COVID-19 has disrupted virtually every industry and business imaginable. While some impacts have been costly and too much for a company, others have found a way to thrive in this tumultuous environment. One impact felt is the increasing number of small businesses. And the more small businesses are created, the greater the need for the best small business loans.
Finding the best business loans and small business lenders is similar to the experience you likely had when shopping for a mortgage or personal loan. Each product has its unique advantage in the market, and some may be a better fit for your business needs than others. The only way to find this out for sure is to shop around.
We’ve taken a little bit of the guesswork out of it for you to compare the features and companies for the best small business loans on the market. These companies are part of the growing segment of online lenders versus the traditional mega-sized financial institutions we’re used to dealing with.
Whether you’ve recently opened your own company or you’ve been in business for years, knowing the details and differences in various loan options are guaranteed to be a wise business decision on your part.
Another aspect of small business loans that makes them similar to mortgages is the variety of products available. Small business financing is possible through several methods, and some of the most common types include:
Lines of credit: For short-term funding, a business can have access to a revolving line of credit to use towards business expenses. These are considered unsecured business loans, so you do not need any collateral to secure funding. You do, however, need a good credit score, both personal and business credit score.
Term loans: These loans provide businesses with a lump sum of cash upfront, usually used to purchase fixed assets, such as equipment. The repayment is spread out over a defined period, from months to years. Collateral is needed, and many lenders require a down payment too.
Small Business Administration (SBA) loans: These are federally backed business loans with various available programs. There are generally small business loans for small, short-term loans, such as the 7(a), microloan program. Plus, there are loans available for real estate, equipment needs, and recovery from disasters.
Invoice factoring: These loans provide cash from the lender based on the outstanding invoices from your current small business customers.
Overview of the best small business loan providers
Business loan provider
You have outstanding invoices from clients and need access to cash
You need access to a line of credit or term loans fast
Full range of funding options
Comparing multiple lenders, products, and options at once
Commercial real estate needs
Businesses with bad credit
Microloans and crowdsourcing
American Express customers who need a line of credit
A super-quick funding process
The best small business loan providers
Founded in 2013, BlueVine specializes in servicing small business owners. It is a financial technology company (FinTech) and does not fall under the traditional bank category. It also does not offer the conventional loan but does have options for a business to access cash. It works with companies across the country and has three brick-and-mortar locations in Louisiana, New Jersey, and California.
Lines of credit are offered for up to $250,000, while invoice factoring is up to $5,000,000. BlueVine also submits approval decisions to you within 24 hours of an application.
Invoice factoring is available to businesses at least three months old with at least a 530 FICO, $10,000 in monthly revenue, and considered a Business to Business (B2B) company. For lines of credit, your business must be at least six months old, and it must have a minimum 600 FICO score.
OnDeck, formed in 2006, specializes in lending for small businesses. It offers various options for small businesses, including lines of credit and term loans. The lines of credit are designed to be flexible to meet the needs of irregular cash flow. Amounts start at $6,000 and increase up to $100,000. The revolving business lines of credit allow you to access the cash when you need it, and then the business is subject to a 12-month repayment period.
Term loans from OnDeck are available to infuse capital into your business and give you an 18-month repayment term. Both products require a minimum 600 FICO score and annual revenue of at least $100,000. Plus you need to be in business for at least one year before applying.
If speed is the name of the game for you, your business may receive the funding the same business day you submit your application.
Funding Circle is an online lending option founded 10 years ago. It specializes in small business funding options and has connected more than 100,000 small businesses to over $15 billion in funds. It offers three major loan products: business lines of credit, business term loan, and the SBA(7)a loan.
The business line of credit allows you to borrow money whenever you need it, withdraw fees of .6% to 2.5%. Term loans are offered from $5,000 to $500,000, with repayment terms from 3 months to 10 years. It typically has higher interest rates but can be used for almost anything your business needs.
The SBA(7)a loan is a federally backed loan with a flat 6% interest rate (as of this writing). You can borrow $25,000 and up to $500,000. Repayment terms are set at up to ten years. Your business must be established for at least two years, so this wouldn’t be a good option for a startup. You also need a minimum annual revenue of $400,000 and a 650 FICO score for eligibility.
Fundbox was established in 2013 as another AI-powered financial company focused exclusively on small businesses. Since its founding, it has released over $2.5 billion in lending to over 325,000 businesses.
One of the most significant advantages with Fundbox is a $0 origination fee with the term loans. Plus, you won’t have to deal with any prepayment penalties. Term loans are available for up to $150,000, and you choose from a 24- or 52-week repayment term. You should also note this is still in beta testing mode, so the term loans may not be available for all applicants.
The business line of credit offers credit for up to $150,000, but repayment begins at 12 weeks. You need a 600+ FICO score, have been in business for at least 6 months, and annual revenue of at least $100,000 to qualify.
Lendio is a marketplace for small businesses that are applying for funding and credit. The company exists to get funding into the hands of business owners, especially where traditional bank loans fall short. Lendio connects business owners to over 75 lenders once your application is submitted. Since its inception, the company has helped connect over $12 billion in funding through over 300,000 small business loans.
Lendio suggests a minimum credit score of 650 and that a business has been in place for 12 months. However, it offers invoice factoring in the event your credit isn't quite to par. Since Lendio puts your application into the marketplace with multiple lenders, it also means you have access to an extensive range of financial products. Lendio can connect your business with lenders for credit cards, business lines of credit, small business loans, short-term loans, business term loans, cash advances, and equipment financing.
Lendio has access to startup loans, commercial mortgages, and business acquisition loans if none of those products suit your needs. Whatever financial solution you are looking for, chances are Lendio can help connect you with an option.
Similar to Lendio, Biz2Credit connects business owners with lenders and various loan options. The company was founded in 2007 and processed loans for over 225,000 businesses and over $7 billion in funding.
Funding options range from $25,000 up to $6 million with Biz2Credit. The three major loan products Biz2Credit offers are working capital loans, term loans, and commercial real estate loan options. It also provides resources for the Paycheck Protection Program (PPP) and the PPP loans.
Biz2Credit working capital loans provide funding from $25,000 to $2 million. These are designed to be paid back as you receive revenue from business receipts. Term loans are for funding from $25,000 to $250,000, and there are various term lengths available from 12 to 36 months. The same is true for Commercial Real Estate loans, but the minimum loan amount is $250,000, and the maximum is $6 million.
Biz2Credit also offers numerous services and matching for funding, such as access to lawyers, CPAs, and financial analysis tools. There is even access to business document storage through the company.
Since National Funding was founded, it has worked with over 50,000 businesses and funded over $3 billion to businesses. The company offers three major loan products: small business loans, equipment financing and leasing, and loans for businesses with bad credit.
Under the small business loan program, National Funding has several unique programs tailored to various industries. Loan programs range from commercial trucking to beauty and wellness center loans.
If you’re worried about your credit score not meeting the credit score requirements for a business loan, National Funding has several options under this umbrella. This includes short-term loans, short-term lines of credit, collateralized loans, merchant cash advances, and working capital loans.
National Funding also provides up to $150,000 for equipment leasing and financing. To qualify, your business must have been established for at least six months, at least a 575 FICO score, and a quote from an equipment vendor.
Kiva is an entirely new concept with small business lending and would fall under the “alternative lenders” category. It was founded in 2005 as a non-profit and based in San Francisco but now has a global presence. Kiva offers microloans, where borrowers can ask for funding for various needs, including business needs, tuition, financial assistance, and multiple other applications.
Kiva works by soliciting donations from the public. Contributors can lend as little as $25, and Kiva then invests their money. For borrowers, applicants apply for funding through Kiva, and once it goes through the underwriting process, the loan is then crowdsourced.
Kiva works with borrowers across the globe and focuses on applicants who might not have access to lending and funding like other countries might have. All funding donated to Kiva goes directly to the loans for the borrowers.
Kabbage funding is a part of the American Express companies and currently has a waitlist unless you are already an American Express customer. Kabbage touts a quick application process, quick approval decision, and quick access to funding.
At this time, Kabbage only offers a line of credit for businesses. The credit line is from $1,000 to $150,000, and you only borrow as you need access to the credit. Each time you draw from the line, you have a 6-, 12-, or 18-month repayment period, depending on the terms of your agreement.
Another advantage of using Kabbage is access to business checking accounts and tools and the payment system's ability. You will be able to offer clients the option to pay an invoice online and with a credit card, so Kabbage ends up offering multiple options for your business needs, not simply a place to access funding.
As the name implies, Rapid Finance specializes in quick access to credit and loans. Funding may be available literally within hours of your loan approval. The difference between Rapid Finance and other companies is the variety of loan programs available to applicants. The financing options available include:
Small business loans
Merchant cash advance
Lines of credit
Commercial real estate
The product terms and conditions vary, but the lines of credit start at $5,000. Some loan products have as much as $10 million available for financing. You must have your business tax ID number (EIN) and at least three months of financial statements to get started with the application.
Working capital loans, term loans, commercial real estate loans
Up to $150,000
Multiple business loans including equipment financing and leasing
No set amounts
Loans for business use
$1,000 - $150,000
Lines of credit
$5,000 - $10 million
Variety of loan products
What is a “term loan” in the small business world of funding?
A term loan is simply a loan with a predetermined repayment period or a defined repayment timeline. Most business loans have 6-, 12-, 18-month repayment options, although some are as lengthy as 10 years.
Is my personal credit score used when I apply for a business loan?
Yes, in most cases, small business loans use the business owner’s personal credit score as a factor in determining creditworthiness. The need for a strong credit score never goes away, and it is true it follows you in the business world. Keeping your credit score as strong as possible will go a long way during the application process and helping you secure the funding you need for your small business.
The bottom line
Securing funding for your small business has never been easier with today’s online-only and non-profit lending options. Whether you’re looking for lower interest rates, low fees, or large lines of credit, borrowers today have more options than ever before. Shopping around and comparing multiple choices small business loan lenders can get you the funding fast, so you can experience the growth you’ve been looking for.
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