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Written by: Mark Stewart
Mark Stewart is the in-house Certified Public Accountant, an accomplished author and financial media specialist.
Published on October 30, 2023
Updated on April 3, 2024
Surprisingly, 50% of small businesses encounter financial hurdles in their first five years. Finding the right loan can be a lifeline, steering your venture towards stability and growth.
In the following sections, we delve deep into the world of small business loans, providing a comprehensive guide on the various small business loans, their pros and cons, and how to qualify for them.
We’ll also share expert tips on how to improve your chances of approval and showcase real-life success stories of businesses that have flourished with the help of the right loan.
Whether you’re a startup looking for initial capital or an established business aiming for expansion, this article is your go-to resource for all things related to small business loans.
Best for Businesses with Bad Credit History
Best for Approval Probability
Best for Short Term Financing
Best for Variety of Loan Options
Best for Equipment Loans
Best for Business Lines of Credit
Best for SBA loans
Best for Startups
Best for Speedy Financing
Best for Lender Matching
Credibly offers two types of small business loans, and they also offer other loan products through third party providers.
They have a working capital loan that has a maximum loan amount of $400,000. Loan terms are between three and fifteen months, and are priced at a factor rate as low as 1.11. A one time origination fee of 2.5% of the loan amount is also charged.
To qualify for a loan your business must be located in the U.S. and have at least $15,000 in monthly revenue and you need a credit score of more than 500. You must have been in business for at least six months.
Credibly also offers a merchant cash advance that also has a maximum loan amount of $400,000 and a factor rate as low as 1.11. Terms are generally between three and fifteen months, and payments are a daily percentage of your credit and debit card sales. The advance comes with a one-time underwriting fee of 2.5% and a $50 per month admin fee.
To qualify you must have been in business for at least six months and have $15,000 or more in average monthly bank deposits. The minimum credit score is 500.
Credibly’s third party provided loan products include:
Credibly has an A+ rating from the Better Business Bureau and overwhelmingly positive reviews on Trustpilot.
Credibly offers loan options for businesses that might not be able to obtain financing elsewhere. They have a variety of loan products, though most are through third party lenders. Credibly receives high marks in terms of its BBB rating and its customer reviews, so based on our overall review, we highly recommend Credibly to business owners.
Businessloans.com is not a direct lender, but a lender matching service. You apply by entering information about your business, and you’ll receive loan offers that meet your needs.
The types of loans available include short term loans, such as a working capital loan, longer term loans, lines of credit, and merchant cash advances. Loan amounts can range from $5,000 to $3 million.
The general criteria for approval is $100,000 in income, one month in business (in some cases), and no minimum credit score. However, Businessloans.com tries to work with every applicant to find a loan option.
Rates and terms will vary by lender but as a general rule, rates can be as low as 3.5% for a line of credit and 9% for term loans. Rates, however, will vary with the interest rate market, and will be based on the lender’s assessment of your risk.
Businessloans.com has outstanding customer reviews on Trustpilot that discuss excellent customer service. They also have an A+ Better Business Bureau rating.
We like Businessloans.com’s lender matching model, which ensures a good borrower-lender fit. They also offer excellent customer support, which is reflected in their customer reviews. Based on their customer-centric business model, we highly recommend Businessloans.com to business owners.
Fora Financial offers a short-term loan option with payment terms of 15 months or less. Loan amounts range from $5,000 to $1.5 million. They price their loans at a factor rate which will be from 1.1 to 1.9, and they charge an origination fee of 2.5%. There are no prepayment penalties and prepayment discounts may be available.
Fora has a $15,000 per month revenue requirement, a 500 minimum credit score, and six months or more in business.
They also offer a revenue advance loan with similar terms, and repayment is a percentage of your daily or weekly revenue receipts.
Fora has an A+ rating from the Better Business Bureau, and mostly positive reviews on Trustpilot. However, there are a few reviews that discuss excessively high interest rates.
Fora Financial offers good short-term loan options, with quick turnaround times. They also offer excellent customer support and have good ratings. While you may end up with a higher rate, qualification requirements are fairly minimal. If you’re looking for a short-term financing option and have had trouble getting approved by other lenders, Fora Financial may be a good option.
Taycor offers a variety of loan products.
Term loans range from $5,000 to $1 million with repayment terms of 4 – 60 months. Loans are priced at a factor rate of 1.1 to 1.36. Origination fees range from 0% to 5%. To qualify, you need a 500 minimum credit score, $8,000 or more in monthly revenue, and a minimum of three months in business. A personal guarantee is required.
They also offer lines of credit from $10,000 to $1 million with terms of 6 to 18 months. Factor rates range from .96 to 1.35 and there’s an origination fee of up to 3%. To qualify, you need a 600 minimum credit score, 6 months or more in business, monthly revenue of at least $4,167, and a personal guarantee.
Taycor also offers merchant cash advances and equipment financing loans. Equipment financing loans can be as low as $500, which is unique.
Taycor has an A+ rating from the Better Business Bureau, but a lower rating from Trustpilot. However, their Trustpilot rating comes from only seven customer reviews.
We chose Taycor Financial because of their variety of loan options and their wide range of loan amounts. They charge competitive factor rates, although origination fees can be on the high side. But overall, we find that Taycor can be a good option for business owners, particularly for equipment financing.
Triton offers a few loan options.
They have working capital loans that range from $10,000 to $250,000, with terms of 3 to 24 months. Rates start at 8.99% but can go up to 74.99%. Origination fees range from 1% to 2.5%.
To qualify you must have a credit score over 600 and at least $350,000 in annual revenue. A personal guarantee from all owners of the business is required.
Triton also offers equipment loans from $10,000 to $500,000 with terms from 12 to 60 months. Rates range from 5.99% to 24.99%. The equipment is the collateral for the loan.
Qualifications are the same as the working capital loan requirements.
Triton also offers SBA loans.
Triton has an A+ rating from the Better Business Bureau, although they are not BBB accredited. They have excellent reviews on Trustpilot.
Triton Capital’s strengths lie in its equipment financing terms. Rates and fees are competitive, although revenue requirements are high. But based on the favorable terms that are available, and their good customer support and reviews, we recommend Triton Capital.
Backd offers three financing options.
They offer a working capital loan in amounts from $10,000 to $2 million with repayment terms up to 16 months. Factor rates range from 1.1 to 1.24. To qualify, you need $100,000 in annual revenue and one year or more in business. The minimum credit score is 600.
Backd also offers a business line of credit with amounts from $10,000 to $750,000, and payment terms of 6 to 12 months. Rates range from 18% to 24%. The $750,000 maximum is higher than most lenders offer on lines of credit. You must have $300,000 in annual revenue.
Finally, Backd offers a buy now pay later loan that allows you to make purchase for your business and pay it back over 12 to 36 weeks at competitive rates.
Backd has an A+ rating from the Better Business Bureau and excellent customer reviews on Trustpilot.
Backd offers competitive short term loan options, and their line of credit maximum is higher than competitors. They also have excellent ratings and customer reviews that rave about their customer service.While they have only a few financing options, we highly recommend Backd to business owners, particularly for those that need a line of credit.
Funding Circle offers three financing options.
They offer a business term loan with amounts ranging from $25,000 to $500,000 with terms from six months to seven years. Rates start at 7.49%, but origination fees are high, ranging from 4.49% to 8.49%. To qualify, you need to have a credit score of 660 or higher, two years in business, and $50,000 or more in annual revenue. Note that loans must be secured with collateral.
Funding Circle also offers SBA loans from $50,000 to $500,000 with terms up to 10 years. Rates start at prime plus 2.75%. Credit score requirements are 630 minimum, and you must have $400,000 in annual revenue.
Finally, they offer a business line of credit from $5,000 to $250,000 with terms from 12 to 18 months. This financing is made through third party lenders.
Funding Circle has an A+ rating from the Better Business Bureau, although they have a few negative reviews on the BBB site. Their customer reviews on Trustpilot, though, are excellent.
We chose Funding Circle because they offer a competitive SBA loan option that can be funded more quickly than most SBA loans. They also have excellent reviews on Trustpilot. While their qualification requirements may make it tough for some businesses to get approved, overall Funding Circle is a good option for business owners with good credit.
We chose Funding Circle because they offer a competitive SBA loan option that can be funded more quickly than most SBA loans. They also have excellent reviews on Trustpilot. While their qualification requirements may make it tough for some businesses to get approved, overall Funding Circle is a good option for business owners with good credit.
1 West is a lending marketplace that works with over 50 lenders. They offer four types of financing.
Their working capital loans range from $5,000 to $1 million with terms from 2 to 24 months. Rates start at 18%. To qualify you need a credit score of 500, 3 months in business, and $10,000 in monthly revenue.
They offer a business line of credit with amounts ranging from $5,000 to $500,000 with terms from three to 24 months. Rates start at 6%.
1 West also offers equipment funding up to $5 million, which is much higher than most lenders offer. They also offer SBA loans up to $5 million.
1 West has an A+ rating from the Better Business Bureau and good customer reviews on Trustpilot.
1 West is a good choice for startups because of their short time in business requirements. They also offer equipment financing up to $5 million, which is unusual. While they are not the speediest lender, overall they are a good option for business owners.
Uplyft offers merchant cash advances rather than loans.
They have four levels of financing options.
Their Starter program has advances from $8,000 to $30,000 with terms of 2 to 5 months and a factor rate of 1.4.
Their Standard program has advances of $5,000 – $125,000 with terms of 2 to 7 months and a factor rate of 1.34.
Their Premium program has advances of $10,000 – $250,000 with terms of 3 to 8 months and a factor rate of 1.3.
Their Premier Plus program offers advances of $30,000 to $500,000 with terms of 3 to 12 months and a factor rate of 1.24.
To qualify for any of the programs, you must have 6 months in business and $144,000 in annual revenue, but there is no minimum credit score.
Uplyft Capital has an A+ rating from the Better Business Bureau and excellent customer reviews on Trustpilot.
Uplyft is a great choice for businesses with bad credit, and they fund quickly. They also have outstanding customer reviews. They are a bit expensive, but they are a good option if your credit is less than stellar.
Lendio is not a direct lender, but a lender matching service that has over 75 partner lenders. They offer a variety of loan options.
Their term loans come in amounts from $10,000 to $2 million with repayment terms of 2 to 10 years. Rates start at 6%, which is very competitive. To qualify, you need a minimum credit score of 680, $8,000 in monthly revenue, and 2 years or more in business.
They also offer a business line of credit in amounts from $1,000 to $500,000 and terms of 1 to 2 years. Rates are between 8% and 24%. To qualify, you need a minimum credit score of 560, $50,000 in annual revenue, and 6 months in business.
Lendio also offers accounts receivable financing for up to 90% of your receivables. The financing has a 1 year term, and fees are as low as 3%.
Lendio also offers SBA loans, equipment financing, cash advances, equipment financing, commercial mortgages, startup loans, and business acquisition loans.
Lendio has an A+ rating from the Better Business Bureau and outstanding reviews on Trustpilot.
Using Lendio is a great way to find a lender that’s right for you rather than shopping around on your own. They can help you to get the best rate available based on your specific situation. Lendio also has excellent customer support, as evidenced by their many positive customer reviews. Rates can be high for some businesses, but overall Lendio is a great option for lender matching.
Small business loans are a way for businesses to fund a variety of business needs, and come in many different forms. They can help businesses to get started, or to grow to the next level. Small business loans are made by banks and by online lenders.
Small businesses may seek loans for a variety of reasons. They may need working capital, sometimes during a seasonal slow sales period. During that time, they can use the funds to meet payroll, pay overhead expenses, or meet other expenses.
Small businesses also may seek loans to fund inventory, or for a marketing campaign designed to grow the businesses. Small business loans can also be used to purchase property or equipment for the business.
How small business loans work depends on the type of loan. With term loans or working capital loans, you receive a lump sum of funds and then pay it back in equal payments over a period of time.
With merchant cash advance loans, you receive advanced funds based on your monthly revenue, and then pay it back as a percentage of your daily or weekly credit and debit card receipts.
With a business line of credit, you have a credit line that you can draw on as needed, and only pay based on how much of the line of credit that you’ve used. Once you draw funds, you have a certain period of time to pay back those funds in equal payments.
The type of business loan that you choose should be based on what you need the money for. If you need to fund payroll or inventory, a term loan is an option. However, a line of credit could be a better alternative, since you can use it as needed.
If you need to fund equipment, clearly an equipment loan is probably the best option. If you need to buy inventory, a merchant cash advance might be an option.
Often, lenders have business loan representatives that can help you to choose the right loan option for you.
When comparing business loans between lenders, you need to choose the one with the best terms to meet your needs. Of course, you want the best rate, but sometimes paying a higher rate for a longer term loan can keep your payments lower, therefore minimally affecting your cash flow.
You should analyze the scenario for each option that you’re comparing. What will your payment be and for how long? What will be your total cost of the loan? By looking at those factors, you should be able to see which option is best for your business.
Lenders generally have three main criteria that they examine when determining whether to approve your loan. The first is either your business credit score or your personal credit score. Minimum personal score requirements range from none to 680.
Second, they look at your monthly or annual revenue. They want to know that you have enough money coming in to repay the loan.
Third, they want you to have some history in business, so they have minimum time in business requirements which can range from one month to two or three years.
You may also be required to personally guarantee the loan, or to put up some kind of collateral, such as business property.
The first thing you can do to improve your chances of approval is to build your personal credit score and offer a personal guarantee for the loan. You can work with credit reporting agencies to find ways to improve your score.
You can also work on improving your business credit score. A good way to do so is to obtain a business credit card, use it, and pay it off monthly. You can also ask your vendors to report on-time payments to business credit reporting agencies.
You should also prepare financial statements so that lenders have a clear picture of your revenue, expenses, cash flow, and assets. Having a solid business plan that explains how you will use the funds and how it will help your business can also boost your chances of approval.
Small business loans can often be expensive and have a serious impact on your business cash flow. Sometimes a business credit card can be an alternative to help you meet certain expenses.
You might also consider taking on an investor such as a family member. You can offer them a percentage of equity in exchange for capital. That way you don’t have to make payments except as a percentage of profits (if that is the arrangement that you make).
Alternatively, you can go to professional investors, although this can be a difficult road for a small business.
Grants may also be available for businesses in certain industries.
In addition to an application, lenders will likely ask you for documentation to verify your personal information. This may include your driver’s license and personal bank statements.
You also may need the following:
Lenders have different criteria for loan approval in terms of credit scores. Most look first at your personal credit score, and have minimum scores ranging from none to 680 or more. Banks typically have higher credit score requirements than online lenders, as do SBA lenders.
Some banks and lenders may also look at your business credit score. Different business credit reporting agencies have different scales. Dun & Bradstreet is used most commonly, and they have a score range of 0 -100. Many lenders will require a minimum score of 80.
If you operate your business as a sole proprietorship or general partnership, you are always personally liable for a small business loan. If you operate as an LLC or corporation, you are not personally liable for the debts of the business unless you personally guarantee the loan. Many lenders require a personal guarantee unless your business has a robust credit history.
An LLC is an entity that can have assets and take on debt, including a bank loan. Qualifying for the loan is not easy, but there are options including SBA loans and online loans.
Interest rates for small business loans can vary significantly depending on several factors, including the type of loan, the lender you choose, and your creditworthiness. Generally, Small Business Administration (SBA) loans offer competitive rates, ranging from approximately 4% to 13%, depending on the specific SBA program and the lender’s terms. Traditional bank loans tend to have interest rates falling within the 4% to 10% range for well-qualified borrowers. Online lenders, on the other hand, may offer a wider range of rates, spanning from 6% to as high as 36%, with higher rates typically associated with riskier borrowers. Invoice financing, which involves borrowing against outstanding invoices, may come with rates ranging from 13% to 60%, depending on the lender and the risk associated with your invoices.
The timeline for loan approval can vary considerably depending on the type of loan and the lender. Online lenders often provide faster decisions, with some offering approvals within a few hours to a couple of days. In contrast, traditional bank loans and SBA loans tend to have longer approval processes, often taking several weeks to a few months. The duration can also be influenced by factors such as the completeness of your application, the complexity of the loan, and the lender’s specific procedures.
Yes, small business loans can come with various fees that borrowers should be aware of. These fees may include origination fees, which are charged by some lenders to cover the cost of processing the loan. Some lenders may also require application fees for reviewing your loan application. Prepayment penalties can apply to certain loans, imposing charges if you pay off the loan early. Additionally, late payment fees may be assessed if you miss scheduled loan payments. Closing costs are common with SBA loans and traditional bank loans and are associated with legal and administrative expenses related to the loan closing process. It’s essential to carefully review the loan agreement and terms to understand any applicable fees.
The primary distinction between secured and unsecured small business loans is the presence or absence of collateral. Secured loans are backed by collateral, which can be business assets or personal assets. In the event of a default, the lender has the right to seize the collateral to recover their losses. Secured loans typically offer lower interest rates because the collateral reduces the lender’s risk. In contrast, unsecured loans do not require collateral but may have higher interest rates and stricter eligibility criteria because they represent a higher level of risk for the lender. Lenders rely on your creditworthiness and financial history to assess your ability to repay unsecured loans.
Your credit score plays a pivotal role in determining your eligibility for a small business loan and the terms you receive. Higher credit scores generally enhance your chances of loan approval and enable you to secure loans with more favorable interest rates and terms. Lenders use credit scores to assess your creditworthiness and the risk associated with lending to you. A strong credit score reflects a history of responsible financial behavior, such as timely bill payments and prudent management of credit. Conversely, lower credit scores may limit your borrowing options and result in higher interest rates, as they suggest a higher level of risk to lenders.
The ability to prepay a small business loan without incurring penalties depends on the specific loan agreement and the policies of the lender. Some loans allow borrowers to prepay the loan amount in part or in full without imposing penalties, while others may have prepayment penalties or fees. It’s essential to carefully review the terms and conditions of your loan agreement and discuss prepayment options with your lender before signing the loan contract. Understanding the prepayment terms can help you make informed decisions regarding early loan repayment and potentially save on interest costs.
Repayment terms for small business loans can vary widely based on the type of loan, the lender, and the purpose of the loan. Generally, small business loans can be categorized into three main types based on their repayment terms: short-term, medium-term, and long-term loans. Short-term loans are typically repaid within a few months to a year or two. Medium-term loans have repayment periods ranging from two to five years. Long-term loans offer extended repayment periods, typically spanning from five to 25 years. SBA loans often feature longer terms, especially for real estate financing. The choice of repayment term depends on your business’s needs, financial capacity, and the loan’s purpose, and it’s important to select a term that aligns with your financial goals and cash flow projections.
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