Compare small business loans in November 2018 | finder.com

Grow or start your business with a small business loan

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Business loans aren’t what they used to be. While you can still walk into a bank to fill out an application, other options may be faster and easier to apply for. We take you through business loan types, potential costs and what you can expect from the application process.
LoanBuilder, A PayPal Service Business Loans

Our top pick: LoanBuilder, A PayPal Service

Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    Compare top business loans

    Rates last updated November 21st, 2018
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    $5,000
    $500,000
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    $5,000
    $250,000
    500+ personal credit score, 6+ months in business, $15,000+ average monthly deposits
    National Funding Small Business Loans
    Working capital loans and equipment financing, some high-risk industries may be eligible.
    $5,000
    $500,000
    Be in business at least one year and make at least $100,000 in annual sales. Other loan types have additional requirements.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    $500
    $5,000,000
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    500+ personal credit score, 1+ years in business, $100,000+ annual revenue
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    $5,000
    $500,000
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.

    Compare up to 4 providers

    What’s a business loan?

    A business loan is money that your business borrows to cover expenses it can’t afford up front. You repay what you borrow over a period of time, typically several months or years. How this works depends on the type of loan you’re interested in and your lender.

    Some loans charge interest and fees, which is expressed as the business loan’s annual percentage rate (APR). Others come with only a fee. Some require your business to put up collateral, though not all do. You can also find business loans with monthly, weekly and daily repayments.

    Small business loan types

    You’ll come across common types of small business loans, each offering different terms and benefits.

    Loan type Best for How it works Typical loan amount Typical APR
    Term loan Covering a large one-time expense. Borrow a lump sum and pay it back plus interest and fees in fixed installments, usually over five to 20 years. $5,000 to $5 million 4% to 99% Read more
    Line of credit Access to working capital to cover ongoing costs. Qualify for access to a specific amount of funds, which your business draws from when needed. $5,000 to $5 million 8% to 80% Read more
    SBA loans Businesses that have been rejected for traditional loans, including startups. Apply for a term loan, line of credit, commercial loan and more, partly backed by the Small Business Administration.

    Business owners are often required to partially guarantee the loan.

    $5,000 to $5 million Starting at 6.25% Read more
    Equipment financing Businesses that need to buy new equipment. Borrow up to 100% of your equipment cost and pay it back in installments plus interest and fees. Your equipment is collateral. 85% to 100% of equipment value 8% to 30% Read more
    Vehicle financing Businesses that need to buy a car, truck or other type of vehicle. Take out a fixed-term loan to cover the cost of new vehicles for business use, using the vehicles as collateral. $10,000 to $10 million 8% to 30% Read more
    Invoice factoring Businesses that rely on invoices from government agencies or other companies. Sell your business’s unpaid invoices to a third party at a discount. 80% to 95% up front; up to 99% of invoice value after your clients pay your lender Discount rate of 0.5% to 6% of invoice value Read more
    Invoice financing Businesses that rely on invoices from government agencies or other companies. Take out a term loan backed by your business’s unpaid invoices as collateral. 80% of invoice value Fee of 2% to 5% of invoice value Read more
    Merchant cash advance Retail and ecommerce businesses that rely on consumer sales. Get an advance on your future sales and pay it back plus a fee with a percentage of daily sales. $2,500 to $250,000 Fee of 0.14 to 0.30 times your loan amount Read more

    Guides to other business loan options

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    How to get a business loan in 7 steps

    Small business loans work by giving your business access to funds to expand or cover day-to-day costs. Here’s what you can expect to happen when you apply for a small business loan.

    Just some of the top providers we compare

    Kabbage LoanBuilder logo
    Lendingclub logo OnDeck logo SmartBiz logo
    Wise Business Loans lgo FastPay logo Bitbond logo
    Bank of America logo Main Street Finance logo LendingUSA logo
    Shield Funding logo Biz2Credit logo Wells Fargo logo

    How can I find the best loan for my business?

    Ask yourself the following questions when comparing business loan providers:

    • Is my business eligible? Most lenders list basic eligibility requirements online. Otherwise, speak with a representative to learn if your business can qualify.
    • Can I borrow as much as I need? If your financing needs don’t fall into the lender’s range of loan amounts, you might want to move on.
    • What’s the overall cost? With term loans, the fastest way to compare business loans is to look at the APR — as long as the lenders offer similar loan terms.
    • How long can I take to pay it back? If you’re applying for a loan with interest, your loan term affects both your immediate and long-term costs. Shorter terms loans give your business higher repayments but lower overall costs.

    9 situations when it’s time for business financing

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    Where can I get a small business loan?

    It used to be that banks and credit unions were your two main options for business loans. That’s no longer the case. Let’s take a look at some common business loan providers in [year].

    Online providers

    Borrowing online is significantly easier than borrowing from a bank: There’s less paperwork, and a shorter application.

    It’s now also easier to qualify for an online business loan as a small business, thanks to regulatory changes following the 2008 financial crisis. Banks can’t take as many risks.

    Here’s a few types of loan providers you might find online:

    Our top picks for business loan providers

    Banks and credit unions

    Some business owners are more comfortable borrowing from a big bank with a name they recognize, even if bank loans are more difficult to qualify for. This kind of loan could be a good option if your business has been around for years, makes at least $1 million in annual revenue and needs funds for a large expense — say, over $100,000. You’ll also face higher personal credit requirements to qualify.

    Credit unions are nonprofits, so you might think they can afford to be more forgiving when it comes to loan amounts and eligibility. But credit unions actually reject more applicants than any other type of lender, according to the 2016 Small Business Credit Survey by the Federal Reserve. You’ll also need to become a member to be eligible, which adds an extra step to your application.

    You might have better luck with a local or regional bank, which tend to approve more businesses than online lenders, according to the Federal Reserve. But you probably won’t get your funds fast: Both bank and credit union loans tend to require more documents and require longer turnaround than your average online loan — sometimes weeks or months longer.

    Our top picks for small business loan providers

    Where can I get an SBA loan?

    The Small Business Administration doesn’t actually fund loans itself. You’ll have to go to a lender that offers SBA financing to apply. You can find SBA loans online through sites like SmartBiz, though the SBA’s top lenders tend to be banks.

    Whether you apply online or through a bank, SBA loans are typically more involved than other types of business financing. They often require more documentation and details about your personal finances and even your criminal record. It can take a few months from start to finish.

    How much do business loans cost?

    Fixed-term loans — including general use, equipment and vehicle loans — come with interest and fees. Interest is a percentage of your loan balance that your lender applies daily, weekly or monthly, depending on your terms.

    Term loans also often come with an origination fee, typically from 2% to 5% of the loan amount. Usually, it’s taken out of your funds before you get the money. So if your business qualifies for $10,000 with an origination fee of 2%, you’d receive only $9,800.

    The APR is an expression of a term loan’s interest and fees. It’s the easiest way to understand how much your loan is going to cost you over time.

    Other types of loan costs

    Not every business loan comes with an APR. Invoice factoring, for instance, typically charges something called a discount fee, often 0.5% to 6% of the value of your invoices. It can be a fixed rate, but the longer your clients take to pay off a loan, the more you’ll likely pay.

    With merchant cash advances, you’ll run into something called a factor rate, which is a number your lender multiples your loan amount by to come up with the amount you’re on the hook to pay back. Rates range from 1.14 to 1.18 but can get as high as 1.30.

    Alternative business loans — for high-risk industries or bad credit owners — come with a pricing scheme that works like a factor rate, though lenders often express it as cents on the dollar.

    Other costs you might have to pay on your business loan


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    Can my business qualify for a loan?

    It depends on your lender, loan type and how much you want to borrow.

    Most loans require you to meet minimum requirements that can include:

    • Time in business. For a bank loan, you often need to be around for at least two years, while many online lenders are willing to work with a business that’s been around at least six months.
    • Good personal credit. While it’s possible to find alternative loans for business owners with bad credit, most lenders require a minimum FICO score of 660 to 680.
    • Minimum monthly or annual revenue. Some lenders want your business to bring in at least $10,000 a month, while others care more that your business makes at least $50,000 a year.

    Other common business loan requirements

    Top 5 reasons business loan applications are rejected

    • Weak business performance: 31%
    • Not enough collateral: 31%
    • Low credit score: 29%
    • Already carrying too much debt: 28%
    • Short credit history: 28%

    Most of these reasons are related to your business’s ability to repay. To a lender, weak business performance might mean that you’re more likely to default on a loan. If your business already has several debt obligations, lenders might be concerned about your ability to take on more regular costs. And if you want to apply for a secured loan, your business needs to have business assets worth enough to cover the cost of your loan balance, should your business default.

    The other two reasons have to do with the business owner’s personal credit history. A low credit score could indicate to a lender that you’ve had trouble paying off debt in the past. A short credit history might imply that you don’t have much experience handling credit — also a risk.

    Source: https://www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-EmployerFirms-2016.pdf (p. 18)

    Approval rate by loan type

    • Vehicle and equipment loans: 79%
    • Merchant cash advance: 72%
    • Line of credit: 68%
    • Term loan: 58%
    • Personal loan: 57%
    • SBA loan: 55%

    Source: https://www.federalreserve.gov/publications/files/sbfreport2017.pdf p.21

    You might find easier approval with a vehicle, equipment loans or merchant cash advance. That’s because they’re backed by some form of collateral — be it a car, a tractor or your business’s future sales. This makes it less risky for the lender, because they won’t have to take the financial hit if your business defaults.

    Lines of credit, term loans and personal loans are typically unsecured — though secured options are out there. Because unsecured loans put the responsibility of your debt on the lender if your business goes under, they often come with tighter eligibility requirements.

    You might need to prove you’ve tried and failed to get other types of financing to be eligible for an SBA loan. But that doesn’t mean they’re easy to get. They involve taxpayer money, and you can get disqualified for reasons that other lenders don’t even consider, like having a criminal record. Learn other ways to get an a business loan easily.

    How secured and unsecured business loans compare


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    Can I get a loan to start a business?

    Yes, but it won’t be easy to get a traditional business loan. Entrepreneurs looking for funding to cover startup costs might need to get creative. Even if you’ve already opened your business’s doors, you might not find many loan options if its younger than six months.

    While some alternative lenders and the SBA 7(a) loan program offer startup loans, you might have better luck looking into other types of financing, like angel investors.

    What you need to know about funding a startup

    What types of documents might I need?

    It depends on your lender and your business’s financials. Online lenders typically ask to see fewer documents than banks do. Younger businesses often need to provide more documents than businesses that have been around the block a few times.

    Common documents that business lenders may ask to see include:

    • Government-issued ID. The federal government requires lenders to verify the identification of all applicants. Typically, lenders do this by requesting to see a driver’s license, passport or other official ID.
    • Business bank statements. Lenders often like to look at the past two to six months of your business’s most recent bank statements to get an idea of its current cash flow.
    • Tax returns. Your taxes give lenders an idea of how much your business makes annually. Some lenders only ask for business tax returns, while others like to see your personal return as well.
    • Business plan. More common with banks and credit unions, some online lenders ask for a business plan — or at least financial projections.
    • Profit and loss statement. Also called an income statement, your P&L breaks down your company’s net revenue and helps your lender verify how much debt your business can afford to take on.

    Business loan alternatives

    Don’t think you’ll qualify for a business loan? Explore alternative options for borrowing.

    Alternative Best for How it works
    Personal loan Entrepreneurs and business owners with good credit and high income Take out a term loan in your name based on your personal creditworthiness. Read more
    Business grants Nonprofits, tech industry
    Businesses owned by women, minorities or veterans
    Businesses located in economically disadvantaged areas
    Complete an application for funding from the government or a private organization. You don’t have to pay it back, but grants tend to be smaller than loans and more difficult to qualify for. Read more
    Investor financing Startups and potentially highly profitable businesses with a plan to expand Sell a percentage of your business’s ownership — it’s equity — to venture capitalists in exchange for upfront financing. Read more
    Crowdfunding Businesses and entrepreneurs with a strong social media presence Set up a campaign asking for small donations from your friends, family and social network. Many platforms take a percentage of the funds you raise as a fee. Read more
    Friends and family Business owners and entrepreneurs with friends and family interested in investing Set up an informal agreement or use services like Loanable to make a formal loan contract outlining the terms and conditions for paying back a family loan.
    Rollover for Business Startups (ROBS) Startups Invest your retirement savings in a new business without paying the usual taxes or fees that come with accessing your 401(k) or IRA early.

    Small business loan glossary

    Definitions

    A to H

    Accounts receivable. Money that a company is owed by its clients, usually in the form of outstanding invoices. This count as an asset.

    Accounts payable. Money that a company owes a supplier, vendor or other source when it purchased goods or services on credit. These count as a liability.

    Asset. Anything of value that a person or business owns or buys, as well as money they are owed (accounts receivable).

    Bridge financing. A high-interest short-term loan, usually two weeks to three years to cover gaps in longer-term financing. Typically used to cover the initial costs of a project or change to a business that hasn’t yet been finalized.

    Business assets. Generally, business assets refer to property or equipment that a business owns, including inventory, real estate, securities and accounts receivable.

    Commercial and industrial (C&I) loan. Usually a short-term secured loan only available to businesses to provide either working capital or to fund a major expense like acquiring another business, maintaining property and real estate or undertaking a new project.

    Daily holdback. When a creditor takes a percentage of a business’s daily sales as repayment for a cash advance.

    Cash flow. The amount of money going into a business, minus the amount of money going out. Positive cash flow means that you have enough money to cover your expenses. When you get into negative territory, you might need a working capital loan to keep afloat.

    Debt-service coverage ratio (DSCR). Also, debt coverage ratio. A business’s cash flow (usually the net operating income) divided by debt service payments (loan repayments and leases). Used by creditors to determine how able a business is to repay a loan (similar to a debt-to-income ratio).

    Gross profit. The total amount a business made, minus the cost of producing goods or delivering a service.

    I to P

    Lien. A legal agreement that allows a creditor to take certain assets if the borrower is unable to repay a loan. A form of collateral.

    Microloan. A small loan — typically less than $35,000 — that can help cover small expenses when a business is getting off the ground.

    Net income. The difference between how much a business makes and how much it costs to run.

    Net operating income. The difference between a business’s profits and its expenses, taxes and interest.

    Payback period. The estimated amount of time it will take for a business to repay a cash advance — similar to a loan term.

    Personal guarantee. A promise to repay a loan if the business is unable to, usually backed by your personal assets.

    Q to Z

    Split withholding. When a credit card processor automatically sends a portion of a sale to a creditor and another portion to a business.

    Working capital. Money used to cover the cost of a business’s day-to-day operations.

    Frequently asked questions

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