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Best Business Loans for 2023

By
Max Freedman
,
Business News Daily Contributing Writer
| Updated
Jan 30, 2023

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 Marketplace Lending
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Variety of loan types and terms
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Funding specialists included
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Network of lending partners
Best for Line of Credit
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Transparent pricing and terms
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Fast approval and funding
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Apply via accounting software
Best for Flexible Terms
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Variety of loan types and terms
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High approval rate
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Fast funding for large loans
Best for Fast Funding
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Variety of loan types and terms
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Approval within hours
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Same-day funding
Best for Short-Term Loans
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Array of loans with 15-month terms
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Fast approval and funding
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No personal guarantee or collateral
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.

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

Unless you have stellar credit and 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. These lenders are typically 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.

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Compare Our Best Picks

Lender Editor’s Score Best for Loan amount Repayment terms Funding speed Minimum requirements
Biz2Credit 75/100 Marketplace lending Up to $6 million 12 to 36 months 72 hours $250,000 in annual sales, 660 credit score, 18 months in business
SBG Funding 95/100 Flexible terms Up to $10 million Six months to 10 years 24 to 72 hours $10,000 in monthly sales, 500 credit score, six months in business
Rapid Finance 95/100 Fast funding $5,000-$5.5 million Varies Same day 500 credit score, 3 months in business
Noble Funding 90/100 Customer service $50,000-$30 million Varies 2-3 days $250,000 in annual revenue, no bankruptcies or liens on assets, at least 51% ownership stake; for some loan products, 650 credit score and 18 months in business
Fora Financial 85/100 Short-term loans $5,000-$1.4 million Up to 15 months 72 hours $12,000 in monthly sales, 500 credit score, six months in business, no open bankruptcies
Businessloans.com 80/100 Comparing loan options $5,001 to $3 million Five to 20 years 24 hours to one week $100,000 in annual revenue, no minimum credit score, one to six months in business
Balboa Capital 80/100 Easy approval $5,000-$250,000 Three to 24 months Same day $300,000 in annual sales, 620 credit score, one year in business
Crest Capital 70/100 Equipment financing $5,000-$1 million 24 to 84 months Same day 24 months in business, 650 credit score
Fundbox 65/100 Lines of credit Up to $150,000 12 to 24 weeks Next business day $100,000 in annual revenue, 600 credit score, six months in business
Accion 65/100 Microloans $500-$100,000 Varies N/A $50,000 annual sales, decent credit score, 12 months in business

Our Reviews

Biz2Credit: Best for Marketplace Lending

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Biz2Credit offers a variety of business financing options at competitive rates.
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Its funding specialists match you with loans that best meet your needs.
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Biz2Credit has tougher eligibility requirements than other lenders we considered.
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We selected Biz2Credit as the best for marketplace lending because the company has a long track record of arranging small business loans and works with a network of lending partners to find you the best financing option. Biz2Credit has leveraged its network to fund more than $7 billion in small business loans since it was founded.

Editor’s Score: 90/100

We like the variety of options that are available with Biz2Credit. You can apply for a term loan, a working capital loan, a commercial real estate loan or an Employee Retention Tax Credit (ERTC) loan. Rates start at 7.99% 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 that isn’t common among business lenders. Simple interest is calculated based on the principal balance each month. Compounding interest, on the other hand, is calculated based on the principal balance plus any outstanding interest already accrued, which makes the cost of the loan 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.

Read Biz2Credit Review

Fundbox: Best Lender for Line of Credit

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With a Fundbox line of credit, you'll know exactly how much it will cost you before you draw any funds.
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This lender provides lines of credit as high as $150,000, and can fund your account 24 hours after approval.
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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.
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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: 75/100

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 with weekly payments through its Flex Pay program. 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 goes beyond lending when supporting its customers. Another feature that stood out to us is its integration with other popular programs many businesses are already using. The lender integrates with Freshbooks, Quickbooks and Zoho, three popular accounting apps. In some cases, business borrowers can receive funding in hours. Most recently, Fundbox added integration with the online job site Indeed to its list.

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.

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SBG Funding: Best Lender for Flexible Terms

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SBG Funding provides fast funding on loans as high as $10 million.
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Small business owners receive favorable pricing and flexible terms on term loans, business lines of credit, equipment and invoice financing, bridge capital and SBA loans.
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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 as short as six months or as long as 10 years.

Editor’s Score: 98/100

SBG Funding’s flexibility doesn’t end with its terms. You can borrow as much as $10 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 credit issues. It can make a qualifying decision in 24 hours and get funding to you the same day in some cases. However, SBG Funding requires more documentation to approve a loan than most other business lenders we reviewed. That may dissuade some borrowers. But with competitive rates, flexible terms and loans of up to $10 million, the extra effort may be worthwhile, 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

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Rapid Finance has an easy online application, quick approval times and same-day funding.
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Rapid Finance offers a variety of loan options with flexible repayment terms.
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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 is true to its name, delivering fast funding to approved loan applicants. Both approval and funding can occur within hours, much faster than most of the lenders we reviewed. Rapid Finance offers merchant cash advances ranging from $5,000 to $500,000. You repay your loans by giving Rapid Finance a fixed percentage of future credit card transactions.

Editor’s Score: 95/100

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. The application can be completed online in about 15 minutes if your documentation is readily accessible.

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Fora Financial: Best Lender for Short-Term Loans

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Fora Financial's terms last as long as 15 months, and loan amounts range from $5,000 to $1.4 million.
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The lender does not require collateral, offers flexible repayment terms, and only requires three months of bank statements.
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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, has a quick and easy qualification process, and can lend small businesses up to $1.4 million. We like that Fora Financial caps its terms at 15 months. That is a shorter period of time than with some other lenders, but you won’t pay as much compounding interest. It also means you won’t have to continue repaying a loan long after it has lost its value.

The lack of collateral or personal guarantees required for Fora’s short-term loans is a bonus, too. It’s 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: 94/100

The lender’s application process is quick and easy. It takes 24 hours to find out if you qualify, and Fora Financial can fund your account in 48 hours after you’re approved.

Fora Financial has provided $3 billion in loans to more than 35,000 small businesses over the past decade. It offers quick approval times and short terms, making it a top contender for small business owners who need funding but want to pay off their loan quickly.

Read Fora Financial Review

Noble Funding: Best Lender for Customer Service

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Noble Funding has issued more than $1 billion in small business loans, it has a good track record in the industry and has accumulated many positive customer reviews.
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It offers a variety of loan types and terms to meet most small businesses' needs.
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You need a credit score of 650 or higher to be eligible for one of its loans, which is a higher barrier than some of the other lenders we reviewed.
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We selected Noble Funding as our best pick for customer service because of the company’s long track record of issuing loans to small businesses, lack of upfront fees, and willingness to work with you to find the best loan product for your business. We like that Noble Funding is focused on providing top-notch customer service and has the reviews and the ratings to back it up.

Editor’s Score: 94/100

Noble Funding has been accredited with the Better Business Bureau for over 15 years and has an A+ rating. There are no negative reviews on the BBB and nearly 200 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 of other lenders, which makes Noble Funding’s glowing assessments stand out.

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 compared to other lenders we reviewed.

Noble Funding has been issuing small business loans since 2005, and, as a result, has a lot of experience and knowledge to offer. The application is simple to complete, approval is fast, and Noble doesn’t require collateral or personal guarantees for some of its loans. Furthermore, Noble Funding offers flexible terms and affordable pricing.

Read Noble Funding Review

Balboa Capital: Best Lender for Easy Approval

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If you don't want to deal with a lengthy application process and burdensome paperwork requirements, Balboa Capital is for you.
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This lender offers small business owners a variety of loans and flexible terms.
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If you need a longer-term loan to cover a big purchase or expensive outlay, Balboa Capital isn't for you. Terms only last up to 24 months for its small business loans.

We selected Balboa Capital as our best pick for easy approval because it makes getting business financing quick and easy. When you work with this lender, you won’t spend hours filling out a complex online application or scanning and submitting tons of documents. You can also expect a fast approval decision after applying.

Editor’s Score: 80/100

For Balboa Capital’s small business loans, you can borrow between $5,000 and $250,000, and pay it back in between three and 24 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 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.

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Crest Capital: Best Lender for Equipment Financing

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Crest Capital offers some of the most flexible equipment financing options, with terms ranging from 24 to 84 months.
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This lender offers fast funding and will let you finance equipment from private sales.
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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 $1 million. 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 when they need to expand their operations immediately. They’re not looking 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: 75/100

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.

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Accion: Best Lender for Microloans

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You can borrow as little as $500 or as much as $100,000, plus Accion Opportunity Fund has flexible terms and competitive rates.
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Accion is focused on underserved markets, including women- and minority-owned small businesses.
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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: 75/100

It’s easy to apply for a loan from Accion; you can apply quickly online. 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 with other lenders, even if it’s for a small amount. That’s not an issue with Accion, which doesn’t have a credit score requirement. You also need to be in business for three months to qualify for a loan with Accion.

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. It should be on the top of your list for lenders specializing in microloans.

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BusinessLoans.com: Best Lender for Comparing Loan Options

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Businessloans.com helps borrowers who are unfamiliar with the lending space understand and compare loans.
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After a simple, quick application, you’ll receive concierge-level assistance comparing your loan options and choosing the best one.
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Collateral is often required, and you might wait as long as one week for funding. This is several days longer than you’d wait with many other lenders on this list.

Businessloans.com launched in 2020 to streamline the loan application process and seamlessly connect borrowers with the loans best for them. The platform excels at welcoming borrowers with minimal knowledge about or prior experience with business loans. The company is known to work with any borrower to get them the funding they need — even borrowers who might not meet the qualification criteria.

Editor’s score: 92/100

Applying for Businessloans.com funding is simply a matter of providing 13 data points you’ll almost certainly know offhand. You can do this in under three minutes. Not long after you apply, a company representative will get in touch to start helping you choose from the available options. The Businessloans.com algorithm determines these options, and the company involves its roughly three dozen lending partners in constantly improving the algorithm.

As you wait for your representative to get in touch, you can browse Businessloans.com’s homepage and guides for more information. The company is committed to demystifying loans and making them work for any borrower. It will teach you everything you should know to effectively compare loans and give you hands-on assistance in doing so. This is why Businessloans.com is our top pick for comparing your loan options.

Read Businessloans.com Review

Choosing a Business Loan Provider

When seeking a loan, you must understand the ins and outs of the lending process, the lender’s qualification requirements and the terms of your loan if you want to secure 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, and franchise agreements.

Interest Rate

Small business loans accrue interest, which is the price you pay for a loan. Rates are either fixed or variable. Generally, alternative lenders offer a fixed interest rate. Your interest rate will depend 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 the cost does not make sense for your needs, 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 (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 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 loan funds in your bank account so you can plan accordingly and avoid 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, such as the cost of the loan and its terms. The more information you have before you begin shopping for a loan, the better prepared you will be to make a good choice.

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

There are a lot of options if you need a business loan. The one that makes the most sense for you depends on your credit score, time in business and amount you’re looking to borrow. The speed in funding and the specific 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 intended to help owners expand their business (e.g., to 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 $5.5 million.

There are four specific types of SBA loans.

  • SBA 7(a) loans: These are a good option for working capital, debt consolidation 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.
  • SBA 504 loans: This type of loan also has a cap of $5 million, with rare extensions to $5.5 million for manufacturing or energy-efficient projects. 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.
  • Microloans: Microloans can be used for working capital, and to purchase supplies, equipment or fixtures, and furniture. Rates vary from 6% to 9%. Loans are available from community-based nonprofits, and the maximum amount you can borrow is $50,000.
  • Disaster loans: In case of emergency, disaster loans offer 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 2.75% to 8%).

Did you know?Did you know?: Volume for the Small Business Administration’s 504 and 7(a) loan programs increased in 2021, reaching $44.8 billion. But an SBA loan may not be right for you, which is why it’s important to consider all loan types.

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 draw down. 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.

[Related Content: Small Business Loan vs. Cash Advance: What’s the Difference?]

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. [Related Article: The Pros and Cons of Bootstrapping]

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 thanks to 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 can advance you as much as 80% of the value of your unpaid invoices. You receive the final 20%, 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 approval requirements 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 more popular ones.

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. Read our reviews to see which lenders have less onerous eligibility requirements.

What are the types of SBA loans?

Several types of SBA loans are available for business owners. Three of the most common include SBA 7(a) loans, SBA 504 loans, and microloans, all of which we previously discussed in this article. The SBA 7(a) loan is ideal for small to midsize businesses, with low interest rates and long repayment terms. The 504 loan is well-suited for purchasing real estate or to pay for construction or renovations. Finally, microloans are best for very small businesses that need to offset startup or early expansion costs, since these loans are capped at $50,000.

Are SBA loans fixed-rate or variable?

The interest rates on SBA 7(a) are typically variable, though they can occasionally be fixed-rate. SBA 504 loans and microloans are fixed-rate.

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

If the loan you’re considering is unsecured (i.e., no collateral is required), you’ll usually need to provide a personal guarantee. This is the case for most startup loans, because your guarantee 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, your company doesn’t have a financial history. Rather than evaluate your business’s credit, lenders will 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 or not you’ll be approved for a small business loan. Unless your business has been around long enough to establish a history of good credit, lenders will 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. The collateral 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 your 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 higher. The requirements depend 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 higher. 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 at least 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, such as Businessloans.com, 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 heavily 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 might 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 is 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 up 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 two to five years, while short-term business loans are typically three to 24 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, and comes with complicated terms.

With a merchant cash advance, you receive 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’ll 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 apply yourself 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. 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.)

Can you still get a COVID-19 EIDL loan through the SBA?

The COVID-19 pandemic EIDL loans expired at the end of 2021. Until May 6, 2022, small business owners were able to request an appeal or reconsideration if they were turned down. This was also the final date on which the SBA accepted applications for loan increases.

What loan can you get through the SBA now that the COVID-19 SBA loan program is over?

You can still get an Economic Injury Disaster Loan if your business was impacted by a fire, hurricane or other natural disaster.

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 off the loan, the debt is settled. Interest rates on installment loans are typically lower than credit card interest rates, but more risk is involved. 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 to fund your startup. If you want the loan 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 often 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 2023

With small business confidence declining amid a receding economy, the tightening of credit availability and rising interest rates are two major themes for business loans in 2023. Loan approval rates tend to fall during a down economy, and businesses that receive financing often must abide by stricter terms. Survey data from the Kansas City Fed points to deteriorating small business financials and falling credit scores as reasons why some lenders are starting to pull back on approval rates. Business owners can head off this tightening cycle by deciding on financing sooner rather than later.

Central banks have also significantly tightened monetary policy in response to rising inflation. The U.S. Federal Reserve has repeatedly raised its benchmark interest rate, and recent comments from officials have indicated that rates will remain higher in 2023. The WSJ Prime Rate, an index of prime rates from 30 major banks, has ballooned to 7.50 percent, compared to just 3.25 percent in 2021. This means that small businesses are likely to continue grappling with higher financing costs in 2023.

Given the likelihood of interest rates rising even further, small business owners should carefully consider the risks of taking on financing with a variable interest rate that could rise in the future. Businesses considering whether to take on a loan now should consider locking in fixed monthly payments that they can afford.

The good news for businesses in need is that many lenders are still approving many small business loans. A down economy and rising inflation may leave many small business owners looking for additional funding. Alternative lenders are ready to meet that demand, and it also appears that the SBA will have more money to lend in 2023. The agency’s FY 2023 budget proposes a $5 billion increase to the amount of money the SBA can lend to small businesses via the 7(a) loan program. That will bring the total amount available to $35 billion.

Additionally, 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 getting a small business loan easier and faster in 2023.

Max Freedman
Max Freedman
Business News Daily Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.
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