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Best Business Loans for 2021

By
Donna Fuscaldo
,
Business News Daily Staff
| Updated
Oct 12, 2021

Here are the best business loans and financing options available to small businesses. We highlight the best lenders for SBA loans, conventional loans, as well as the best alternative lenders.
Best for Flexible Terms
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Variety of loan types and terms
Best for Fast Funding
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Fast approval / same-day funding
Best for Marketplace Lending
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Several loan types available
Best for Short-Term Loans
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Array of loans with 15-month terms
Best for Customer Service
Noble Funding
Ongoing support provided
Here are the best business loans and financing options available to small businesses. We highlight the best lenders for SBA loans, conventional loans, as well as the best alternative lenders.

  • Alternative lenders provide fast funding, flexible terms and, in many cases, relaxed qualifications.
  • Your credit score, as well as other factors specific to your business, determines how much you can borrow, the type of loan you can get and the cost to you (i.e., interest rate, fees, etc.).
  • Whether you are startup or have been in business for years, there is a loan to suit your situation and needs. Business owners should select the lenders that are flexible about how you borrow money and repay it.
  • This guide is for small business owners seeking financing options besides traditional banks.

Unless you have stellar credit and have a booming business that's been around for a while, securing a traditional business loan can be tough. That's where alternative lenders can help. They are willing to work with borrowers that traditional banks often turn down for business financing. Alternative lenders offer a wide range of financing options, including working capital loans, merchant cash advances, equipment financing, invoice factoring and term loans. Many alternative lenders also make it easy to get financing, with online applications and same-day funding. To help you find the lender that's right for you, we researched a variety of options. Below are the ones we think are best for different types of loans and businesses.

 

Business Loan Provider Review Summary

Lenders considered 10
Minimum loan amount $300
Maximum loan amount $5 million
Minimum repayment terms 12 weeks

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Compare Our Best Picks

Lender Best for Loan amount Repayment terms Funding speed Minimum requirements
SBG Funding Flexible Terms Up to $5 million 6 months-5 years Same day $10,000 in monthly sales, 500 credit score, 6 months of business
Fora Financial Short-term loans $5,000-$500,000 Up to 15 months 72 hours $12,000 in monthly sales, decent credit score, no open bankruptcies 
Biz2Credit Marketplace lending $25,000-$250,000 12-36 months 72 hours $250,000 in annual sales, 660 credit score, 18 months in business
Rapid Finance Fast funding $5,000-$5 million Varies Same day 500 credit score, 3 months in business
Noble Funding Customer service $75,000-$3.5 million Varies 2-3 days 2 years positive net income, 500 credit score, 18 months in business
Balboa Capital Easy approval $5,000-$250,000 Up to 18 months Same day $300,000 in annual sales, 6 months in business, decent credit score
Crest Capital Equipment financing $5,000-$500,000 24-84 months Same day 24 months in business, 650 credit score
Fundbox Lines of credit Up to $150,000 12-24 weeks Next business day 24 months in business, 650 credit score
Accion Microloans $300-$150,000 Varies N/A $50,000 annual sales, decent credit score, 12 months in business
Truist SBA loans No limit Varies N/A Varies

Our Reviews

SBG Funding: Best Lender for Flexible Terms

SBG Funding provides fast funding on loans as high as $5 million.
Small business owners get favorable pricing and flexible terms on term loans, business lines of credit, and equipment and invoice financing.
SBG Funding requires you to provide a lot of documentation when applying for a loan. That may not be appealing to time-crunched business owners.
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Flexibility is important to small businesses. You don't want to be locked into a loan for a long time. You also don't want to scramble to find the cash to repay a loan in too short of a period. If you need short, medium or long-term funding, SBG Funding has an option for you. We like that terms for SBG Funding's loans can be a short as six months or as long as five years.

Editor's Score: 7.5/10

SBG Funding's flexibility doesn't end with its terms. You can borrow as much as $5 million, depending on the type of loan. That allows you to grow with this lender. You may need a $10,000 short-term loan to start but later need a loan to buy a $1 million piece of equipment. SBG Funding can support that growth with its loan products.

SBG Funding is also willing to work with borrowers who have had a credit issue. The company says it has an approval rating of 85% with its term loans. It can make a qualifying decision in 24 hours and can get funding to you the same day in some cases. SBG Funding requires documentation to approve the loan. That may dissuade some borrowers. But with competitive rates, flexible terms and loans of up to $5 million, it may be worth the effort, which is why SBG Funding is worth serious consideration if you are looking for a flexible lender.

Read SBG Funding Review

Rapid Finance: Best Lender for Fast Funding

Rapid Finance has an easy online application, quick approval times and same-day funding.
Rapid Finance offers a variety of loan options with flexible repayment terms.
If you have a low credit score, the interest rate Rapid Finance charges may cause the loan to be too expensive.
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Rapid Finance's merchant cash advances range from $5,000 to $250,000. You repay your loans by giving Rapid Finance a fixed percentage of future credit card transactions.

Editor's Score: 9.5/10

To apply with Rapid Finance, you'll need to provide a government-issued photo ID, a voided check from your business's checking account, the last three months of your company's bank account statements and the three most recent credit card processing statements. You can apply online or over the phone. Approval typically takes 24 hours, with funds available in three days.

Read Rapid Finance Review

Biz2Credit: Best for Marketplace Lending

Biz2Credit offers a variety of business financing options at competitive rates.
Its funding specialists match you with loans that best meet your needs.
Biz2Credit has tougher eligibility requirements than other lenders we considered.
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We selected Biz2Credit as the best for marketplace lending because this company has a long track record of arranging small business loans, and it works with a network of lending partners to find you the best financing option. Biz2Credit has funded more than $2 billion in small business loans. Through Biz2Credit's platform, you are matched with the financing products that meet your specific needs.

Editor's Score: 7.5/10

We like the variety of options that are available with Biz2Credit. You can apply for a term loan, a working capital loan or a commercial real estate loan. Rates start at 8.99% and depend on your credit score. The better your credit, the lower your interest rate will be.

Biz2Credit charges simple interest, which is another feature we like, something that isn't common among business lenders. Simple interest is calculated based on the principal balance each month. Compounding interest is calculated based on the principal balance plus any outstanding interest already accrued. Compounding interest tends to be more expensive.

To qualify for a loan with Biz2Credit, you need a credit score of at least 660 and sales of $250,000 per year. That could shut some borrowers out, but it allows the lender to provide competitive rates. Biz2Credit offers an additional discount if you connect your business checking account.

For small business owners who want to consider different borrowing options and not overpay for a loan, Biz2Credit stands out. It has a strong partner network, and it provides quick funding.

Read Biz2Credit Review

Fora Financial: Best Lender for Short-Term Loans

Fora Financial's terms last as long as 15 months, and loan amounts range from $5,000 to $500,000.
It does not require collateral, it offers flexible repayment terms and only requires three months of bank statements.
Fora Financial requires borrowers to have $12,000 in monthly revenue, which is a high hurdle for startups.
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We selected Fora Financial as our best pick for short-term loans because it offers flexible terms of up to 15 months, it has a quick and easy qualification process, and it can lend small businesses up to $500,000. We like that Fora Financial caps its terms at 15 months. That is shorter than other lenders, but you won't pay as much compounding interest. It also means you won't have to repay a loan long after it has lost its value. The lack of collateral required for Fora's short-term loans is a bonus, too. That is one less thing you have to worry about when applying for a loan. Fora Financial is one of the few lenders that doesn't charge additional fees. You pay the principal and interest, and that's it.

Editor's Score: 9.5/10

The lender's application process is quick and easy, which was another aspect we liked about Fora. It takes 24 hours to find out if you qualify, and Fora Financial can fund your account in 72 hours after you're approved. It's a longer wait time compared to other banks and lenders, but Fora Financial is willing to issue loans without collateral and for as much as $500,000.

Fora Financial has provided $2 billion in loans to more than 25,000 small businesses over the past decade. It offers competitive rates, quick approval times and short terms, making it a top contender for small business owners who want funding and want to pay it off very quickly.

Read Fora Financial Review

Noble Funding: Best Lender for Customer Service

Noble Funding has issued more than $500 million in small business loans, it has a good track record in the industry and has many positive customer reviews.
It offers a variety of loan types and terms to meet most small businesses' needs.
You need a credit score of 650 or higher to be eligible for one of its loans, which is higher than some of the other lenders we reviewed.

We selected Noble Funding as our best pick for customer service because this lender has a long track record of issuing loans to small businesses, it doesn't charge upfront fees, and it is willing to work with you to find the best loan product. We like that Noble Funding is focused on providing top-notch customer service and has the reviews and the ratings to back it up. Noble Funding has been accredited with the Better Business Bureau for 15 years and has an A+ rating. There are no negative reviews on the BBB and more than 100 positive reviews on Trustpilot. That's pretty impressive for an alternative lender. Some lenders charge excessive fees or provide less-than-stellar customer service. Borrowers are quick to note that in their reviews, which makes Noble Funding's glowing assessments stand out.

Editor's Score: 9.0/10

We also like that Noble Funding understands that not every loan product will work for every borrower. It is willing to analyze your needs and find them the best loan for your situation. That's a refreshing level of customer service that we like about Noble.

Noble Funding has been issuing small business loans since 2005, and, as a result, has a lot of experience and knowledge. The application is simple to complete, approval is fast, and Noble doesn't require collateral or personal guarantees for some of its loans. Further, Noble Funding has top-notch customer service, flexible terms and affordable pricing, Noble Funding is worth serious consideration.

Read Noble Funding Review

Balboa Capital Review: Best Lender for Easy Approval

If you have less-than-stellar credit, or you don't want to deal with a lengthy application process and burdensome paperwork requirements, Balboa Capital is for you.
This lender offers small business owners a variety of loans and flexible terms.
If you need a longer-term loan to cover a big purchase or expensive outlay, Balboa Capital isn't for you. Terms only last 18 months for its small business loans.

We selected BBalboa Capital as our best pick for easy approval because it makes it quick and easy to get business financing. When you work with this lender, you won't spend hours filling out a complex online application or scanning and submitting tons of documents. Balboa says it typically reaches a decision within an hour of receiving an application, and it provides same-day funding in some instances.

Editor's Score: 8.0/10

In addition to its easy application, Balboa stands out because of its underwriting process. To Balboa Capital, you are more than a credit score. It looks at your business's finances when approving a loan. You need annual revenue of $300,000 and at least one year in business to be eligible for a loan, which could shut some business owners out.

For its small business loans, you can borrow between $5,000 and $250,000, and pay it back in between three and 18 months. These loans make the most sense for business owners who need a bridge loan to purchase inventory or run a marketing campaign. Since terms on these loans are short, it is not a viable option to finance expensive purchases, like equipment. However, Balboa Capital offers equipment financing and lines of credit as well.

Reputation also matters, particularly in the business lending market. Some unscrupulous lenders tack on hidden fees and charge exorbitant rates for their loans. Balboa Capital isn't one of them. It has been in business for decades and is accredited by the Better Business Bureau since 1999.

Read Balboa Capital Review Review

Crest Capital: Best Lender for Equipment Financing

Crest Capital offers some of the most flexible equipment financing options, with terms ranging from 24 to 84 months.
This lender offers fast funding and will let you finance equipment from private sales.
Crest Capital charges an administration fee, which may not appeal to some small business owners.

We selected Crest Capital as our best pick for equipment financing because it offers 100% financing, flexible terms and loans up to $500,000. When financing equipment under $250,000, Crest Capital doesn't require a lot of paperwork, which is a huge positive. Typically, business owners purchase equipment when something breaks, or they need to expand their operations immediately. They don't want to go through a time-consuming, arduous process to get financing. If the equipment you want to finance costs more than $250,000, however, Crest Capital requires a lot of documentation to prove your creditworthiness.

Editor's Score: 7.0/10

Crest Capital is quick to approve loans and has same-day funding. It also offers a variety of financing agreements, more than many rival lenders. You can finance new and used equipment and apply for Section 179 qualified financing, which allows you to deduct some or all of the cost of the equipment.

Another reason we chose Crest Capital as the best equipment financing lender is its track record in the industry. Crest Capital has been providing small businesses with financing for decades. That experience is important. Financing can be complicated. You want to work with a lender that offers flexible payment terms and transparent pricing, and who knows what they are doing. You get that with Crest Capital, which is why it should be at the top of your list for equipment financing lenders.

Read Crest Capital Review

Fundbox: Best Lender for Line of Credit

With a Fundbox line of credit, you'll know exactly how much it will cost you before you draw any funds.
This lender provides lines of credit as high as $150,000, and can fund your account 24 hours after approving you.
To qualify for a line of credit, you need to be an established business bringing in at least $100,000 in sales, which may be difficult for some small business owners.

We recommend Fundbox as the best lender for lines of credit because it not only has competitive rates, but it is extremely transparent about its pricing. When you get a line of credit from Fundbox, you'll know exactly how much it will cost before you finalize the transaction. Not many lenders offer so much transparency. It enables you to make an informed decision.

Editor's Score: 6.5/10

Fundbox can extend up to $150,000 and has repayment terms of 12 or 24 weeks. That is shorter than other lenders, but that isn't necessarily a bad thing. A line of credit is not a term loan ‒ it's designed to provide working capital or peace of mind. If you need money to cover a pricey piece of equipment or a longer-term business expense, a term loan is the better option.

We also like that Fundbox makes it easy to pay back your line of credit by withdrawing the money from your bank account weekly. Some business owners may prefer monthly payments, but paying weekly means smaller chunks coming out of your cash flow. The lender also offers an easy online application and next-day funding. That's another reason we selected it as one of our best picks. Time is money. The sooner you can get the cash you need, the faster you can put it to work for you.

Fundbox's line of credit may not be for startups or those with limited sales. It has competitive rates, quick funding and very transparent pricing.

Read Fundbox Review

Accion: Best Lender for Microloans

You can borrow as little as $500 or as much as $150,000, plus Accion Opportunity Fund has flexible terms and competitive rates.
Accion is focused on underserved markets, including women- and minority-owned small businesses.
Accion requires a lot of documentation when underwriting a loan, which may not appeal to all business borrowers.

We selected Accion Opportunity Fund as our best pick for microloans because it is focused on working with underserved business borrowers and will extend loans for as little as $500. When you work with Accion, you get more than a small business loan. The nonprofit, which has served the small business community for more than two decades, offers educational resources, training, coaching and networking opportunities. We like that about this lender. When you are a small business starting out you can use all the help and advice you can get.

Editor's Score: 6.5/10

It's easy to apply for a loan from Accion; the lender boasts its application process takes 15 minutes. You can apply online, in person or by phone. You are then assigned a specialist who works with you to determine the best loan amount and terms for your business. We also like that Accion has relaxed qualifications. It's hard for new business owners to get funding, even if it's for a small amount. That is not an issue with Accion, which doesn't have a credit score requirement. You can be no more than 30 days late on any bills, loans and credit card payments. If there is a late balance of under 30 days, it has to be less than $3,000. You need to be in business for 12 months and have more than $50,000 in annual sales, which isn't a big hurdle for many small business owners to overcome.

Microloans can help businesses get off the ground, boost working capital or chase a growth opportunity. Accion Opportunity Fund makes it easy to get funding, even if you don't have a lot of sales or the best credit score, and should be on the top of your list for lenders specializing in microloans.

Read Accion Review

Truist Review: Best Lender for SBA Loans

Truist offers a variety of Small Business Administration loans with varying terms.
Truist is an SBA Preferred Lender and has years of experience helping small business owners get SBA loans.
Truist does not have an online application. You will need to visit a branch or apply over the phone.

We selected Truist as our best pick for SBA loans because this lender has years of experience issuing SBA loans and is willing to provide support for your business beyond supplying it with money. Truist, which is a preferred SBA lender, was created by the merger of SunTrust and BB&T Bank, two traditional banks that have been in business for years. The experience the two banks have in issuing SBA loans stood out to us. Applying for an SBA loan can be a complicated and document-heavy process. Approval and funding can take several weeks, and any mistakes with the application can delay it further. When you work with Truist, you get guidance throughout the application process to ensure your loan can be funded as quickly as possible.

Editor's Score: 6.0/10

Truist offers SBA 504, SBA 7(a) and SBA Express loans. Truist SBA loans offers lower down payments, longer terms and lower interest rates than other financing products. We also like that Truist provides short- and long-term loans and equipment financing. If you decide against an SBA loan, you have other options available to you with this lender. Truist also stood out because it has a team of advisors that can provide advice to help you run your business.

The process of applying for an SBA loan can be arduous. Truist makes the process easier. It knows the ins and outs of this type of funding and the mistakes that could delay processing your loan.

Read Truist Review Review

How to Choose the Best Loan for Your Business

Before your borrowing journey begins, you need to figure out how much you need, how soon, and for what. That helps you determine if you should take out a long-term loan or choose a quick financing option. When you need capital fast, it's easy to accept the first offer, giving little thought to interest, fees and the need for collateral. But that could leave you with an expensive loan you're ill-equipped to repay. 

Before you apply with any lenders, pore over all the terms and requirements. Check the interest rates and fees, then determine if the loan is an amount you can reasonably afford to pay back. Compare the interest rates and fees of various lenders until you find a rate that's best for you. 

Take time to understand the repayment terms, too. Do the terms, principal (the amount borrowed), and interest makes sense for you and your company? Will you be able to pay it back? Once you have a clearer understanding of the issues, you can start shopping for a business loan.

TipTip: Small business lenders cater to different types of borrowers and segments of the market. It's important that you shop around for a loan based on your business's needs.

What Type of Business Loan Is Best for Your Small Business?

There are a lot of options when it comes to business loans. The one that makes the most sense for you depends on your credit score, time in business and the amount of money you're looking to borrow. The speed in funding and the terms also vary from one product to the next. With that in mind, here's a look at the small business financing options available to you.

SBA Loans 

U.S. Small Business Administration loans are processed by lenders and banks. They are low-interest loans that are available to help owners expand their business (buy a business, land, or equipment) or recover after a natural disaster. The maximum amount of money you can receive from an SBA loan is $5 million.

There are four specific types of SBA loans:

  • SBA 7(a) loans are a good option for buying a business, working capital or buying equipment for your enterprise. You can borrow up to $5 million. SBA 7(a) loans feature a variable interest rate, which is tied to the prime rate. Collateral is required.

  • A 504 loan also has a cap of $5 million. Many business owners use a 504 loan to purchase machinery or land. SBA 504 loans cannot be used for working capital or inventory. Interest rates are typically fixed and are based on five and 10-year U.S. Treasury bond rates. No collateral is required.

  • SBA microloans can be used for working capital, and to purchase supplies, equipment or fixtures, and furniture. Rates vary from 8 to 13%. Loans are available from community-based nonprofits, and the maximum amount you can borrow is $50,000.

  • An SBA disaster loan offers borrowers up to $2 million. They are designed specifically for small business owners affected by natural disasters or global crises. According to the SBA, interest rates are fixed and are determined by legally established formulas (Rates typically range from 3% to 7%.)

Term Loans

With a term loan, you get a lump sum of money and are required to pay it back in installments over a set period of time. Term loans come with different repayment schedules depending on your business needs.

  • Long-term loans: These loans have terms of at least six years. They are typically used for big purchases, such as a company vehicle or property.
  • Medium-term loans: These loans have terms that range from two to five years and are commonly used to purchase business equipment or to fund expansion.
  • Short-term loans: These loans have terms of less than two years. They are typically used to purchase inventory, fill cash flow gaps for working capital or meet other short-term cash needs.

Lines of Credit

Lines of credit or LOCs provide business owners with quick access to capital. There are no rules for what the money can be used for, and you only pay interest on the money you drawdown. The loan size and interest rate are determined by the lender. Many LOC loans have qualification requirements such as a minimum annual revenue, how long your company has been in business and minimum credit scores of 500 or higher.

Merchant Cash Advance

With this type of loan, the lender offers merchants an advance in exchange for future credit card sales. You get access to cash quickly and are required to pay it back daily via a percentage of your credit card sales. 

Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a loan from another business owner or individual investor interested in financing your business. This cuts out the need for banks. These types of loans have drawbacks and are not allowed in all states. 

Unsecured and Secured Loans

An unsecured loan doesn't require you to put up collateral. However, you must have good credit to qualify. A secured loan requires collateral, which may be an asset, a piece of equipment, accounts receivable or real estate property. 

Equipment Financing

This occurs when a business owner takes out a loan to pay for equipment. The collateral is the equipment you are financing. Most business owners can get approved given the collateral component. 

Invoice Financing

With invoice financing, business owners get an advance on unpaid invoices. It's often referred to as accounts receivable financing. Invoicing companies advance you as much as 85% of the value of your unpaid invoices. You receive the final 15%, minus any fees when the invoices are paid off.

Alternative Loans

Alternative lenders are non-bank lenders that provide loans to business borrowers. They are typically more flexible than banks and have a quicker application process and funding time. The requirements to get approved are usually more relaxed than those of a bank. Any financing outside of a bank is considered an alternative loan.

Did you know?Did you know? Business owners have a lot of options when it comes to accessing capital, all with varying costs and terms. SBA loans, term loans, lines of credit, equipment financing and alternative lending are among the popular ones.

Key Aspects to Pay Attention to When Shopping for a Business Loan

When seeking a loan, understanding the ins and outs of the lending process, the lender's qualification requirements and the terms of your loan is vital to securing the capital you need without compromising your business's future.  As you compare various lenders, pay attention to the following elements.

Loan Application Ease

As you evaluate lenders, ask how long or detailed the application process is. Your lender will collect information, such as how much income your business generates and the debts you have. That information is used to assess your ability to pay back the loan. Some lenders require a lot of paperwork, while others don't, depending on the loan size and length. If you need money quickly, select a lender that offers an online application and relaxed requirements about the documentation you need to provide. You can speed the approval process by having certain documents ready, including your business's tax returns, bank statements, financials and articles of incorporation, franchise agreements, etc. 

Interest Rate

Small business loans accrue interest, which is the price you pay for a loan. Rates can be fixed or fluctuate (variable). Generally, alternative lenders offer a fixed interest rate. Your interest rate will vary depending on the lender you partner with, your business's financials, credit score, years in business and your personal financial history. It is important to weigh the cost of the loan against the benefits of borrowing. If it does not make sense, seek a lower-cost alternative.

Rules and Requirements

Lenders charge business borrowers money to access capital. That includes interest, an origination fee, and other charges, such as maintenance and late payments. Pay attention to the annual percentage rate or APR. That tells you the full cost of the loan, including fees. The size of the loan also impacts how much interest you'll pay. The loan term is the amount of time you have to pay back the loan. Terms can range from as short as a few weeks to as long as several years. 

Qualifying Criteria

Depending on the type of loan and lender, the qualifications for approval will vary. Most lenders look at your business and/or personal credit score, years in business, annual sales and your business plan. Lenders don't want to lose money and will scrutinize you and your business to ensure you are capable of repaying the loan.  

Collateral

Collateral is an asset you pledge to get, or secure, your loan. If you can't pay the loan back, the collateral is forfeited to the lender. Collateral can be your building (if you own it), equipment, accounts receivables, property or something else of value. Lenders that offer secured loans require the business owner to put up a certain amount of collateral. Unsecured loans do not require collateral. Many lenders also require a personal guarantee, which is a binding legal document in which you pledge to personally pay back the loan if your business can't. If the debt is nondischargeable and you file personal bankruptcy, you're still obligated to repay the loan.

Funding Speed

It is important to know when you'll have the funds in your bank account. Knowing this upfront helps you plan accordingly so you don't face a cash crunch for payroll or other business operating expenses. Some alternative lenders can fund your loan the same day you're approved, while others take a few business days.   

Paperwork

Some lenders require you to provide additional documentation, like tax returns, photo ID, bank and credit processing statements or a voided check. Each lender has specific requirements.  

Key TakeawayKey takeaway: There is a lot to consider when applying for a small business loan, from the cost of the loan to the terms. The more information you have before you begin shopping for a loan, the better prepared you will be to make a good choice.

COVID-19's Impact on Business Loans

The COVID-19 pandemic is having a big impact on the small business lending market. Many small businesses have permanently closed. In the early days of the pandemic, the government passed the CARES Act, a $3 trillion aid package targeting small business owners. The Paycheck Protection Program was born out of that legislation, providing business owners with forgivable loans if they kept staff on their payroll. It proved to be a huge lifeline but quickly ran out. Economic Injury Disaster Loans (EIDL) are another option; these are low-interest loans you pay back over 30 years.

To encourage more business owners to take advantage of the EIDL program, the White House recently raised the cap on the amount small businesses can borrow to $2 million, up from $500,000. Small business owners have to act soon to take advantage of these low-cost, long-term, small business loans. The program expires at the end of the year.

Business Loan FAQs

What business loans are the easiest to be approved for? 

The answer to this question depends on how much you need and how you intend to use the funds. Many lenders have minimum qualification requirements for annual revenue, time in business and the business owner's personal credit score. This is helpful for startups without a financial history that cannot meet the requirements lenders have for more established organizations. Be sure to read our reviews to see which lenders have less-onerous eligibility requirements.

Do you need to provide a personal guarantee if you're a startup? 

If the loan you're considering is unsecured (no collateral is required), more often than not, you'll need to provide a personal guarantee. This is the case for most startup loans, because this is how lenders protect themselves if you're unable to repay the loan.

Will lenders look at my personal credit?

If you are a startup, there isn't a financial history for your company. Rather than evaluate your business's credit, lenders check your personal credit. This is common, especially for new business owners. Sometimes, looking at your personal credit is the only option lenders have.

How important is your credit score when you're applying for a small business loan?

Your credit profile has a significant impact on whether you'll be approved for a small business loan or not. Unless your business has been around long enough to establish a history of good credit, lenders look at your personal credit profile to assess your creditworthiness. The higher your credit score, the better. Many lenders also require collateral to underwrite the loan. It could be your home, car or other private property of value. If your business fails to pay back the loan, the lender can come after that collateral.

What credit score is necessary to qualify for a small business loan?

The minimum credit score you need to qualify for a business loan ranges from 500 to 640 or more. However, the requirements are based on the type of loan you're seeking and your lender. For an SBA 7(a) loan or SBA Express loan, borrowers need a score of 640 or more. If you're interested in the SBA CAPLines program or an SBA export loan, you need a credit score of at least 660. SBA CDC/504 loans require a minimum score of 680, and for an SBA microloan, a score of 620 to 640 is preferred. Online lenders often have more flexible requirements. Some provide loans to those who have credit scores between 500 and 550. However, if your credit score is that low, you will likely pay higher interest rates.

Can borrowers with bad credit get approved for a business loan?

It can be hard, but it's not impossible. Some lenders don't use your credit score as a determining factor in whether you qualify for a business loan or not. Some weigh your financial history and business success more than your credit score.  If your credit score isn't great, shore up other parts of your business value, such as revenue or sales. 

Does applying for a business loan affect your personal credit score?

Often, to be approved for a small business loan, you must personally guarantee the debt, meaning you will pay back the loan yourself if your company doesn't. The lender has every right to go after you individually if the loan is delinquent, and that could hurt your personal credit score. The same applies to a business line of credit. If you personally guarantee any loan and the business is unable to repay it, you are on the hook for it.

Is there specific documentation required to get approved for a small business loan?

Among the documents you'll need to provide lenders with are your annual business revenue and profit, bank statements, personal and business tax returns, a business plan, business licenses and permits, proof of collateral, a balance sheet, a copy of your commercial lease, and any legal contracts and agreements you already have in place.

What is the fastest and easiest way to get a business loan?

The traditional way of borrowing money has been to apply at a local bank or credit union, but this route can take weeks before your business is approved and funded. Online lenders tend to do a better job in this regard, getting loans into business owners' hands in days or hours.

Alternative lenders typically offer several loan options, including working capital loans, merchant cash advances, equipment financing, term loans and invoice factoring. Depending on the type of loan you want, you could have money in your bank account in less than 24 hours.

Whichever option you go with ‒ a traditional lender or an alternative lender ‒ you can speed the approval process by having your business documentation ready, including tax forms, bank statements, financials and other documents related to your enterprise.

What are some assets business owners can use as collateral for a loan?

Lenders vary about the collateral they'll accept, but in general, anything valuable can be used. Common types of collateral for business loans are equipment, vehicles, real estate, inventory and accounts receivables. Some lenders may require you to offer personal collateral not tied to your business. This could include vehicles, real estate and cash in the bank.

What are typical business loan terms?

There are several types of business loans, all with varying terms. Business loan terms can be as short as a few weeks or as long as 25 years. A traditional bank loan has terms from three to 10 years. Medium-term business loans last one to five years, while short-term business loans are typically three to 18 months in length. SBA small business loans have terms up to 25 years, but 10-year loans are more common.

What payback terms can you get for a merchant cash advance?

A merchant cash advance gives you quick access to the money from your credit card sales. However, it's a costly and risky way to access cash, with complicated terms.

With a merchant cash advance, you get an upfront payout and pay it back with a percentage of your future credit card and debit card sales, or you can make daily or weekly fixed payments. Either way, you make payments, plus fees and interest, until you've paid back the advance. The lender assesses how likely and able you are to pay back the advance, which impacts the fees you'll pay; your riskiness to the lender is known as the factor rate. The higher your factor rate (i.e., the greater risk the lender determines you to be), the more fees you're on the hook for.

Where can I apply for an SBA loan?

You can DIY by searching for lenders who are approved by the SBA. Armed with that list, you can comparison shop and apply directly on the lenders' websites or through their mobile apps.

Another, easier, option is to use the SBA's Lender Match tool, which connects borrowers with SBA lenders. You answer a series of questions, which the SBA says takes five minutes, and two days later you'll receive an email with offers from lenders. It is up to you to pick the lender, but once you've settled on one, you apply directly with them. (The SBA's Lender Match tool is not for its disaster relief loans and assistance.)

What is a business installment loan, and why would I need one?

An installment loan is financing that you use to pay for equipment or property over a set period of time. Unlike a credit card, where you have a revolving line of credit, your payments are fixed over the term of the loan. Once you pay it off, the debt is settled. Interest rates on installment loans are typically lower than credit card interest rates, but there's more risk. If you can't pay back the loan, the lender claims your collateral.

Installment loans are common for purchasing property, expensive equipment, business vehicles or other high-priced items. You can also use an installment loan for funding your startup. If you want it for this purpose, you'll need good credit, collateral, a sound business plan and a willingness to sign a personal guarantee.

What is a business line of credit, and how does it work?

A business line of credit is a revolving loan that business owners tap as they need funds to grow and/or fill cash-flow gaps.

Instead of getting a lump sum and paying interest on the full amount, you pay interest on the money you draw from the line of credit. Typically, a line of credit ranges from $1,000 to $250,000, though some lenders may issue higher amounts. Most lines of credit have a variable interest rate, which means the amount you pay changes depending on the prevailing interest rate.

A business line of credit can be secured or unsecured. With a secured line of credit, you need to provide collateral.

With an unsecured line of credit, you don't have to provide collateral, but you may need to sign a personal guarantee. [Read related article: Should You Get an Unsecured Business Loan for Your Small Business?]

Which bank is best for small business loans?

For small business owners with a strong credit score, a well-established and growing business, and valuable collateral, a bank loan is often the best option. Interest rates tend to be lower with a bank. Sure, it may take longer to get the cash, but it's cheaper than using an alternative lender. If you are applying through a bank, the best first place to try is your local bank. They already know you and your business and will be more inclined to offer favorable terms to an existing customer than a stranger.

Online lenders vs. traditional banks: Which one is better?

We recommend that you assess how much money you need to borrow and for how long. You don't want to take out a long-term loan for a short-term cash-flow problem. Nor do you want to wait weeks for funding that you needed yesterday. If fast funding is your priority, an online lender is the better option. The same goes for your credit profile. If you have less-than-perfect credit, you'll do better with an online lender versus a bank. If you care about the cost of borrowing above all other considerations and are in good financial standing, choose a bank. 

What to Expect in 2021

Small businesses are starting to turn the corner from a pandemic that forced companies to pivot into new markets and adopt online business models. Government aid, widespread vaccinations and easing shutdown restrictions mean increased sales for small business owners in 2021. To prepare for a post-pandemic growth period, many small business owners will seek funding. Alternative lenders are ready to meet that demand.

Business owners who tap online and alternative lenders in 2021 will not only receive lower interest rates than in the past, but advances in technology will improve the process. Artificial intelligence and machine learning are reducing loan approval wait times and increasing the speed with which funds are deposited into business owners' bank accounts. Credit scores still matter, but lenders are increasingly scrutinizing other aspects of a business owner's finances to ascertain their creditworthiness. Altogether, these changes are designed to make it easier and faster to get a small business loan in 2021.

The number of companies that offer online and mobile lending is expected to grow. Since digital options provide extensive financing opportunities and faster approval, they are expected to be increasingly popular choices compared to traditional banks and credit unions.

September 2021: Aiming to increase transparency in small business lending, the Consumer Financial Protection Bureau (CFPB) proposed a new rule that requires lenders to collect more data about borrowers. The CFPB wants to know the demographics of the borrowers, how much they are paying for small business loans, and why they were rejected. The consumer watchdog agency is aiming to gauge how easy it is for small business owners to get a loan and what roadblocks they face. 

August 2021: The SBA is making it easier for small business owners with PPP loans of $150,000 or less to get their loan forgiven. It just launched an online portal that bypasses the banks, speeding up the process. Once registered, the application process is a simple that has you find your loan based on your EIN or Social Security Number and your loan amount. You are then able to upload gross receipts for 2019 and 2020 and enter how much money was spent on payroll. Once completed and electronically signed, the SBA will review and confirm or deny forgiveness.

July 2021: To speed up the forgiveness process of the PPP loans, the SBA is getting rid of a requirement for borrowers with loans of $2 million or more. For several months, those borrowers had to provide the SBA with proof there was a financial need for the PPP loan. Now that that documentation is no longer needed, it is expected that the time it takes to get borrowers off the hook for their PPP loans will be sped up.

June 2021: Online and mobile lenders are expected to play a larger role now that the Paycheck Protection Program  has ended. Enacted during the pandemic, the PPP gave small business owners forgivable loans and proved to be a huge lifeline for many small companies. Under the program, the SBA issued close to $800 billion in loans to 11.8 million businesses. Now that PPP loans are no longer available, small business owners will seek funding from banks and alternative lenders. We expect to see an increase in online lending as small businesses can no longer readily receive government-backed loans.

 

 

Our Methodology

To help you find the right business loan, we researched and analyzed dozens of options. Here is a roundup of our 2021 best picks, followed by an explanation of how we chose them.

Locating the Best Services

We asked small business owners which lenders they have used and would recommend to others. To this list, we added lenders on our current vendor list, those who had reached out to us asking to be reviewed, plus others we learned about as we researched this topic.

Choosing the Best Services

After preliminary investigation, including a look at other best-pick lists, Better Business Bureau ratings, and initial research into each lender, we whittled the list down. After several rounds of research and other considerations, we arrived at a shortlist of companies to research further.

Researching Each Service

Next, we researched each lender, investigating the types of loans it offers, the amount of money that can be borrowed, the loan term, the application and approval process, and repayment process. We contacted each lender by phone and live chat (if this option was possible) and posed as business owners to gauge the support each company offers.

Our Best Picks

Ultimately, we settled on 10 best picks: SBG Funding, Fora Financial, Biz2Credit, Rapid Finance, Noble Funding, Balboa Capital, Crest Capital, Fundbox, Accion and Truist.

Donna Fuscaldo
Donna Fuscaldo
Business News Daily Staff
Donna Fuscaldo is a senior finance writer at business.com and has more than two decades of experience writing about business borrowing, funding, and investing for publications including the Wall Street Journal, Dow Jones Newswires, Bankrate, Investopedia, Motley Fool, and Foxbusiness.com. Most recently she was a senior contributor at Forbes covering the intersection of money and technology before joining business.com. Donna has carved out a name for herself in the finance and small business markets, writing hundreds of business articles offering advice, insightful analysis, and groundbreaking coverage. Her areas of focus at business.com include business loans, accounting, and retirement benefits.
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