6 Best Small Business Loans

If you’re one of the millions of folks in the U.S. who left your job to seek greener professional pastures, you might be mulling over the possibility of starting a new business. Whether you’re at the seed stage of a new venture, or would like to scale and grow your existing small business, you’re going to need some capital.

Running a successful business, whether it’s a startup or established company, requires steady cash flow. And if you’re scaling your business, an infusion of money can help you make improvements, invest in new tech, staff up, or open another location.

For these reasons, choosing the right small business lender is incredibly important. Not only do you want a lender with low interest rates, speedy funding times, limited fees, and a handful of different types of loans, but considerations like customer service, reputation and the lender’s qualifying requirements should also come into play.

We analyzed the market and chose the six best small business lenders based on these factors and more. Considering starting a business and would like some business financing options? Read on to find the best small business lenders for your needs.

Our Top Picks for Best Small Business Loans

• BlueVine: Best for Lines of Credit
• OnDeck: Best for Multiple Loans
• Fundbox: Best for Cash Flow Predictions
• National Funding: Best for Borrowers with Bad Credit
• Biz2credit: Best for Business Insights
• Lendio: Best for Startup Loans

Best Small Business Loans Reviews

The best small business loan for your company depends on the state of your business, your financial situation and your priorities as a small business owner. To help guide you toward the most fitting one for your needs as an entrepreneur, we’ve meted out our top picks by category. See below for the most appropriate small business lender for you.

We chose BlueVine, a company primarily known for its business checking accounts, as our best provider of lines of credit because small businesses can obtain a business credit line for up to $250,000 and only need to be in existence for six months.

BlueVine offers lines of credit and invoice factoring, among other loan products. BlueVine’s revolving line of credit is a particular standout as it features interest rates as low as 4.8%, and small business owners can get extended lines of credit up to $250,000. Further, a major selling point is that the online application is simple and asks for basic information. The approval process can also be lightning quick, and you can receive funds within several hours of approval.

BlueVine has partnered with FundThrough for invoice factoring. What’s particularly appealing about its policies is that there are no long-term contracts and borrowers can choose which invoices they want to submit as collateral. While BlueVine is strictly an online financial platform and has no physical locations, customer service is available weekdays from 8 am to 8 pm ET.

We chose OnDeck as the best lender for people who need to take out multiple loans because, unlike nearly all of the lenders we analyzed, OnDeck offers significant savings on fees and interest for those who take out a second loan.

OnDeck offers term loans and lines of credit. What’s particularly appealing about both types of funding is the loyalty benefits for existing customers. Once borrowers have paid back 50% of their current loan, they’re eligible to take out a second small business loan. In turn, OnDeck might waive the interest on the current loan. Plus, the origination fee might even be reduced to zero percent on your new loan.

OnDeck also doesn’t charge any prepayment fees or penalties. So should you get ahead of your payments and pay early, you won’t be hit with any charges, nor owe the remaining interest.

OnDeck is also a good choice for borrowers with fair or good credit. A 600 credit score minimum is required. OnDeck claims that it can drop funds into your bank account the same day that your loan is approved. APR rates, however, can be quite high. The APR for term loans starts at 35%, while the APR for lines of credit starts at 35.9%. According to the company’s website, the average APR for term loans is 54.96% while the average rate for lines of credit is 47.14%. As these are high interest rates and there are no prepayment penalties, it’s in the borrower’s best interest to pay off these loans as quickly as possible.

Fundbox tops our category for best for cash flow predictions, because, unlike the other lenders we analyzed, it offers comprehensive financial analysis and borrower insights.

While Fundbox offers lines of credit to small businesses and term loans, its term loans program is currently in beta and therefore not available to everyone who applies. You can receive either a revolving business line of credit (12-24 week repayment) or lump-sum term loan of up to $150,000 (24-52 week repayment).

Fundbox’s standout feature is its cash flow analysis and predictions. Borrowers can easily look at their cash balances across all their accounts, see cash flow predictions, and also simulate different scenarios so they can anticipate their cash flow and plan ahead. Although FundBox’s insights feature is in beta mode now and not widely available to all customers, it’s a free service that shows promise.

Speaking of cash flow, Fundbox’s Flex Pay program allows borrowers with a business line of credit three extra days to repay their loans. This is fee-free if you pay by ACH. Flex Pay might be a good option if you aren’t able to put those expenses on a debit card or credit card.

While its competitors have higher credit score requirements, National Funding claims the spot in our best for borrowers with bad credit as it requires a low minimum credit score while offering high approval rates.

National Funding is well-known for offering multiple financial options to small business owners — startup loans, inventory factoring loans, and merchant advances to name a few.

National Funding accepts borrowers with bad credit or a thin credit profile to apply. The minimum credit score you’ll need for direct loans is 500, and if you’re renewing your loan, you only need a 475 credit score. Besides your credit score, National Funding reviews standard criteria when you apply, such as the length of time you’ve been in business and your annual revenue.

Biz2credit is a standout for our best for business insights category because it offers small business owners tools to assess their company’s creditworthiness and financial health.

Biz2Credit features three types of small business financing: working capital, term loans, and commercial real estate loans. The application can take a few minutes to complete, and approved loans can be funded quickly.

Biz2Credit’s business insights are particularly noteworthy. Its free BizAnalyzer looks at the data you provide through your account. Then, it provides an at-a-glance way to see how your small business’s financial health and creditworthiness stacks up against other businesses within your industry. It also offers tips on how you can boost your financial health.

Lendio earned a spot for our best startup loans because, unlike many of its competitors, the company requires that new businesses only need to be operating for six months before they are eligible for a loan. New businesses can receive up to $150,000 in financing.

Lendio serves as a middleman of sorts and works with over 75 lenders to match you with business funding that’s the best fit for your needs. Because Lendio works with so many lenders, it’s a one-stop shop for a number of loan types, including invoice factoring, business lines of credit, equipment financing and merchant cash advances.

Lendio offers a slew of funding options, so the terms and rates can vary. Merchant cash advances are available from $5,000 to $2 million, with a 1.20 invoice factoring rate. Startup loans are available in loan amounts up to $150,000, and the interest rates can be as high as 31%.

Lendio might be an especially good fit if your business needs only a small amount of money. The recommended credit score to apply is 680, and you’ll need a few years of personal tax returns in order to complete their application.

Small Business Loans Guide

How do small business loans work?

Small business loans provide funding to small business owners. This capital can be used to grow the business, cover payroll, buy new equipment, inventory or supplies, or cover day-to-day expenses.

Like personal loans, small business loans have minimum qualification requirements that vary by lender and loan type. In general, however, you will need to have a good credit score and, for some types of loans, property documentation to show that your business is eligible.

Types of small business loans

Commercial real estate loans

Commercial real estate loans (CRE) can be used to purchase or renovate commercial real estate with the intention of generating revenue. Examples of such properties are warehouse space, retail space, office buildings, and hotels. CRE loans are typically more expensive than residential loans, and a lien is placed on the commercial property to secure the loan.

Invoice factoring

Also known as accounts receivable financing, invoice factoring is a type of financing where the small business sells outstanding customer invoices to the lender at a discount. The lender, or factoring company, offers a percentage (say 90%) of the total outstanding amount. It is then tasked with collecting payment from the business’s customers, which is applied against the borrower’s outstanding balance.

Equipment loans

Equipment loans are a type of commercial loan where you can buy or rent equipment and machinery necessary to run your small business. While you don’t pay anything upfront, the loan is backed up by the equipment, which serves as collateral.

Business lines of credit

Business lines of credit are revolving loans. Similar to a credit card, this means that you’re given a credit limit. Once you pay back what you owe, your funds are replenished. For example, if you have a $20,000 business line of credit, and use $5,000, your credit limit goes down to $15,000. Once you repay the $5,000, your credit limit will increase to $20,000. You’ll pay interest on what you borrow.

Term loans

Business term loans are a type of installment loan. You’ll be given a lump sum up front, and you’ll repay the loan in set intervals over a predetermined amount of time. These might be weekly or monthly payments. Term loans usually have a flat fee or fixed interest rate.

Merchant cash advances

A merchant cash advance enables you to get a lump sum upfront for a percentage of your future debit and credit card sales. While you can get same-day funding, MCA rates can be extremely high. Further, repayment schedules are aggressive, and typically need to be made daily or weekly.

SBA loans and how they work

​​The Small Business Administration (SBA) backs traditional bank loans for small businesses by covering a portion of the loan if the borrower defaults. In that case, the SBA will cover up to 85% of the loss. Since SBA loans are less risky for lenders, rates for SBA-backed loans are usually more competitive and might feature more attractive terms.

For example, during the pandemic, the SBA extended a number of relief programs to help small businesses affected by COVID-19. For example, the Payment Protection Program (PPP loan) and the Economic Injury Disaster Loan (EIDL) were two such programs that opened up loans to businesses that typically wouldn’t qualify. The SBA does not loan money directly to small businesses unless they are located in a declared disaster area. Instead, the SBA sets lending guidelines for the lenders it partners with, including banks, community organizations and microlenders. Applications are submitted to the lender, who also is tasked with closing the loan and disbursing loan proceeds. The SBA’s job is to review applications to make sure the small business meets credit and eligibility requirements.

Difference between SBA loans and other types of loans

Small business loans guaranteed by the SBA typically have lower interest rates and fees, longer repayment terms, and flexible lending requirements. In some cases, SBA loans do not require collateral. However, it may take up to three months for you to receive an SBA-backed loan.The SBA guarantees loans for amounts up to $5 million, with annual percentage rates ranging from 2.231% to 11.25%, depending on the loan program. SBA loans are a solid fit for long-term investments, buying real estate or equipment, purchasing other businesses and refinancing existing loans.

Types of SBA loans

SBA 7(a) loans: This is the SBA’s most common loan program. The loan amount is capped at $5 million. The funding can be used toward short- and long-term working capital, to purchase supplies and furniture, and to refinance existing business debt. SBA 7(a) loans are typically a solid option when real estate is part of the business purchase.

Real estate and equipment loans (CDC/504): SBA 504 loans are a fixed-rate, long-term financing option. These loans are available through Certified Development Companies (CDC) and can be used for fixed major assets that help with job creation and the growth of a small business. The maximum loan amount is $5 million.

Microloans: The SBA offers microloans up to $50,000 to help small business owners start or grow their businesses. The average microloan administered is $13,000, and these loans are available through non-profit community organizations.

Disaster loans: SBA disaster loans are low-interest loans for eligible small businesses in declared disaster areas. The loan proceeds can go toward repairing or replacing real estate, machinery and equipment, inventory and business assets and personal property.

How to get a small business loan

1. Compare interest rates

Do your homework and compare rates from different lenders. Revolving loans, business credit cards, accounts receivable financing and merchant cash advances can bear higher interest rates than other business financing options. What’s more, non-bank online lenders usually have significantly higher rates than banks.

2. Look into fees

Beyond interest rates, take a close look at any fees the lender might have. These fees might include funding, underwriting, opening, closing, late payment, prepayment, service, guarantee, maintenance, and insufficient funds fee.

While most lenders do charge an origination fee, they might waive prepayment penalties and closing fees. SBA loans might have different fees than other small business loans, and are dropping fees on specific government-guarantee loans through September 2022. Each lender is different, so research the fees that are specific to the lender, and reach out to their customer support team with any questions.

3. Prepare to apply

To be eligible for a small business loan, you typically need a good business or personal credit score (some lenders have a minimum credit requirement, and scores of 660 and above are preferred), and having a business checking account is required for certain types of loans. Lenders typically have minimum annual revenue requirements and will look at the age of your business and your credit score.

You’ll also typically need to provide legal, financial, and business documentation:

• ​​Loan application form
• Social Security number, tax ID or EIN
• Business history and business plan
• Financial statements (i.e., profit and loss statements, balance sheet)
• Business and personal credit report
• Personal and business tax returns
• Bank statements
• Accounts receivable and accounts payable
• Collateral in the form of business or personal assets
• Legal documents such as articles of incorporation

Where to get a small business loan

Small business loans are available through a financial institution such as a bank, credit union or community bank, or through an online lender. As mentioned, financial institutions typically offer more competitive rates than online lenders, but online lenders tend to offer speedier funding times and a quicker application process.

Another lending option that’s growing in popularity for small businesses is peer-to-peer (P2P) lending. P2P loans cut out the middle man (i.e., banks) and are funded by individual investors versus lending institutions.

Business credit versus Personal credit

When applying for a small business loan, lenders will look at both your business credit score as well as your personal business score. While both help lenders gauge your creditworthiness, or your ability to pay back the loan, there are some major differences between the two.

For personal credit, your FICO credit score can range from 300 to 850. Your business credit score can range from 0 to 100. The major credit bureaus for consumer credit are Equifax, TransUnion, and Experian, while the major business credit reporting agencies are Equifax, Experian, and Dun & Bradstreet.

The five major factors that determine credit business scores are:

• Payment history
• Age of credit history
• Debt and debt usage
• Industry risk
• Company size

The five major factors that determine personal credit scores are:

• Payment history
• Amounts owed
• Age of credit
• Credit mix
• New credit

Lenders will look at your credit history and each lender has different credit score requirements. To qualify for the best rates and terms on your small business loan, you’ll need a strong credit score.

How We Chose the Best Small Business Lenders

Here are the most important factors we considered as we compiled this list of the best small business loans and lenders for 2022.

• Easy application process. We looked for lenders offering a quick, simple online application, especially those offering same-day approval.
• Fast funding times. Our top lenders provide funding in as little as 24 hours and as much as three days after approval.
• Flexible qualification requirements. Lenders accepting credit scores around 660 or below, between 6 and 12 months in business and annual revenue of less than $200,000 were ranked higher.
• Variety of funding options and high loan amounts. With few exceptions, we favored lenders offering a wide swath of funding options and higher-than-average loan amounts.

Summary of the Best Small Business Lenders

• BlueVine: Best for Lines of Credit
• OnDeck: Best for Multiple Loans
• Fundbox: Best for Cash Flow Predictions
• National Funding: Best for Borrowers with Bad Credit
• Biz2credit: Best for Business Insights
• Lendio: Best for Startup Loans