Small business bank loans

Small business bank loans are often considered the gold standard for business financing. Banks are known to offer the most competitive rates, favorable terms and a large variety of business loan products.

But not all banks serve small businesses: Many larger banks prefer to work with industry heavyweights. And banks of any size aren’t very well known for advertising loan details, so comparing them can be a bit of a pain. It may also be difficult for new businesses to qualify with a bank. Profitable small businesses with multiple years in business and an existing bank relationship tend to have higher approval odds.

How bank loans work for small businesses

Banks tend to offer the safest, most traditional financing options to established businesses. Borrowers prefer banks compared to other types of lenders regarding rates, products offered and overall satisfaction, according to the Federal Reserve’s Small Business Credit Survey. And big banks may also be able to lend larger amounts compared to credit unions and online lenders.

For small businesses, bank loans typically work by offering loans in the form of a term loan, a line of credit, equipment financing and more — and there are usually multiple options of each to choose from.

However, your first small business loans from a bank may have a longer turnaround time compared to less traditional lending types, such as online lenders or peer-to-peer loans. Many small businesses consider this a fair trade-off, because you’d be starting a long-term financial relationship with that bank — ideally, your bank will have a close enough eye on your business’s finances to anticipate your need for financing before you even apply.

Small business loan options from banks

Most banks offer a combination of these lending options.

Types of banks that offer business loans

The Big Four aren’t the only banks out there.

Large national and international banks

Big names like Wells Fargo and Chase fall under the category of large national banks. The benefit of working with these banks is that they’re available in most states and have the budget to invest in new technology that smaller banks might not access.

These might benefit businesses that operate in multiple states. But large banks have low approval rates and consistently have lower customer satisfaction than smaller counterparts, according to the Federal Reserve’s 2022 Small Business Credit Survey (SBCS).

Regional banks

Regional banks typically offer services that are a little more tailored to the industries in the states that they serve. They also typically have multiple branches and offer a wide range of online services and tools. These are generally a good option for businesses owners who want a personal touch but also would like to manage their accounts virtually.

Regional banks are more likely to close when interest rates rise quickly. That’s because in 2019, the FDIC reduced the liquidity coverage ratio requirement for regional banks from 100% to 85%. This means they aren’t required to have enough liquid assets on hand to cover all deposits. If enough customers decide to withdraw funds from the bank at the same time, the bank could fail.

Community banks

Community banks specialize in financing businesses in their areas. Loan officers are often experts in the local market as well as popular industries in their area. They often have high customer satisfaction and approve a larger portion of applications, according to the SBCS.

These are your best bet when you want to develop a close, mutually beneficial relationship with a financial institution in your area. But they often only have a handful of branches and, like regional banks, may also be vulnerable to failure. Community banks are also likely being bought out by a regional bank, or another community bank. They were also traditionally slow to adapt to new technology — though they have started partnering with tech companies to bring applications online.

CDFIs

Community Development Financial Institutions, or CDFIs, are typically community banks with a mission to develop the economy of the area it serves. These often have special financing programs for underrepresented business owners — such as women, minorities and veterans. And they often offer services like training for entrepreneurs and financial management courses.

CDFIs also typically offer financing to business owners with poor credit and startups, often at a more competitive rate than you’d find online.

How to find the best small business bank loans

Borrowing from a bank is different from going to an online lender. It’s usually more about developing a long-lasting relationship than just getting a loan and calling it a day. Consider these all of these factors when comparing banks:

• Rates and requirements. These details may be hard to find, but if you can locate that information, compare introductory rates, credit score requirements and loan amounts. Also ask about available discounts like relationship or autopay, which can mean big savings long term.
• Your business’s banking history. Banks prefer to work with current customers, and the longer you’re with the bank, the better deal you’ll get on financing. If you already have a business checking account with a bank, borrowing from them could be a good way to cultivate a relationship.
• Look for long-term options. Don’t just look at loans — also compare additional business services. Banks prefer to lend to businesses they have a relationship with, so go with one that you can see yourself working with for a long time, so it works in your favor later.
• Knowledge industry specialists. Banks often have loan officers that are experts in a specific industry. Find a bank that can provide valuable insights into your business’s operations and anticipate your financing needs.
• Types of loans. If you’re looking for a specific type of financing — like an SBA Export Express loan — make sure a bank offers it before reaching out.
• Employee reviews. A bank with low employee ratings could be a warning sign, especially with local banks. Low morale can be a sign that you might not get top-notch service and have to switch loan officers frequently.

How to get and qualify for a small business bank loan

Finding a good lender is one thing — qualifying is another beast. To qualify with a bank, you generally need to meet the following criteria, according to Brad Stevens, commercial banker and founder of Stevens Risk Management:

• Profitable business. Your business should already be turning a profit on an annual and interim basis. Community banks generally don’t provide startup funding.
• Enough cash flow. Your business should generate enough income and cash flow to cover the new loan payments as well as any existing debt payments.
• Sufficient ROI. A loan should be an investment in the future of your business. The project or asset you’re funding should also have a high enough rate of return to cover loan repayments. Figure out the return of investment (ROI) before you reach out to a bank.
• Cash reserves. In addition to cash flow, your business should have enough equity to prove sufficient to survive a period of stress before you start working with a community bank.
• Excellent credit. It’s standard for banks to require some kind of personal guarantee from each business owner, so it may consider your personal credit score as well as your business’s credit score — especially if you haven’t been open long.
• Time in business. Banks typically want to see at least two to five years in business. The longer your business has been around, the more likely you are to qualify.
• Existing relationship. Having a business checking account with a bank will help prove your revenue. And if you already work with a specific banker who knows your business, you may have an added edge in getting your application approved.
• Strong business plan. A strong business plan demonstrates that you have a plan for your funds and know how your business will be able to pay back the money you borrow.

Community banks tend to have more flexible requirements than large national banks. If you’re not sure what type of loan your business might qualify for, it’s worth setting up a meeting with a commercial loan officer at a community bank. Even if you can’t get a loan, they might point you toward other financing options and offer tips on what to improve before you apply again.

How to apply for a small business bank loan

The application process typically begins as soon as you hand a loan officer financial documents for your business. While it can vary from bank to bank, here’s what usually happens:

1. 1. Get a preliminary proposal. Your banker can give you an idea of what you might qualify for — or a quick no — during your first meeting, based on your basic financial documents.
   2. Submit more documents. You’ll likely need to submit more documents in order to go through your finances and decide on the type of financing, rates, terms and amounts they’re willing to offer.

1. Wait for a decision. The application is considered complete as soon as your banker has enough information to make a decision. You should receive a response within 30 days of submitting your documents.
2. Discuss the proposal. Often, loan officers will come to you with a slightly different proposal than you had in mind, based on their analysis of the submitted information. A good banker will walk you through any terms you don’t understand and explain the process it used to come up with these terms. They should also explain the process of how they arrived at the proposed structure.
3. Review and sign your loan commitment. When presented with a final commitment, review the loan amount, rate, payment amount, amortization, fees, guarantee information, collateral to be pledged, reporting required and the maturity date of the loan before closing.

Often, your loan commitment will require you to keep your banker up to date on your business’s finances. You might be required to supply business financials on a yearly or even monthly basis during the term of your loan.

Quickly compare small business loans with a marketplace

Business loan marketplaces offer a quick and simple way to compare small business loans from banks and many other providers.

Marketplaces are particularly helpful when it comes to comparing bank loans because it allows you to quickly compare bank rates, loan amounts and more — it’s not always easy to get that information without contacting the bank directly. Marketplaces also often partner with other types of lenders like credit unions or fintechs, so you’re just not fishing out of one pool.

Lendio

Lendio business loans

4.75 / 5 ★★★★★

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• Overview
• Pros & Cons
• More Details

Lendio is a connection service with a large network of over 75 lenders, including several banks. It's free to compare lenders, which involves an online application before matching you with lenders based on your information. You're only charged a fee if you're funded. With eight types of business financing to search for, Lendio is a top business loan marketplace for simple comparison.

Pros

• Large lender network
• Compare multiple lending options
• Funding as soon as next day

Cons

• Fee if you're funded
• Mixed customer reviews

Loan amount	$10,000 – $2,000,000
APR	Starting at 3%
Min. Credit Score	560
Loan term	2 to 10 years
Requirements	Operate business in US or Canada for 6 months or more, have a business bank account, 560 personal credit score, at least $8,000 in monthly revenue

Loan amount	$10,000 – $2,000,000
APR	Starting at 3%
Min. Credit Score	560

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SmartBiz

SmartBiz business loans

4.5 / 5 ★★★★★

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• Overview
• Pros & Cons
• More Details

SmartBiz is a connection service that works exclusively with banks. While originally specializing in SBA loans, SmartBiz has branched out to help small business owners find traditional bank loans as well. Non-SBA loan rates currently range between 11.25% to 12.25%, with larger loan amounts than you'll find through their SBA offerings. And if you want an SBA loan, this might also be a great place to start. It only partners with preferred lenders and packaging services can cut the turnaround time from months to weeks.

Pros

• Compare regular bank loans and SBA loans
• Cuts weeks out of SBA loan turnaround time
• Simplified online application

Cons

• Charges SBA referral and packaging fees
• No loans under $30,000
• Relatively high starting APR of 11.25% on non-SBA loans

Loan amount	$30,000 – $500,000
APR	11.25% to 12.25%
Loan term	10 to 25 years
Requirements	650+ credit score, 2+ years in business, $50,000+ in annual revenue, no bankruptcies or foreclosures in past 3 years

Loan amount	$30,000 – $500,000
APR	11.25% to 12.25%
Min. Credit Score	650

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Big Think Capital

Big Think Capital

4.7 / 5 ★★★★★

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• Overview
• Pros & Cons
• More Details

A little newer on the scene, Big Think Capital is an emerging business loan marketplace with eight different business financing options to choose from. It's also offering assistance in getting the Employee Retention Credit and has startup funding options to compare. Like other marketplaces, you submit an online application and compare lenders.

Overall, Big Think Capital is transparent with rates and requirements, as that information is clearly listed on the site to see before you spend your time applying.

Pros

• Eight business loan options
• Low credit score requirements across options
• BBB accredited and excellent customer reviews
• Offers ERC assistance

Cons

• Doesn't list fees
• Some options have low loan amounts

Loan amount	$10,000 – $5,500,000
APR	Starting from 8%
Loan term	Up to 10 years
Requirements	600+ credit score, 11 months in business, $100,000 annual revenue

Loan amount	$10,000 – $5,500,000
APR	Starting from 8%
Min. Credit Score	600

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Bank loan pros

• Flexibility. Community banks are much more flexible in both analyzing and responding to requests for financing. They typically have fewer processing requirements than larger banks, which can mean a faster turnaround time.
• Strong relationship with your lender. Most of the time, you’ll be working with the actual decision-maker when you borrow through a community bank — or at the very least, will have contact with the final arbiter of the credit decision. This allows a personal touch on both sides, as you get to know them and they get to know you.
• Small business experts. Since community banks typically deal with smaller clients, they’ll likely understand your business better than a larger bank. And they’ll also generally see you as a more important client.
• Can anticipate future financing needs. As your banker gets to know you, they can see when you might need financing in the future and help you prepare the appropriate documents so that financing is available when you need it.

Bank loan cons

• Limited experience. There’s a chance you’ll work with a banker that hasn’t been exposed to larger, more complex financing structures. These types of green bankers tend to force a one-size-fits-all approach on all of their clients.
• Limited personnel resources. Often, community banks have limited staff that can easily get overwhelmed with credit portfolios of larger clients that require a lot of attention. This might limit how much time they can spend with any one client.
• Not ideal for startups. Banks often require two to five years in business to qualify for business loans, so if you’re a brand-new business, you’ll likely need to look elsewhere.
• Small banks get bought. Your community bank could be acquired by another bank — which could mean you’ll get a lower quality of service or have to switch banks entirely.

6 alternatives to small businesses loans from banks

Banks are easy, safe and familiar. But if your business doesn’t quite meet a bank’s requirements, you might want to consider these alternatives:

Compare online lenders

Banks aren’t the only option if you need a small business loan, or compare more top lenders with our best business loan guide.

Use our table to quickly compare more providers by amounts, rates and requirements.

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Name	Product	Filter Values	Min. Amount	Max. Amount	APR	Requirements
National Business Capital business loans Finder Rating: 4.3 / 5: ★★★★★ National Business Capital business loans Finder Rating: 4.3 / 5: ★★★★★			$100,000	$10,000,000	Varies	1+ Year in Business, $500,000 in Annual Revenue, US citizen or permanent resident	Find a loan to match your business needs with an advisor to help you navigate through the process.	Go to site More Info	Compare	loading Fetching your data...
$3M+ funded! Lendio business loans Finder Rating: 4.75 / 5: ★★★★★ Lendio business loans Finder Rating: 4.75 / 5: ★★★★★			$10,000	$2,000,000	Starting at 3%	Operate business in US or Canada for 6 months or more, have a business bank account, 560 personal credit score, at least $8,000 in monthly revenue	Submit one simple application to potentially get offers from a network of over 300 legit business lenders.	Go to site More Info	Compare	loading Fetching your data...
Lendzi Finder Rating: 4.59 / 5: ★★★★★ Lendzi Finder Rating: 4.59 / 5: ★★★★★			$5,000	$2,000,000	Starting from 4%	525+ credit score, one year in business, at least $50,000 annual revenue	Compare lending options and get funded fast.	Go to site More Info	Compare	loading Fetching your data...
CreditAve Not rated yet CreditAve Not rated yet			$25,000	$500,000	Starting from 2%	550+ credit score, at least one year in business, $240,000+ annual revenue	Apply within minutes without impacting your credit score.	Go to site	Compare	loading Fetching your data...
BusinessLoans.com Finder Rating: 4.38 / 5: ★★★★★ BusinessLoans.com Finder Rating: 4.38 / 5: ★★★★★			$5,000	$3,000,000	Varies by loan type and lender	Must have been in business between 1–2 years, have a minimum revenue of $75,000–$250,000 and have a minimum credit score of 500–650.	Complete a three-minute form to see loans that fit your business’s needs. Compare offers without a hard credit check.	Go to site	Compare	loading Fetching your data...
OnDeck short-term loans Finder Rating: 4.6 / 5: ★★★★★ OnDeck short-term loans Finder Rating: 4.6 / 5: ★★★★★			$5,000	$250,000	29.9% to 65.9%	Companies in business at least 1 year, $100,000+ in gross annual revenue, majority owner with a 625+ personal credit score, active business checking account	Receive flexible financing at competitive fixed rates from this A+ rated business lender.	Go to site More Info	Compare	loading Fetching your data...
Loanspark Finder Rating: 4.6 / 5: ★★★★★ Loanspark Finder Rating: 4.6 / 5: ★★★★★			$10,000	$30,000,000	Starting at 1%	600+ personal credit score, 1+ years time in business, $140,000+ minimum annual revenue, active business checking account required	Prequalify with this lending marketplace using an easy application process. Plus, work with real loan experts to make the best decisions on loan programs for ERC, SBA, e-commerce, cannabis and other loan categories.	Go to site	Compare	loading Fetching your data...

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