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Reviews

Best Small Business Loans

One of the easiest ways to get your hands on cash is a small business loan. But there are hundreds of different lenders to choose from and dozens of loan types, making the process incredibly challenging and confusing. After diving deep into dozens of offers, we found Lendio to be the best option for small businesses needing extra cash because it matches you with 75+ lenders and 11 loan types in about 15 minutes, giving you a clear picture of your options from day one. Plus, it’s free!

The Best Small Business Loans for Most

Lendio

Lendio

Best for Most

Loan marketplace with 300+ lenders. Signing up takes less than 15 minutes, and you get expert help choosing the best loan type and lender for you and your business. Popular lenders include PayPal, Bank of America, and American Express. Includes options for loans of up to $5 million.

Lendio is a loan marketplace that combines access to 75+ vendors into one online application that takes about 15 minutes to complete. 15 minutes is no time at all compared to the countless hours it would take to apply for each lender individually. Once you submit your application, you can explore all your options from each lender side-by-side with all the info you need to make the best decision for your business.

You also get a personal account manager to walk you through your options and their top recommendations based on your needs and financial situation. Overall, Lendio delivers a beginner-friendly and personalized experience.

The 6 Best Small Business Loan Options to Consider:

  1. Lendio – Best small business loan for most
  2. OnDeck – Best short-term loans with same-day funding
  3. BlueVine – Best quick cash injection for B2B businesses
  4. SmartBiz – Best way to get unbeatable terms on SBA loans
  5. Crest Capital – Best for equipment, vehicle, and software financing
  6. Kiva – Best crowdlending platform for startups and entrepreneurs

When It Makes Sense to Take Out a Small Business Loan

You can get a business loan to help pay for anything related to your business, from running payroll during a crisis and making a big purchase to ensuring cash flow stays positive, opening a new location, and buying new software.

But some loans have certain contingencies, like how you’re allowed to spend the money and how you document your purchases.

With some, you can only use the cash to purchase equipment. While others are specifically for your commercial mortgage. And even if you’re a solopreneur trying to fund your startup, there are loans specifically for getting your new business off the ground. 

From building maintenance to purchasing a new vehicle, expanding your operation, and everything in between, there are infinite reasons to apply for a small business loan. 

If you need extra cash to run your business or make a purchase, a small business loan makes sense.

However, you shouldn’t get a business loan if you don’t have a plan to repay what you borrow. And you should also have a business plan with financial projections before applying so you have everything you need ready to go when you sit down to get started.

Even established organizations need to know exactly how (and when) the loan gets repaid. If you don’t have this figured out, getting a loan right now can leave you and your business in a financial world of hurt down the road.

#1 – Lendio — The Best Small Business Loans for Most

Lendio

Lendio

Best for Most

Loan marketplace with 300+ lenders. Signing up takes less than 15 minutes, and you get expert help choosing the best loan type and lender for you and your business. Popular lenders include PayPal, Bank of America, and American Express. Includes options for loans of up to $5 million.

Lendio is our top recommendation for most businesses—and for good reason. However, it’s important to point out right away that it’s not a traditional bank or loan vendor. Instead, it’s a loan marketplace that helps businesses streamline applications and make the best choice for their situation.

The platform has more than 75 lenders in one place, covering 11 different types of loans with various dollar amounts, repayment terms, and interest rates. 

And it has facilitated over $10 billion in funding to more than 216,000 small businesses to date, making it one of the most successful and versatile marketplaces out there.

To access those lenders, all you have to do is submit one application. Rather than applying for each lender individually, you’ll gain deep insight into the loan types you qualify for—and the associated terms—in less than half an hour.

The Lendio team will shoot you an email and walk you through how to upload your documents online in just a few clicks. After you submit your application, you get paired with a dedicated loan manager who will work with you throughout the process. 

They’ll go over your options, help you pick the best loan type and lender for your needs, and act as your sole point of contact, so you always know where to turn along the way. 

It’s a beginner-friendly experience perfect for anyone unsure of what type of loan they need or what they qualify for. 

But it’s also excellent if you know exactly what you want, since you can shop around with various lenders to ensure you get the best terms.  

From quick cash advances and lines of credit to long-term financing options like SBA loans, commercial mortgage financing, and term loans, the perfect loan can be found through Lendio’s platform. 

One important distinction to make, though, is that Lendio doesn’t actually fund business loans. Instead, it’s a match-making service that pairs you with the most cost-effective options. 

There are no fees to use the service, submit your application, or talk to professional loan managers. But, some of Lendio’s partners may charge additional fees once you get approved for a loan. 

The good news is that you’ll know about all of these fees upfront. So, you can compare the fee structure of multiple lenders to find the best fit for your business before making a decision. 

While the match-making service is usually good at matching you with loans you qualify for, it’s not always perfect. So, it’s essential to keep in mind that some types have particular qualifications, and you may not qualify for all of your matches. 

If you’re looking into a startup loan, for example, you need a personal credit score of 680 or higher and at least six months in business to qualify. 

On the other hand, a merchant cash advance doesn’t require those things because it’s based on your monthly sales. 

Before making any decisions, make sure to ask your loan manager about all of the associated fees with each option you’re considering. Some lenders charge prepayment fees, origination fees, withdrawal fees, and more. 

So, it’s crucial to understand the total cost of your options before making a decision. 

Once you find the perfect fit, Lendio will package and submit your final application to that lender for you. 

Depending on the type of loan, you can get funding in as little as 24 to 72 hours after final approval. But some loans, like lines of credit and those for startups, can take up to a month. And SBA loans, term loans, and other more extensive financing options may take several months. 

If you’re ever unsure of how long it’s going to take, be sure to reach out to your loan manager and make sure they deliver updates along the way. Lendio also has 44 locations across the United States, so you can drop in at any time if you want face-to-face guidance.

#2 – OnDeck — The Best Short-Term Loans with Same-Day Funding

OnDeck

OnDeck

Best Short-Term Loans w/ Same-Day Funding

Get a line of credit up to $100k or a short-term loan of up to $250k with same-day funding when you submit your application before 10:30 am EST on a weekday. Repayment terms range from 12 to 18 months, and instant withdrawals are always free.

If you’ve been in business for more than a year, have a credit score above 600, and generate more than $100,000 in annual revenue ($8,333/month), OnDeck is the way to go for short-term loans. 

As long as you’re not in Nevada, South Dakota, or North Dakota since OnDeck doesn’t offer financing in those states.

It’s a great choice if you need cash as soon as possible because it’s one of the few lenders that offers same-day funding for borrowers who qualify.

While OnDeck offers loans up to $250,000, you can only receive same-day funding if you’re getting less than $100,000. 

You also have to submit your application before 10:30 am EST, Monday through Friday. If you do that—and live in a state that supports same-day funding—you’ll receive your money by 5 PM the same day.

Even if you don’t meet the deadline or submit your application on a weekend or holiday, you’ll have access to your funds in two to three business days. 

Either way, it’s much quicker than most of the other options on our list which can take a week or even up to a month after you apply and finalize all the paperwork. Simply put, if you qualify and need money fast, OnDeck is your best bet.

Unlike Lendio (a marketplace for just about every type of loan out there), OnDeck only offers two types of loans—lines of credit and term loans. Both are eligible for same-day funding. How you plan to use the money dictates which one is best for your business. 

If you’re struggling with cash flow and need ongoing access to extra cash, a line of credit is the way to go. 

You can use it for things like payroll, hiring more employees, expanding to a new location, reopening your business, and other short-term uses. 

An OnDeck line of credit includes:

  • A range of limits from $6,000 to $100,000
  • 12-month repayment terms for each withdrawal
  • Weekly automatic repayments
  • No prepayment penalties or fees
  • Instant no-fee withdrawals 24/7/365
  • A monthly $20 maintenance fee

Overall, a line of credit is an incredibly flexible way to access working capital for everyday operations as you need it. 

Suppose you’re making a large purchase or investment, like acquiring a business, starting a massive expansion project, making renovations, launching a new product, or building out a marketing campaign. You probably don’t need ongoing funds for those expenses. In that case, you may be better off choosing a term loan instead. 

The benefit of a term loan is that you get all the money upfront and you can get more money than you can with a line of credit. OnDeck’s term loans start at $5,000 and go up to $250,000 (more than 2x as much as a line of credit).

You also have more time to pay it back with flexible repayment terms of up to 18 months.

Term loans are less flexible than lines of credit, but they’re a great option if you don’t need ongoing access to cash. 

The interest rates for both options start around 35% APR, which is much higher than other longer-term financing options. However, your interest rate depends heavily on your creditworthiness, time in business, annual revenue, and current cash flow. 

OnDeck’s online application process is quick and easy. You only have to apply once to see your options for both term loans and lines of credit, which is a huge time saver. It also lets you weigh your options before making a decision.

And you may even be able to get both if you need to. 

After you submit your application, you get a dedicated loan advisor to go over your options and help you make the right choice for your business. 

You can give your loan advisor a call any time Monday through Friday from 9 am to 8 pm EST.

On top of that, you also get access to a handy—and transparent—loan comparison tool that helps you understand each option’s terms and total cost side by side. You never have to go in blind or wonder what the true costs of your options are.

It covers the total interest you’ll pay over the lifetime of your loan, all associated fees, your weekly or monthly payments, the interest amount you’ll pay for every dollar you borrow, and prepayment terms.

#3 – BlueVine — The Best Quick Cash Injection for B2B Businesses

BlueVine

BlueVine

Best for B2B Businesses

Get an 85% to 90% cash advance on unpaid invoices up to $5 million with 24-hour approvals or a low-interest line of credit up to $250k with no maintenance fees and near-instant approvals in about five minutes. Line of credit APR starts at 4.8% with repayment terms of six to 12 months.

BlueVine is a business banking solution with fee-free checking accounts, a payment processing system, and business funding options, including PPP, lines of credit, and invoice factoring.

It’s a great choice if you don’t already have a business bank account or are unhappy with the solution you’re currently using – with BlueVine’s checking accounts, you get unlimited transactions, no monthly fees, an excellent mobile app, 1% interest on accounts up to $100,000, no minimum deposit, and live support when you need it.

But BlueVine’s standout offer is its invoice factoring options up to $5 million and its low-interest lines of credit. The strength of those two offerings makes BlueVine the superior lender for B2B businesses.

It’s not uncommon in the B2B space to get paid weeks or even months after delivering your goods or services. Because of that, many businesses experience negative cash flow during the in-between.

This can put a damper on things if you rely on those payments to run payroll, buy inventory, expand your business, or pay your bills. With invoice factoring, you can get an advance on those payments by selling unpaid invoices to BlueVine.

While it’s not the only lender that offers this loan alternative, BlueVine’s invoice financing services are more flexible and generous than other lenders on the market. 

The application takes less than 10 minutes and approvals can be as fast as 24 hours. So, you could have cash in your account by this time tomorrow.

To apply, you need a credit score of at least 530, three months in business, and at least $30k in monthly revenue. You also have to be in the B2B sector and issue invoices regularly.

During the application, you’ll need basic business information and recent invoice details. You also have to either connect your bank or provide three months of bank statements to prove you meet the monthly revenue requirement. 

If you’re applying for less than $250k, this is all you need. 

There are also a few requirements for invoices BlueVine will accept. Each one has to be a minimum of $500 at face value for a customer in the U.S. or Canada, and the payment term must be at least one week away but no more than 13 weeks away. 

You can also only submit invoices in which you’ve already delivered the goods or services. If you meet those requirements, you can enjoy:

  • 85% to 90% of the cash for unpaid invoices upfront
  • The remaining cash coming in (minus BlueVine fees) after the invoice is paid
  • Flexible limits based on the strength of your customers (rather than your credit score)
  • Complete control over how many and which invoices you submit
  • No minimums or long-term contract requirements
  • No recurring payments to pay back the loan

You can either connect your accounting software to automatically pull invoices into the system or manually upload them yourself. 

One thing to note is that you’re responsible for the outstanding balance if a customer doesn’t pay the invoice for any reason. If it happens, you’ll get the option to self-pay online or set up an installment plan to pay it back. 

If you don’t like the idea of invoice factoring or you don’t qualify, BlueVine also offers lines of credit. 

To qualify, you have to have a minimum credit score of 650, two years in business, $30k in monthly revenue, and a corporation or LLC registration. You also won’t qualify if you live in Nevada, North Dakota, South Dakota, or Vermont. 

These qualifications are stricter than OnDeck, but you get much lower interest rates that start at 4.8% APR (vs. upwards of 35% or higher with OnDeck). 

You can request a limit from $5k up to $250k and get approved in as little as five minutes. 

Once you’re approved, you can withdraw funds from your online dashboard, access funds within a few hours, and enjoy repayment terms from six to 12 months. 

There are also no maintenance fees, prepayment penalties, or account closure fees. 

Regardless of the type of loan you choose, BlueVine offers free ACH transfers that can take up to three business days. If you need funds faster, you can choose a wire transfer instead. They’re $15 per wire, and funds appear the same day. 

#4 – SmartBiz — The Best Way to Get Unbeatable Terms on SBA Loans

SmartBiz

SmartBiz

Best SBA Loans

Submit a free application to pre-qualify for a wide range of SBA 7(a) loans from $30k to $5 million and repayment terms of 10 to 25 years with dozens of preferred SBA lenders in one place. With a 90% approval rate, SmartBiz knows the in’s and out’s of SBA funding and how to match you with lenders that are most likely to say yes.

Like Lendio, SmartBiz is a marketplace rather than a lender. However, it focuses on matching businesses with SBA preferred lenders, making it our top pick for anyone interested in applying for a government-backed SBA loan.

Traditionally, you have to apply for these at a bank, one at a time. 

The problem is that SBA applications can take weeks or even months to make their way through the process, and many businesses aren’t approved. If that happens, you have to start over somewhere else. 

As such, it can take years to get the funding you need. But with SmartBiz, you submit one application and match with numerous preferred lenders that are most likely to say yes. 

In fact, 90% of businesses referred to an SBA lender through SmartBiz get approved. 

So, your chances of approval are much higher than going the traditional route, and the entire process is much simpler.

In most cases, you can get pre-approved in as little as five minutes, and the entire process can take as little as seven days. However, most applications will probably take a few weeks. 

After you submit your application, SmartBiz assigns a dedicated team ready to help you throughout the entire process. You can reach out any time to ask questions about anything. And they’ll even make recommendations based on your goals and financial profile. 

For most SBA loans, interest rates range from 4.75% to 7%, with repayment terms of 10 to 25 years. But those rates can go higher, and it heavily depends on a wide range of factors. 

The benefit of meager interest rates and extended repayment terms is that you get to keep more cash for everyday operating expenses while still paying off your loan in the long-term. 

The caveat is that it’s much harder to qualify. SmartBiz helps with two different types of SBA 7(a) loans, including working capital and commercial real estate. Each one has its own set of qualifications.  

These loans range from $30,000 to $350,000. You can use them for debt consolidation, expansion projects, equipment purchases, buying inventory, hiring, payroll, or other operational expenses. 

Qualifications for an SBA working capital loan include:

  • Minimum of two years in business
  • U.S. based business ran by a US citizen or lawful resident 21 and older
  • A personal credit score of at least 640
  • No outstanding tax liens
  • No bankruptcies or foreclosures in the last three years
  • Current on all government-related loans
  • No recent charge offs or settlements

On top of that, SmartBiz states that most of their successful clients make more than $100,000 per year, are profitable and cash-flow positive, and have proof they can meet monthly loan repayments. However, these aren’t strict SBA loan requirements. 

SmartBiz also helps with SBA commercial real estate purchases and refinancing, with loans ranging from $500,000 to $5 million. 

These are harder to get, and there are a few more restrictions to keep in mind, including:

  • A personal credit score of 675 or higher
  • More than $350,000 in annual revenue
  • 51% of the square footage must be owner-occupied
  • Sufficient business and personal cash flow to cover payments
  • No delinquencies or defaults on government loans
  • The ability to pay 10% to 30% as a down payment

With both loan types, business owners who own more than 20% of the company must personally guarantee the loan. In doing so, you become personally (and legally) responsible for paying it back if your business is unable to. 

While using the SmartBiz service is 100% free, there may be higher associated fees with SBA loans than other loan types because of the extensive application process.

For example, many banks in the SmartBiz network charge an application fee up to $3,000. It helps cover the lender’s cost of packaging, preparing, and submitting your application to SBA. 

With most other loan types, the application fees are small or nonexistent, so this is definitely something to keep in mind. Some banks may also add closing fees, typically around $450 for smaller loans and up to $5,000 for commercial real estate loans. 

Besides bank fees, the SBA charges a guarantee fee ranging from 1.7% to 3.75%, depending on various factors. 

It seems like a lot of additional costs because it is. But the good news is that most of these fees are deducted from your loan amount, resulting in no out-of-pocket expenses for you. 

If you’re not sure if you qualify or what you qualify for, you can always apply through SmartBiz to find out. 

SmartBiz also helps with bank term loans if you don’t qualify for an SBA loan. However, we recommend going with Lendio if you’re looking for something other than SBA funding.

#5 – Crest Capital — The Best for Equipment, Vehicle, & Software Financing

Crest Capital

Crest Capital

Best Equipment Financing

Crest Capital offers the most flexible equipment, vehicle, and software financing on the planet, with loans ranging from $5k to $500k. Choose from eight different loan structures and four payment plans with the option to create a fully customized loan if none of the others match your needs.

If you need to buy equipment, vehicles, or software, the loan process is a bit different. Rather than receiving money, you submit an invoice, and your lender buys the item for you. 

With Crest Capital, you can get financing from $5,000 up to $500,000, including the cost of the item itself and all associated soft costs, like installation, delivery, and training. We like Crest because you can also get financing for used equipment or vehicles. 

From office furniture and new computers to custom software, heavy machinery, delivery trucks, ambulances, and everything in between, you can rest easy knowing you’re in good hands. 

Interestingly enough, Crest Capital is also an excellent choice if you sell equipment, vehicles, or software. You can leverage its services to offer unique financing opportunities to your customers, resulting in more sales. 

Essentially, the only things Crest won’t cover are passenger vehicles and businesses within the transportation industry. 

If you’re wondering why you wouldn’t go with a bank for this type of loan, the main benefit is that you can still go to a bank later if something else comes up. You get added peace of mind knowing you have another option if you need funding in an emergency.

The process is also much faster than going to a bank. And you’ll get financing that covers 100% of your purchase plus soft costs vs. around 80% elsewhere. 

You can finish and submit your application in less than 15 minutes, with most decisions happening within a few hours. This is lightning fast compared to a timeframe of several days or even weeks with most banks. 

To make things even easier, you don’t have to provide any financial documents for loans less than $250,000. 

With all that said, Crest isn’t a suitable option for new businesses or those with bad credit. 

You must have a personal credit score of at least 650 with no bankruptcies. Plus, your business has to be at least two years old, and you can’t have any outstanding payments with other lenders to get approved. 

Crest’s practice of only working with strong companies helps them keep costs low and deliver better terms than other lenders can. 

If you qualify, you have eight different loan types to choose from. There are also four other payment structures to match the cash flow of your business. There are dozens of loan structure combinations, making it the most flexible place to get equipment financing. 

Want to own the equipment outright after paying it off? No problem! Choose the equipment finance agreement in which Crest releases its security interest after your final payment. 

Maybe you want lower monthly payments with more flexibility at the end of your loan. You can go with the 10% or fair market value option. With each, you get lower monthly payments, but you don’t own the equipment at the end. 

Instead, you have the option to buy it at 10% of its original price or fair market value, depending on the loan type. 

Or you can return it to Crest, renew the lease, or apply for an equipment upgrade. 

A guaranteed purchase agreement sets a guaranteed purchase price for the equipment at the end of your contract. You can choose a fixed amount or a range that gives you more control. This option is incredibly flexible since you can control the fixed monthly payments based on the final purchase price at the end of your term. 

Aside from different types of loans, there are four payment plans you can combine with those loans, including:

  • Master agreement – turns your loan into a line of credit
  • Step up payments – small initial monthly payments that grow over time
  • Deferred plans – the option to defer payments for up to six months
  • Seasonal – you can skip monthly payments in slow seasons

All of these options exist to help you easily manage cash flow for your business. The master agreement means you can add more equipment in the future if your initial purchase ends up working well for you. 

With step-up and deferred plans, you have time to start generating additional revenue as a result of your new equipment, vehicle, or software before you start paying it off. 

Seasonal businesses, like a ski resort for example, can make payments on a new ski lift only during the fall, winter, and spring when it generates a lot of revenue. 

You can also work with Crest to set up a custom plan to make your loan experience as easy as possible.

#6 – Kiva — The Best Crowdlending Platform for Startups & Entrepreneurs

Kiva

Kiva

Best for Startups and Entrepreneurs

Get the best of crowdfunding and traditional borrowing under one roof with Kiva’s unique crowdlending platform and social underwriting process. No credit score or minimum time in business requirements, making loans of up to $15k easily accessible to social-savvy startups and entrepreneurs.

If you’re struggling to qualify for a small business loan because you’re just getting started, Kiva may be your answer. It’s a nonprofit organization that helps small and new businesses get off the ground with 0% crowdfunded loans of up to $15,000 and repayment terms up to three years.

It’s similar to Kickstarter and GoFundme, but it’s not exactly that same. 

With Kiva, you’re not getting donations or offering collateral in exchange for someone backing your project. Instead, you’re getting a loan that you’re required to pay back. 

Kiva is also quite different from traditional loans because you’re marketing yourself to receive microloans from individuals who believe in your message and business, rather than one lump sum of cash from a lender or bank. 

Essentially, it combines all the good parts of traditional financing options and crowdfunding platforms into one package. 

To qualify as a borrower on the platform, you have to:

  • Live in the United States and be at least 18
  • Use the loan for business purposes
  • Have no current foreclosures, bankruptcies, or liens
  • Not operate as an MLM, a pure investing firm, or in an illegal industry
  • Have no violent or financial convictions in the last five years
  • Live outside of Nevada, North Dakota, or Vermont
  • Have a PayPal account

You also can’t use the money to refinance debt or purchase stocks. While the requirements are generous compared to other loans that rely heavily on your credit score and revenue, there’s an additional caveat. 

You have to prove your “social capital” by getting a specified number of friends and family to lend you money on the platform before your project goes public on Kiva. 

This process replaces the traditional underwriting process of verifying your financial records and credit score. So, Kiva calls it social underwriting. 

The reasoning behind this is that your credit score and business finances aren’t the only factors that demonstrate your creditworthiness. The company also deeply cares about re-introducing human relationships into the loan process. 

With this process, you have 15 days to get between 5 and 35 people from your network to lend you money. The minimum loan amount is $25. 

The specific number of lenders required depends on your loan amount and a few other undisclosed factors. 

So, the more you ask for, the more social capital you need to move forward. 

Another important thing to note is that your time in business, industry, debt-to-income ratio, government-issued business proof, separate bank account, and the quality of your application play a role in how much money you qualify for. 

Essentially, Kiva does care about those things but it places less of an emphasis on them than other lenders. 

It also gives you a chance to prove yourself beyond those factors, which removes many of the most frustrating barriers to entry into the loan world for startups and entrepreneurs. 

Kiva’s online application takes about 30 minutes to an hour. 

To speed up the process, make sure you have basic financial info for your business, a business plan, a detailed repayment plan, and your desired loan amount handy. 

You’ll also need to attach a photo of you and write a business story that covers who you are, what you do, and how you’ll use the money. The point of your business story is to inspire those on the platform and share your message to encourage visitors to lend to you. 

From there, Kiva will review your application within 15 business days. So, this definitely isn’t a snappy process. 

Once you’re approved, you have 15 additional days to prove your social capital. If you do, your campaign goes live on Kiva’s public platform with more than 1.6 million potential lenders around the world. 

Then, you have 30 days to meet your goal. After your campaign is over, you get all of the money you raised via PayPal within five to seven days. 

Your first repayment is due within the next three months. Every month after that, you owe a fixed amount on the same day of the month. You’ll get a reminder a few days before it’s due and you can make additional payments at any time. 

Kiva’s repayment terms are between six and 36 months with 0% interest. Or you can pay it off early with no fees or penalties. 

Despite being a long process, it’s an excellent alternative loan option for startups, local businesses, home-based businesses, and entrepreneurs needing an extra push to help them get their big idea off the ground.

Methodology For Choosing The Best Small Business Loan

With dozens of loan types and hundreds of vendors to choose from, making the best decision for your business isn’t an easy task. 

To simplify the process, we put together a streamlined methodology you can use to whittle down your options and ultimately land on the best small business loan for you, your business, and your current financial needs.

Loan Qualifications

Most lenders are transparent about loan qualifications for different types of loans. But it’s essential to keep in mind that different types of loans have different qualification requirements, and you may not qualify for everything. 

Because of that, qualifications are the best way to start narrowing down your options. 

The first thing to think about is your personal credit score. If yours is good—above 650 or so—you can apply for just about anything given you meet the other requirements. 

A better credit score means you’ll likely get better-than-average interest rates and repayment terms since it’s a strong indicator that you’re good at paying back creditors and responsible with your finances. 

If your score isn’t so great, you’re a bit more limited. Don’t let that deter you, though. 

There are plenty of options out there for businesses with bad credit. But keep in mind that you’ll get hit with higher interest rates to make up for the added risk, and you may have to offer up collateral, too. 

Besides your credit history, lenders also pay close attention to how long you’ve been in business. Some may only approve companies that have been around for at least two years.

Other lenders aren’t as strict with this, and there are startup-specific loans that forego this qualification altogether if you’re just getting started. 

However, lenders with more leniency will probably want to see a business plan (for startups) or minimum monthly revenue to ensure you can generate enough cash flow to pay back your loan on time. 

While those are the most common requirements, lenders may also look at:

  • How much debt you already have
  • Previous bankruptcies, foreclosures, and outstanding liens
  • Late payments on your rent or mortgage
  • Your criminal background (particularly financial crimes)
  • State laws where your business operates
  • Industry-specific risk factors

Some of these factors won’t necessarily disqualify you. But they may result in higher interest rates and worse loan terms because there’s more risk in lending you money. 

Before starting your application, make sure you have all the documentation you need to prove your qualifications. You may need things like previous tax returns, business and personal bank statements, incorporation documents, and proof that you own what you’re putting up as collateral. 

Not all applications require this upfront, but you may need it somewhere along the way. So, it’s a smart move to gather everything you need before getting started. 

If you want an easy way to see what you qualify for, we recommend going with Lendio. Once you apply (it takes about 15 minutes), you get matched with all the loan types and lenders that may be a good fit for you. 

From there, you can talk to a loan specialist to decide which one is the best option based on your qualifications and goals. 

Which Type of Loan Is Right for You?

There are dozens of types of loans, making it challenging to figure out which one is right for your current situation. 

After going through the qualifications section, you already know what you don’t qualify for. 

Now it’s time to go through your remaining options to see which ones are a good fit for your current and future financial situation, the amount of money you need, why you need it, and how you’re going to use it. 

PPP Loans

Paycheck Protection Program (PPP) loans came about in 2020 as a response to COVID-19. You can use them to pay your employees and cover other operational expenses if you’ve had to temporarily close your doors due to the pandemic.

The deadline to apply is March 31, 2021. Lendio, BlueVine, and SmartBiz are all dedicated to helping businesses apply and get approved for PPP loans. 

Term Loans

You get a lump sum of cash at once and pay it off in weekly or monthly installments over a set period with interest. Payback terms typically range from one to ten years. You can use these for just about anything, but they’re most suitable for large business purchases. 

There are industry-specific term loans, including professional practice, startups, restaurants, medical professionals, construction, beauty salons, pawnshops, and more. 

Lendio, OnDeck, and SmartBiz are our top recommendations if you’re looking for your standard loan with predictable monthly payments. OnDeck offers shorter payback periods with higher interest rates, but you can get your funds the same day. 

Merchant Cash Advance

Cash advances are based on your monthly transactions. You can typically get an advance of up to 125% of your total monthly sales. Some lenders take a flat fee every day until you’ve paid them back, and others keep a percentage of every sale. 

These are easy to get, scale as your business grows, and easy to pay back. But they come with very high interest rates. 

Lendio is your best bet for getting a cash advance. 

Line of Credit

These are typically used for everyday cash flow and are incredibly flexible. You only take what you need rather than taking a large sum even if you don’t need it all (like a term loan). Your credit limit replenishes as you pay off previous withdrawals, and you can take money out whenever you need it without having to reapply. 

Repayment terms and interest rates vary depending on the lender and your financial health, but you can typically get your funds within a few days. 

Lendio, Ondeck, and BlueVine are the best places to apply for a line of credit. 

Equipment, Vehicle, and Software Financing

Technically, these are different types of loans, but they all work the same way. In most cases, you choose what you want to buy, send the invoice to your lender, and they will pay the seller for you. Most of these loans are very flexible to match your needs. 

If you have good credit and strong financial health, Crest Capital is the way to go. If you don’t qualify, you can go with Lendio to scope out other alternatives. 

Invoice Factoring

Invoice financing is a viable option for B2B businesses who typically get paid several weeks after delivering products or services to customers. Your lender will buy unpaid invoices from you and pay you up to 90% of the total cash minus their fees. 

From there, the customer pays your lender and fully closes the loop. It’s an excellent way to get cash upfront rather than waiting weeks to get paid. 

Lendio and BlueVine are the best options. 

Micro-Loans

These are typically less than $50,000. They often require an asset as collateral, but that isn’t always the case. You can use a micro-loan to start a business, expand your business, make repairs, reopen your business, or anything within the guidelines of your specific agreement. 

Kiva is the best crowdlending platform for up to $15,000. Lendio, OnDeck, and BlueVine also offer micro-loans from $5,000 to $50,000. 

Small Business Association (SBA) Loans

The SBA sets strict guidelines for loans from its partnered lenders. But lenders are more likely to lend you money (and be more generous with the amount they give) because the government guarantees they’ll get their money back. 

There are various types of SBA loans. And applying for them is more cumbersome than with other loans because there’s more paperwork, extra fees, stricter requirements, and an extended application process. 

Lendio and SmartBiz are our top recommendations for SBA funding. 

Business Credit Cards

If you’re unable to get a loan through other methods, you may still qualify for a business credit card. The caveat is that they have much higher interest rates that start around 14% APR. 

Lendio is our top recommendation if you want to go this route. 

Secured vs. Unsecured Loans

Any type of loan can be secured or unsecured. While the terms sound intimidating, they’re straightforward. With secured loans, you have to offer an asset, like a building, land, investments, or a vehicle, as collateral. 

If you don’t pay off the loan, the lender can take that asset from you. 

With unsecured loans, you don’t have to put anything up as collateral. However, your financial situation plays a more significant role in what you qualify for and the loan terms you receive.

How Quickly Do You Need Cash?

Now that you have a list of all the different types of loans and lenders you qualify for, you can further narrow it down by deciding how fast you need your funds. 

Some lenders are quicker than others, but you should also consider the time it takes to finish your application, go through the approval process, and gain access to your funds. These time frames vary depending on the type of loan and the amount of money you need. 

If you need cash quickly, go with a term loan, micro-loan, merchant cash advance, line of credit, invoice factoring, or a business credit card. 

In most cases, you can apply in a few minutes and get approved within 24 hours—but that’s not always the case. It also depends on the lender you choose and the amount of money. 

OnDeck is a good choice for same-day funding if you get your application in before 10:30 am EST. But you’ll still get it in a few days if you submit your application after that. If you’re a B2B business, BlueVine is another excellent quick-cash option. 

You should also keep in mind that application volume, PPP loan priorities, and limited staff due to COVID may slow things down a bit, depending on which company you choose. 

Equipment financing, SBA loans, and loans above $100,000 will take more time. Some can even take a few months to finalize. But again, it depends on numerous factors that may be outside of the lender’s control. 

Your best bet is to apply as early as possible and avoid being in a rush to finalize the process. 

Additional Fees

Unfortunately, fees are unavoidable. Some lenders charge more than others, so we highly recommend comparing several lenders to scope out your options. 

You should also look for full transparency. There shouldn’t be any surprises or unexpected fees at any point in the borrowing process. 

These are some of the most common:

  • Application fees – None of the lenders on our list charge this, but some of Lendio and SmartBiz’s partners do. SBA loans, for example, have very high app fees up to $3,000. 
  • Origination fees – Most lenders charge from 1% to 6% or a flat fee for certain loan types. Payment usually comes directly out of the initial amount of money you receive with no out-of-pocket costs for you. 
  • Prepayments – This one’s a mixed bag. Some lenders charge extra or hit you with a penalty for paying off your loan early, while others don’t. 
  • Late payments – You may be charged a flat rate or a percentage of your missed payment if you miss your payment deadline. Most charge this, but the amount varies. 
  • Monthly or annual fees – OnDeck charges a $20 monthly maintenance fee for lines of credit. BlueVine charges weekly fees for invoice factoring when customers pay up. Rates depend heavily on the lender and loan type. 
  • Withdrawal fees – Most lenders offer both free and paid withdrawal options. For example, BlueVine charges a $15 bank wire fee per withdrawal if you want your funds the same day, or you can wait two to three days and avoid those fees. 
  • Referral fee – Loan marketplaces typically charge these. SmartBiz charges a 3% referral fee if you use the service to connect with one of their partners for term loans. 
  • Packaging fee – Also charged by loan marketplaces. This covers the labor and expertise required to “package” your loan application before it’s sent off for the lender’s final review. SmartBiz charges a 3% packaging fee on top of their referral fee for non-SBA loans. 
  • SBA guarantee – Ranges from 0.25% to 3.75% for SBA loans. These have been waived during COVID but will probably come back at some point. 

There are also several other types of fees you may come across, like underwriting, unused line of credit, and even collection agency costs if the lender sends your account to collections. 

Before signing anything, it’s crucial to ask for a detailed outline of all the fees associated with your loan. And since fees are unavoidable, it’s vital to look for a lender that delivers full transparency and ongoing communication throughout the process.  

An Open Line of Communication

Applying for a loan can be very confusing and overwhelming. So, you should be able to hop on the phone, shoot an email, or start up a live chat session for help with anything along the way in a timely manner. 

Your lender or marketplace should be proactive in understanding your business, niche, and market before making recommendations. 

They should also go through your options and walk through the entire process with you. 

Aside from getting help along the way, you should also never be in the dark about your application’s status. Some lenders are better than others, so it’s essential to look for responsive and proactive customer support. 

However, the best thing to look for is the ability to work with a dedicated team or loan expert.

This helps ensure you always get updates from the same person and you have someone you can reach out to at any time. 

It also means there’s less confusion, and you won’t have to worry about getting conflicting info from several different people throughout the process. 

In most cases, the only way to gauge the quality of customer support is to reach out and ask questions before applying. We recommend using several communication channels, including email, chat, social media, and phone. 

You can ask for help with choosing a loan, ask questions about a specific loan type, or just ask for general advice to see how they respond. 

If it takes several days for an answer or you don’t get answers at all, you may want to look elsewhere. 

Keep in mind that some companies may claim to have phone support but make it near impossible to get a human on the phone with dozens of automated menus. 

Some also aren’t available on weekends or after hours. It may not be a dealbreaker, but it’s something to think about before making your final decision. 

Lendio

Lendio

Best for Most

Loan marketplace with 300+ lenders. Signing up takes less than 15 minutes, and you get expert help choosing the best loan type and lender for you and your business. Popular lenders include PayPal, Bank of America, and American Express. Includes options for loans of up to $5 million.

Summary

Choosing a business loan that matches your financial situation, current and future goals, good interest rates, and your desired repayment time frame isn’t an easy task. There are dozens of moving parts and banks certainly play their part in making it as challenging as possible.

Thankfully, there’s a better way.

Lendio is our top overall recommendation for most businesses because it matches you with 75+ different lenders across 11 different types of loans.

However, there are plenty of other viable options to consider. 

So, don’t forget to use the methodology talked about as you go through the process of choosing the best small business loan for you, your employees, and your business.


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