programs require that you submit both personal and business financial statements, listing your cash flow, assets and liabilities. Personal and business bank statements may also be requested along with financial statements.
Collateral is required by some, but not all lenders. The higher the risk from the lender's point of view, the more likely collateral will be required.
A sound business plan coupled with financial statements helps avoid large collateral requirements. Prepare a list of personal and business assets and property along with their values for prospective lenders.
Questions to Ask When Shopping for Business Loans
As I've found, it's important that you shop around for the best options business loans. By comparing lenders, you can make sure that you are getting the best deal that's available. However, you should be selective (at least at first) with which lenders you apply to. Here are some things to look out for when shopping for the best business loans.
1. What Kind of Lender is it?
It is important to know exactly where your money is coming from. Small business loans can come from a variety of sources including the government, banks, a private institution or a peer lender. When using an online platform, it may not always be clear which you are dealing with.
However, different types of lenders have different advantages and disadvantages. Knowing the type of lender you're dealing with can help you get the best deal possible.
A well thought out loan can boost your company's finances and give you the right nudge towards success but a hasty decision can wind up hurting your finances in the future.
Banks typically offer the best rates but they are very selective when it comes to choosing businesses to lend to. This makes them a good place to start your loan search but there are many viable alternatives if a bank.
Online lenders like peer to peer lenders and lending networks are growing as an option for businesses looking for fair business loans.
2. What Type of Loan is it?
Even more important is the type of lender is the type of loan you're looking for. Traditional unsecured loans offer the decent rates and terms if you have a good personal and business credit history. If you don't, you may have trouble qualifying for a loan and if you do, your rates may be a bit higher.
You can also get lower rates by choosing a secured loan, but that will require you to put up your own property as collateral.
But if you are denied a traditional loan, look into the Small Business Administration's approved loans.
3. Keep Your Credit in Mind
Applying for multiple loans all at once can affect your credit, especially if the potential lenders are performing hard credit checks. Hard credit checks can lower your score, at least temporarily. However, it's possible that multiple credit checks do some serious damage.
4. Watch Out for Fees and Read Terms Carefully
Companies may tell you that the fees associated with their loans are standard in the industry and they may be. However, there are companies that streamline their loans by cutting out expenses like origination fees, early repayment fees, and even late fees.
On the other hand, many loans come with certain fees attached to them, but the rates they offer may be worth it. Make sure you know what they are and how much they will cost you in the long run. Read the terms of the loan carefully and make sure you weigh the negatives and positives so they are beneficial to you.
5. Look at Small Business Loan Rates Carefully
Interest rates for unsecured loans can end up costing you a lot over the life of your loan. Rates will vary from lender to lender and based on your credit and business history and it's important to compare business loan rates carefully. However, don't take it for granted that you will have to accept larger interest rates if your credit is less than perfect.
Look at what industry standards are for people with your credit history and financial background. By comparing these standards against your loan offers, you'll be able to tell if you are getting the best rates. Don't let anyone charge you more than what your research says is fair.
Business Loan Calculator
Proper planning is imperative to any aspect of your business especially your finances. If you plan to do any expansions, hire new staff or even upgrade equipment, obtaining a business loan can be a great way to accomplish these objectives. To help you prepare for the loan, it's important to use financial resources at your disposal to assist you in preparation.
One tool in particular that will aid you is a business loan payment calculator. With this calculator, you can determine how much your monthly payments will be that way it helps you ensure you have the budget in place to repay the loan without overtaxing your finances.
Tips & Advice
If you've done your homework, like I have, If you've looked at some of the top providers and you're interested in some more information about small business loans, take a look at our comprehensive advice section. We've looked at every aspect of the industry to provide a wealth of small business loan information. Here are some important topics to explore:
- Should you fund your company out of your own pocket or take out a small business loan. It can be difficult to secure funding for a startup business, but is it a good idea to fund a venture with your personal finances?
- What's right for you: secured or unsecured business loans? Both have their risks and advantages but your specific needs may make the choice clear.
- How should you open your startup business? It is very difficult to start a business from scratch, but knowing the steps required can make it a little easier.
- What does a lender's ideal borrower look like? When applying for a loan, it's a good idea to know what a small business lender is looking for in loan candidates.
There are a variety of small business loan options out there for owners who can't or won't deal with banks. Take a close look at the alternative loan choices that seem to work for you.
If you have a very small business, it's possible that you can find more options in our review of the best personal loans. A personal loan may be all you need to fund smaller side projects or small startups.
A business credit card can be another useful tool for certain businesses. If you have a tiny side business, your own finances and credit card might be enough. However, finding the best business credit cards can be helpful for separating your personal and business finances, especially for tax purposes.