Best Small Business Loans of December 2023 – Forbes Advisor

Best Small Business Loans Of 2023

Best for Short-term Loans

OnDeck

Why We Picked It

OnDeck was founded in 2006 and has since been a leading provider in the business lending space, offering both term loans and lines of credit. To date, the company has extended $14 billion in funding to small businesses.

We picked OnDeck for its variety of business lending products and same-day funding. OnDeck offers a term loan from $5,000 to $250,000 with repayments terms of up to 24 months. You can also access a credit limit of $6,000 to $100,000 through its line of credit with a 12-month repayment term that resets after each withdrawal.

Note: OnDeck does not lend to businesses in Nevada, North Dakota or South Dakota. What’s more, while it lends to over 700 industries, there are some industries it cannot serve.

Pros & Cons

• Term loans from $5,000 to $250,000; lines of credit up to $100,000
• Same-day funding
• Low minimum credit score requirement

• $100,000 minimum annual revenue requirement
• Must have been operating for at least one year
• Does not lend to businesses in Nevada, North Dakota or South Dakota.

Details

Eligibility: Prospective borrowers must have a minimum personal credit score of 625 to qualify for an OnDeck term loan or line of credit. Additionally, their business must have been in operation for at least one year and have annual gross revenue of at least $100,000. Applicants must also have an open business checking account.

Turnaround time: You can apply and receive a decision from OnDeck on the same day. What’s more, approved borrowers can have their funds in their bank account as early as the day they’re approved.

Best for a Lender Comparison Site

Lendio

Why We Picked It

Lendio is an online business loan marketplace that connects prospective borrowers with traditional banks and nonbank online lenders. By filling out one application, business owners are able to connect to over 75 lenders. Over its existence, Lendio has helped small business owners receive over $12 billion in funding nationwide.

Applicants may see Lendio as a one-stop shop. You can apply for business loans, lines of credit, SBA loans, equipment financing, merchant cash advances (MCAs), commercial mortgages, invoice factoring and business acquisition loans. However, because Lendio is a marketplace and not a lender, it doesn’t publish specific terms. Instead, you’ll have access to its lending partners, and it will help you find the best offer for your specific needs.

Pros & Cons

• One application connects you to more than 75 lenders
• Wide variety of loan products, including term loans, lines of credit and SBA loans

• Some lenders charge prepayment penalties
• Funding times vary depending on specific lender

Details

Eligibility: Minimum credit score requirements vary by loan product. You can qualify for financing with a score as low as 560; however, we recommend scores of at least 680 to receive the most favorable terms. Additionally, your business should have been in operation for at least six months to one year, depending on the type of loan you apply for.

Funding time: Applying through Lendio takes 15 minutes. After you review your offers and are approved by your lender, you can receive your funds in as little as 24 hours.

Best for Fast Funding

QuickBridge

APR range

Factor rates start at 1.11

APR range

Factor rates start at 1.11

Why We Picked It

QuickBridge provides small business loans to business owners nationwide. Applying is quick and funding can happen within 24 hours, but you need fair to excellent credit to qualify.

Interest on loans from QuickBridge is expressed as a factor rate. To determine the cost of borrowing, multiply your desired loan amount by the factor rate. For example, if you borrow $30,000 at a factor rate of 1.11, you would owe $33,300 in total with $3,300 in interest. With a loan term of six months, your interest rate would be 22%, but that doesn’t include any fees the lender can tack on.

Pros & Cons

• Flexible loan terms
• Quick application and fast funding deposited to a bank account
• Early payoff discounts

• Origination fee
• Loan interest may be high
• $250,000 minimum annual revenue requirement for small business loans

Details

Eligibility: Business owners need fair to excellent credit to qualify for a QuickBridge loan. On the FICO score scale, fair credit is considered to be at least 580. However, we recommend a score of at least 600.

Additionally, your business must be in operation for at least six months and have a minimum annual revenue of $250,000 to qualify.

Turnaround time: QuickBridge provides as quick as 24 hours.

Best for Small and Large Lines of Credit

American Express® Business Line of Credit

Minimum Credit Score

660 FICO at the time of application

Minimum Credit Score

660 FICO at the time of application

Why We Picked It

American Express Business Blueprint™ is best for its American Express® Business Line of Credit (formerly Kabbage from American Express and Kabbage Funding™), which gives business owners the chance to secure funding between $2,000 to $250,000 . Repayment terms include six, 12, 18 and 24 months.

Line of credit customers incur a loan fee for each month they have an outstanding balance. Total monthly fees incurred over the loan term range from 3% to 9% for six-month loans, 6% to 18% for 12-month loans, 9% to 27% for 18-month loans and 12% to 18% for 24-month loans.

In addition to its line of credit, American Express Business Blueprint provides other tools beneficial to small business owners, including its own mobile app that provides comprehensive cash flow insights.

Pros & Cons

• Backed by American Express
• No prepayment penalty

• Monthly fees on unpaid balances
• Requires personal guarantee

Details

Eligibility: To be eligible for financing through American Express Business Blueprint, applicants must have a minimum personal credit score of 660 FICO at the time of application, have started your business at least a year ago and have a valid business checking account. Applicants should have an average monthly revenue of at least $3,000. All businesses are unique and are subject to approval and review. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.

Funding time: Once you complete your loan application and sign the loan agreement, funds are sent to your verified bank account. Funds can take up to three business days to appear in your account, depending on your bank.

Best for Flexible Lines of Credit

BlueVine

Why We Picked It

BlueVine is a financial technology company that provides financing solutions to small businesses nationwide. It specializes in business lines of credit and checking accounts. As of December 2021, BlueVine no longer offers invoice factoring as one of its financing methods.

Small business owners looking to access a line of credit on an as-needed basis can receive funds from $6,000 to $250,000. BlueVine offers two payment structures: Flex 6 or Flex 12. Customers who choose Flex 6 make weekly payments over 26 weeks while Flex 12 customers make monthly payments over 12 months. What’s more, after 45 days of payment on Flex 6, or 90 days of payment on Flex 12, you may be eligible for a credit line increase.

BlueVine also charges weekly or monthly fees for its line of credit. Standard pricing is 1.7% per week or 7% per month for line of credit draws.

Note: BlueVine’s line of credit is available in most U.S. states except North and South Dakota, Puerto Rico and U.S. territories.

Pros & Cons

• Businesses that have been in operation for at least 24 months are eligible
• Lines of credit up to $250,000
• Low credit score requirement

• No mobile app for its line of credit
• Monthly revenue requirement
• Not available to businesses in North and South Dakota, Puerto Rico and U.S. territories

Details

Eligibility: Eligibility varies on the specific program a business owner chooses.

Flex 6:

• Minimum personal credit score of 625
• Must have been in business for at least 24 months
• $40,000 per month in revenue or $480,000 annually
• Your business must be a corporation or LLC
• No bankruptcies within the last three years

Flex 12:

• Minimum personal credit score of 650
• Must have been in business for at least three years
• $80,000 per month in revenue or $960,000 annually
• Your business must be a corporation or LLC

Turnaround time: After you submit your application, you can receive a decision in as quickly as five minutes. If approved, you’ll receive your funds in your bank account within a few hours if you choose its $15 bank wire option. Choose its free ACH transfer option, and you’ll receive your funds within one to three business days.

Best for Small- to Mid-sized Businesses

National Funding

Why We Picked It

National Funding offers working capital small business loans from $10,000 to $500,000 with terms of four months to two years, paid daily or weekly. Borrowers can use their funds for all working capital needs, including inventory, payroll, marketing, taxes and more. National Funding also offers equipment financing up to $150,000 but applicants must have a minimum personal credit score of 575 to qualify for that financing method.

Unlike most business lenders, National Funding offers early payoff discounts. Small business loan customers who repay their total remaining balance in full within the first 100 days of the contract will automatically receive a 7% discount off the total remaining balance. Equipment financing customers who repay the total remaining balance early, at any point during the term, will automatically receive a 6% discount off the total remaining balance.

Pros & Cons

• Financing up to $500,000
• Early payoff discounts

• Requires daily or weekly payments
• Potential high borrowing costs
• Requires minimum gross annual sales of $250,000

Details

Eligibility: National Funding recommends a minimum credit score of 600 to qualify for its equipment financing. Your business must also have been in operation for at least six months. National Funding requires minimum gross annual sales of $250,000.

Turnaround time: Most of National Funding’s loans are disbursed within 24 hours of approval. However, this is subject to receipt of required documentation, underwriting guidelines and processing time by your bank.

Best for Quick Approvals

Fundbox

Why We Picked It

Fundbox is an AI-powered business lending platform that speeds up the application, decision-making and funding process. It offers decisions within three minutes and funds as soon as the next business day.

Prospective borrowers have two business financing options through Fundbox. Business owners can apply for revolving business lines of credit up to $150,000 with repayment terms of 12 or 24 weeks. Your available credit goes back up as you repay your line of credit.

Pros & Cons

• Receive a decision within three minutes
• Low minimum credit score requirement
• Next-day funding

• Only short-term repayment terms are available
• Relatively low lines up credit of up to $150,000

Details

Eligibility: Applicants must have a minimum personal credit score of 600 to qualify for financing through Fundbox. The applicant’s business must be in operation for at least six months, making it a possible option for startups. However, businesses must have at least $100,000 in annual revenue.

Funding time: If you’re getting a line of credit, your funds transfer to your bank account as soon as the next business day.

Best for Healthcare Professionals

TD Bank

Loan amounts

$10,000 to $1 million

up to $5 million for small business loans

Learn More

From participating partners via businessloans.com’s website.

Loan amounts

$10,000 to $1 million

up to $5 million for small business loans

Why We Picked It

Business owners can apply for traditional term loans and lines of credit, U.S. Small Business Administration (SBA) loans and even other products like credit cards and checking accounts through TD Bank.

TD Bank offers business loans from $10,000 to $1 million with terms ranging from one to five years. If you’d rather have access to a line of credit, it offers credit lines between $25,000 and $500,000. What’s more, TD Bank is an SBA-approved lender, meaning you can apply for an SBA through the bank. SBA loans typically have loan amounts of up to $5 million and terms up to 25 years.

The company also stands out for healthcare professionals and offers unique financing options for dentists, veterinarians, physicians and eye care professionals. For instance, it offers lending solutions up to $12 million with 100% practice financing plus working capital, in addition to partnership buy-ins and buy-outs, equipment purchase, and practice mergers and acquisitions.

Note: While online applications are available for loans up to $100,000, you must apply in person for loans over $100,000. TD Bank has branches in Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and Washington D.C.

Pros & Cons

• Offers term loans, lines of credit and SBA loans
• Online application and mobile banking
• Customized financing options for healthcare professionals

• Must apply in person for loans over $100,000
• Must have been in business for at least one year
• Branches located in only 16 states

Details

Eligibility: To qualify, applicants must have a minimum personal credit score of 660. Their businesses must also have been in operation for at least one year. Generally, TD Bank is more difficult to qualify for compared to nonbank online lenders on this list.

Turnaround time: While TD Bank offers same-day approval for its business loans and lines of credit, it may take up to two business days to receive your funds. SBA Loans, on the other hand, may take several weeks to fund.

Best for Established Businesses

Funding Circle

Learn More

From participating partners via businessloans.com’s website.

Why We Picked It

Funding Circle has been a direct lender specializing in small business loans since 2010. It has helped 135,000 businesses in 700 industries and lent $20.2 billion globally. We chose Funding Circle because it provides fast, affordable loans with a simple application process and funding in as little as 48 hours. Prospective borrowers have three options: business term loan, line of credit or SBA loan.

Funding Circle term loans range from $25,000 to $500,000 with repayment terms from six months to five years. If you choose to apply for a business line of credit, you can access credit lines between $6,000 and $100,000. However, Funding Circle doesn’t specify its line of credit repayment terms. You can also apply for Funding Circle SBA loans, which range from $25,000 to $500,000 with terms up to 10 years.

There is one main drawback of Funding Circle: There’s a one-time origination fee on each loan ranging from 3.49% to 6.99% of the approved loan amount.

Pros & Cons

• Loans up to $500,000
• Funding in as little as 48 hours
• No minimum annual revenue requirement

• One-time origination fee between 3.49% to 6.99% of the approved loan amount
• Requires two years in business
• Not available for Nevada businesses

Details

Eligibility: The minimum qualifications for a loan through Funding Circle are:

• Two years in business
• Minimum personal credit score of 660
• No personal bankruptcies amongst the business owners within the last seven years
• Not available in Nevada, due to state lending regulations

SBA loans, however, require two years in business, a minimum credit score of 650, a minimum annual revenue of at least $400,000, no current federal tax liens and that your business operates in one of the SBA’s eligible industries.

Turnaround time: Depending on the financing method you apply for, you can receive your funds within two to three days. However, SBA loans may take several weeks due to long underwriting turnaround times, which typically take up to three weeks.

Best for Loan Options

Biz2Credit

Why We Picked It

Biz2Credit is a business financing platform that provides three funding options—term, working capital and commercial real estate (CRE) loans—ranging from $25,000 to $500,000. It only takes a few minutes to apply and, depending on the funding type, 24 hours to receive a decision.

Biz2Credit can connect business owners with working capital funding from $25,000 to $2 million and term loans between $25,000 to $500,000. Working capital financing is paid back with your business receipts through daily, weekly or bimonthly payments while term loans are repaid through weekly, bimonthly or monthly payments over the course of 12 to 36 months. Biz2Credit also offers interest-only CRE  loans from $25,000 to $2 million with terms between 12 and 36 months; payments are due monthly.

In the event that Biz2Credit cannot provide a financial product, it may present third-party options to qualified prospective borrowers. However, Biz2Credit confirms that “in the vast majority of cases, [it] will make a financing decision without referral to any external party.”

Pros & Cons

• Less stringent qualification requirements for working capital funding
• Minimum annual revenue requirement of $100,000 for some loans
• Quick application, approval and funding process

• More stringent qualification requirements for term and CRE loans
• Working capital funding require daily, weekly or bimonthly payments
• CRE loans approvals can take up to 30 days

Details

Eligibility: To qualify for working capital financing, applicants must have a minimum personal credit score of 575, have been operating their business for at least six months and have annual revenue greater than $100,000. Term loans, on the other hand, require a minimum score of 660, 18 months in business and annual revenue greater than $250,000. CRE loans share the same minimum requirements as term loans but also require that prospective borrowers already own commercial property.

Funding time: Business owners can typically apply within four minutes, get a decision as fast as 24 hours and receive funds in 72 hours from approval. However, CRE loan approvals may take up to 30 days.

Summary: Best Small Business Loans Of December 2023

Tips for Comparing Small Business Loans

Consider these tips when comparing small business loans:

• Where possible, prequalify. Some business financing lenders offer a prequalification process. This means prospective borrowers can share details about their financing needs, revenue and other relevant information to find out what loan amounts, rates and repayment terms they may qualify for. This process typically only requires a soft credit inquiry, which has no impact on your credit score.
• Determine how you want to receive your funds. Two of the most common ways you can receive and access your business funds are through a lump-sum payment or on an as-needed basis. If you want to receive your funds up front, choose a traditional working capital or term loan. However, if you want to use funds only as you need them, consider a business line of credit.
• Consider the repayment terms and flexibility. Each business financing lender has its own repayment structures. While some types of financing require monthly payments, others may require daily or weekly payments. Take this into account when choosing your preferred lender and business loan.
• Look out for additional fees. Some lenders offer fee-free business loans that don’t require borrowers to pay origination fees, late payment fees, prepayment penalties or any other common loan costs. However, this is not always the case. Be sure to confirm a lender’s fee structure when shopping for the best terms. Factor in additional fees into your decision-making process.
• Evaluate the lender’s customer support options. If you’ve found a lender that’s prepared to offer the money you need at acceptable terms, consider the lender’s support options before signing the loan agreement. Customer support can make a huge difference down the line if you encounter issues with repayment. Research the lender’s customer service resources and read reviews to make sure it’s a good fit.

Methodology

We reviewed 25 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the nine best lenders based on the weighting assigned to each category:

• Loan cost: 35%
• Loan details: 25%
• Customer experience: 20%
• Eligibility and accessibility: 10%
• Application process: 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like online applications, prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

Survey Methodology

This online survey of 500 Americans who have applied for a business loan was commissioned by Forbes and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected from July 12 to 20, 2023. The margin of error is +/- 4.4 points with 95% confidence. This survey was overseen by the OnePoll research team, which is a member of the MRS and has corporate membership with the American Association for Public Opinion Research (AAPOR).

The Complete Guide To Business Loans

What Is a Small Business Loan?

A small business loan is a source of funding business owners can access to cover the costs associated with operation and growth. Like personal loans, business owners can get small business loans through traditional banks and credit unions as well as online lenders—including those backed by the U.S. Small Business Administration (SBA). Depending on the type of loan, you can use funds for everything from working capital and equipment acquisition to larger purchases like real estate.

How Do Small Business Loans Work?

Small business loans help companies make large purchases and cover the cost of doing business. Loans generally are issued as a lump sum that can be used to make a specific purchase or manage cash flow and then repaid with interest. However, there are other types of small business loans—like lines of credit, merchant cash advances and invoice financing—that can be used to access cash more quickly and on an as-needed basis.

The best loan for a business depends on a number of factors, including its creditworthiness, how much it needs to borrow, what the funds will be used for and how quickly it needs access to loan proceeds.

Read More: How Do Business Loans Work?

Business Loan Terms People Are Opting For

According to a Forbes Advisor survey of 500 U.S. adults who applied for a business loan, business owners utilize various loan amounts and term lengths.

Our survey found that 34% of respondents who took out a business loan in the past five years borrowed $100,000 or more, while 29% and 16% borrowed $75,000 to $99,999 and $50,000 to $74,999, respectively. Moreover, 51% of respondents opted for a one- to three-year loan, 22% opted for a four- to six-year loan and another 22% opted for a loan less than one year. Only 1% of respondents opted for a loan of 10 or more years.

How Much Did You Borrow for Your Most Recent Business Loan?

The loan amount you’re eligible for depends on your creditworthiness, the overall health of your business and what your preferred lender offers. For example, business loans typically range from $1,000 to $500,000, but some lenders offer up to $5 million. Lenders typically reserve larger loan amounts for highly qualified applicants and businesses.

Because lenders charge interest on your entire loan amount, it’s best to borrow only the amount you need. We also recommend using the Forbes Advisor business loan calculator to estimate your monthly payments and ensure you can afford your desired loan amount.

Which Term Length Did You Opt for When Taking Out Your Most Recent Business Loan?

Business loan term lengths help determine both your monthly payment and interest charges. Short-term loans come with larger monthly payments but less interest overall. Long-term loans, on the other hand, offer smaller monthly payments but with more interest over the life of the loan.

For example, if you borrow $50,000 over five years with 10% interest, you’d owe $1,062 per month and $13,741 in interest overall—a total of $63,741. Now say you extend that same loan over eight years. You’d owe $759 per month but $22,836 in total interest—or $72,836 for the full loan amount and interest. You can save money by opting for shorter loan terms, but only do so if your business can afford the higher monthly payment.

6 Types of Small Business Loans

In general, small business loans help businesses access the money they need to operate and grow. However, there are several types of small business loans, and it’s important to find the best fit for your needs.

1. SBA Loans

SBA loans are small business loans that are guaranteed by the Small Business Administration, including the SBA 7(a), 504, CAPLines, Export, Microloan and Disaster loan programs. These loans typically range from $30,000 to $5 million and come with low interest rates and extended repayment terms—up to 25 years. That said, qualification requirements are more demanding than for other loans not backed by the government, and the application process typically takes longer.

Common types of SBA loans include:

• SBA 7(a) loans. With maximum loan amounts up to $5 million, the SBA 7(a) loan program is the SBA’s main offering. Loans are commonly used to purchase real estate but may also be used for working capital, debt refinancing and the purchase of business supplies. Current interest rates, as of Oct. 7, for SBA 7(a) loans range from 5.5% to 11.25%.
• SBA 504 loans. Available up to $5 million, SBA 504 loans must be used for major fixed assets, like existing buildings or land, new facilities and long-term machinery and equipment. As such, 504 loans may not be used for working capital, inventory or other common business uses. Rates on SBA 504 loans are lower than those imposed by the 7(a) program, and range from about 2.81% to 4%.
• SBA microloans. SBA microloans extend up to $50,000 and are intended to help small businesses start or grow. This may involve using the funds for working capital, inventory, machinery, equipment and other fixtures and supplies needed to do business. Rates typically range from 8% to 13%, but this varies by lender.

2. Term Loans

Terms loans are a traditional form of financing that’s repaid over a set period of time. In general, short-term loans range from just three to 18 months, whereas long-term business loans may be extended for up to 10 years. While some term loans are designed for specific uses—like financing equipment or inventory—term loans traditionally can be used to fund most large business-related purchases. Business term loans are typically available up to around $500,000, and annual percentage rates (APRs) start around 9%.

3. Lines of Credit

Unlike a term loan that’s paid out in a lump sum, a business line of credit is a set amount of money that a business owner can access on a revolving basis. This means the borrower can draw against the line of credit for a set period of time—usually up to five years. If the borrower pays back a portion of the line of credit early, they can access it again until the draw period ends.

Once the draw period is over, the borrower enters the repayment period and can no longer access the revolving funds. Rather than pay interest on the entire amount, as with a term loan, a business owner who accesses a line of credit is only charged interest for what they actually use.

Lines of credit are a good option for businesses that want to access cash on an as-needed basis for things like unexpected expenses and other cash-flow issues. Borrowing limits generally range from $2,000 to $250,000 and come with APRs from 10% to 99%.

4. Invoice Factoring and Financing

Invoice factoring is the process of selling a business’ outstanding invoices in exchange for a lump sum cash payment. Invoices are sold to a third-party factoring company at a discount, so you won’t get paid for invoices in full. And, once you sell an invoice to a factoring company, the factoring company assumes responsibility for collections.

However, this form of financing can be an effective way to access cash quickly without having to wait the 30 to 90 days customers usually have to pay invoices. For that reason, invoice factoring is a helpful strategy when you need short-term financing or help managing cash flow. In general, invoice financing amounts can extend up to $5 million with APRs between 10% and 79%.

5. Merchant Cash Advances

Merchant cash advances (MCAs) let business owners access a lump sum of cash by giving the lender—often a merchant services company—a portion of future sales receipts. In contrast to a traditional business loan, a merchant cash advance and related fees are repaid from the business’ individual sales or through automatic clearing house (ACH) payments on a daily or weekly basis.

Under this strategy, a business owner borrows a set amount of cash at a factor rate usually between 1.2 and 1.5. To repay the loan, the business must repay the advance with a set percentage of daily credit card sales over an estimated repayment term. A merchant cash advance may be a good option for businesses that experience a high volume of sales and need to access cash quickly—without qualifying for a traditional business loan.

6. Equipment Financing

Equipment financing is a form of small business loan that helps businesses purchase the equipment and machinery needed to start and maintain operations. This flexible financing can typically be used for everything from office furniture and electronics to manufacturing equipment.

Equipment loans are collateralized by the items being purchased, so the size of a loan depends on the value of the equipment and the size of the down payment. However, the best equipment financing companies offer terms and limits of up to 25 years and $1 million or more.

Interest rates on equipment financing may be lower than available through other types of financing and typically range from 8% to 30%. As with other small business loans, rates vary by lender and borrower creditworthiness.

Pros and Cons of Small Business Loans

Pros of Small Business Loans

• Provides funds you can use to start, grow or expand your business
• Receive funding without losing equity
• Repayment terms extend up to 25 years
• Loan amounts up to $5 million

Cons of Small Business Loans

• Most lenders require a personal guarantee or collateral
• Lenders typically require a minimum credit score of 670
• Approval and funding may take up to several weeks
• May charge high interest rates and other processing fees

Best Place To Get a Business Loan

Small business loans are available from a variety of traditional banks and credit unions as well as online lenders. However, each lender is limited by its own financial products and lending requirements.

Banks & Credit Unions

Traditional banks and credit unions typically offer a limited range of small business loans, including those backed by the SBA. While traditional banks often have tighter borrowing standards than online lenders, small business owners may still find it easier to qualify at an institution where they have an existing banking relationship.

Not only will the bank already have the business’ financial statements on file, but it may also be easier to get approved with a local lender who is familiar with your operation.

Online Lenders

In general, online lenders may have more flexible borrower qualifications than larger, traditional banks. And, while APRs may be higher through online banks than traditional lenders, approval rates also are higher and borrowers are less likely to need collateral. What’s more, many online lenders provide faster funding speeds than their brick-and-mortar counterparts, making them a good option for businesses that need cash quickly.

How To Choose a Small Business Loan

Just as certain types of loans are more appropriate for certain businesses, some lenders may be better suited to your business than others. Consider these factors to choose a small business loan:

• Lender reputation. Check online reviews so you’re aware of any red flags or potential issues before you sign on the dotted line. If you plan to work with a local bank or credit union, check with other local business owners to see which institutions have the best reputation.
• Qualification requirements. Most small business loans are underwritten based on the business owner’s personal credit score and are personally guaranteed. The minimum credit score required to qualify for a small business loan depends on the lender and the type of loan. So, it’s generally a good idea to check your personal credit score and then research each lender to compare minimum credit score requirements.
• Available loan amounts. Loan amounts vary by lender and loan type. Before choosing a small business lender, evaluate your business’ borrowing needs and shop for a loan that fits those parameters.
• Underwriting and funding speed. The amount of time it takes to process an application and receive funds varies widely by lender and loan type. In general, it can take anywhere from a couple of days (in the case of a merchant cash advance) to several months (for an SBA loan) to receive funds after submitting an application. If you need a loan quickly, choose a loan type and lender that can meet those time constraints.
• Annual percentage rate. APRs also vary by loan type and lender, but generally range anywhere from 5% to 99%. The most creditworthy applicants qualify for the lowest rates, but some lenders are more competitive than others.
• Additional costs. Many lenders charge origination fees that cover the costs of processing applications and underwriting loans. Likewise, some lenders charge prepayment penalties for borrowers who opt to pay off their loans early, while others charge draw fees on lines of credit. However, borrowers should not be charged application fees, and any fees levied prior to loan approval are a red flag.

How To Qualify for a Business Loan

The requirements for small business loans can vary by lender. But in general, lenders may review the following information to approve you for a loan:

• Personal credit. You may be able to qualify for a business loan with a credit score as low as 500. However, a good score of at least 670 could give you a better shot at getting approved for a competitive rate.
• Time in business. Lenders typically require that you be in business for at least six months to two years to qualify for a loan.
• Business checking accounts. Lenders may require that you have a business checking account with several months of transactions to show cash flow.
• Business revenue. Most lenders require that you have between $100,000 to $250,000 annual business revenue to qualify.

How to Get a Small Business Loan

The business loan application and underwriting process varies by lender, but most banks and lenders follow the same general guidelines. To get a small business loan, expect to follow these general steps:

• Determine the type of loan you need. Some lenders limit what industries they’ll finance or how loan funds may be used, so determine how you’ll use the cash before applying for a loan. Also evaluate how much you need to borrow, as this may impact the type of loan you apply for and the best lenders to approach for funds.
• Familiarize yourself with your credit profile. Lenders typically look at a business owner’s personal credit score when evaluating a loan application. You should have a score of at least 680 to qualify for an SBA loan or a traditional bank loan, and 630 for equipment financing or business lines of credit. Short-term financing and merchant cash advances typically have less stringent requirements—averaging around 600 and 550, respectively.
• Research lenders. When shopping for a small business loan, determine whether your current bank offers small business loans that meet your needs. This can streamline the application process because the bank will already have your financial information on file. Next, research other banks, credit unions and online lenders to compare available loan amounts, repayment terms and rates.
• Gather required documentation. Required documentation varies by lender. However, most lending institutions require a business plan, at least 12 months of personal and business bank statements, tax returns for at least two years and details about any current and past business loans. Lenders also require copies of applicable business licenses and legal documents, details about available collateral and a description of how loan proceeds will be used.
• Submit a formal loan application. Once you research the best small business loans and prepare your business for due diligence, submit a formal loan application. The process varies by lender, so familiarize yourself with the application process and contact customer service with questions.

Related: How To Get a Business Loan

How To Get a Business Loan With Bad Credit

It can be tough to qualify for a business loan with bad or limited credit. If possible, giving your business time to become more established can make qualifying for a loan easier.

If you can’t wait, start by looking for online lenders as they can have more flexible qualification requirements. Nonprofits that focus on microloans can also be an option to fund a new business venture.

Lastly, business partners that are willing to invest in your business or co-sign on a loan can be another option to fund your business.

Alternatives to Small Business Loans

Business Line of Credit

While a business loan disburses funds as a lump sum, you have access to a predetermined credit line with a business line of credit. You can draw on this credit line during the draw period, and you only owe interest on the amount you borrow, not the full credit line. Once the draw period ends, you enter the repayment period, when you’re required to repay your outstanding balance plus interest and any fees.

Business lines of credit are more flexible than business loans and are handy as a rainy day fund.

Business Credit Card

Business credit cards work similarly to consumer credit cards, except you use the card to pay only for business-related expenses. In some cases, business credit card rates may be higher than business loan rates; however, they tend to have more flexible qualification requirements.

A business card may be better than a business loan if you don’t need to borrow a large sum. Plus, some cards offer cash back or points-based rewards programs. You may even be able to find a card with no-interest financing for a certain period of time, which can be equivalent to an interest-free loan if you repay your balance during the introductory period.

Crowdfunding

Crowdfunding can help you reach your funding goals without taking out a loan. You can use popular sites like Kickstarter and Indiegogo to raise money for your business or product. On these sites, you’ll set a funding goal and typically create reward tiers for people who pledge funds. However, if you don’t reach your goal, you usually get nothing.
¹The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.

Personal Loans for Business

Some lenders allow you to take out a personal loan to fund your business. This loan is tied to your personal credit, not the business credit score, which means you’ll be personally liable to repay the loan.

A personal loan can be a good option to fund your business if you don’t have sufficient revenue or time in business to qualify for a business loan. The funds from a personal loan can be used however you need to fund your business, but the amounts may be lower than what’s offered on many business loans.

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