10 Best Small Business Loans of 2017
Get the Best Small Business Loan. We review and compare the Top Small Business Loan services for your growing business.
Small business loans consist of funds paid out to small businesses, to be repaid with interest over a set period of time. Taking out a small business loan can be a very convenient way to obtain start-up funds. It can also help established businesses manage day-to-day expenses or receive an influx of capital to meet short-term obligations.
Some of the small business loan options available are guaranteed by the government, via the Small Business Administration (SBA), whereas others are private. Other financing options include microlenders—generally small non-profit organizations geared to helping disadvantaged communities—, and alternative lenders, like the online lending community. Regardless of the type of loan, lenders will invariably look at time in business, business plan, personal credit score, gross annual revenues, net annual profits, and what collateral is available to back the loan.
Debt financing for a business has the advantage that the lending institution has no say over how the borrower runs their company, the interest is deductible as a business expense, and since the monthly payments are a known amount, they’re easy to factor into forecasting models. However, taking out a loan does add a monthly debt payment to the company’s expenses, and depending on the collateral provided, can put your home or business at risk if you default.
Borrowers choosing between lenders should evaluate and compare the purpose of the loan, its size, interest and APR rates, terms and costs, including prepayment penalties and origination fees. Every single lender is going to look very carefully at your cash flow, your debt ratio and the rest of your financials. Companies with a sound fiscal situation are going to have higher chances of obtaining favorable rates, no matter the type of loan or lending institution.
Top 10 Companies
- Our #1 Choice: A+ BBB Rating - 9.7 of 10 on TrustPilot
- Largest Small Business Online Lender - 50k+ Customers
- Loans up to $500k, and Lines of Credit up to $100k
- Decision in minutes - no obligation
- Funding in as fast as 24 hours
- Must have 100k in revenue, minimum 12 mo in business, 500+ Fico
- Revolving line of credit up to $150,000!
- Apply online and get a decision right away
- No hidden fees, pay only when you access your line for the amount you take
- Monthly payments with no origination fees or prepayment penalties
- Friendly support representatives
- Grow your business with Fundbox Credit
- 9.7 of 10 on Trustpilot – trusted by industry leaders and business owners
- No credit pull or minimum revenue requirement
- Approval in hours, next business day funding, lines up to $100K
- One transparent weekly fee with no early repayment penalties
- No paperwork required, simple application process that’s integrated with accounting software
- Flexible financing options for small to mid-sized businesses
- A+ rating by the BBB, Excellent rating on Trustpilot with over 1,000 reviews
- Over $1B in funding to more than 16,000 small businesses across 500 industries
- Funding available from $5,000 to $500,000
- Best price guarantee, get a lower offer and the company pays you $500
- Get funds in as little as 1 business day
- J.D. Power certified outstanding customer service
- Flexible repayment options
- Business loans & lines of credit for everything you need: cash flow, debt, new equipment, etc.
- Great choice for Small Business Loans A+ BBB Accredited Company
- Fill out a short form (less than 3 minutes) and save money by comparing up to 4 free offers
- When banks compete, you win!
- Must have 100k in revenue, 12 mo in business
- Established Company Loans: $10k to $500k - No Collateral or Financials!
- Fast approval with 48-hour funding
- A+ BBB Accredited
- Simple & paperless loan application
- Multiple funding options for different types of business
- Access to a list of small business lenders, brokers, and private investors
- RapidAdvance offers very low rates to qualified businesses
- Over $1 Billion in Loans to Small Businesses
- Rated A+ by the BBB
- Business-financing ranging from $15,000 to $500,000
- Get approval as quick as 24 hours
- Best suited for well-qualified applicants: 600+ Fico, 10k/mo in Revenue, 1+ year in business
- Digital media businesses can finance receivables in as little as 48 hours
- Directly integrated with leading account software
- $1.5 billion in loans originated
- 3,000 plus advertisers financed
- Quick and easy online application
- Simple eligibility requirements, even new businesses can apply
- Starting credit line up to $100,000
- Flexible options for Women's Loans, Traditional Business Loans & More.
- Secure online request form
- Loans of up to $350,000
- Competitive interest rates
- Qualification: 10K/mo revenue & 3+ mo in business
- Bank-level security
- Guaranteed low rates
- Apply to multiple lenders and get offers at once
- Eligibility Tracker
- Completely free service without hidden charges
- Marketplace with several known lenders
- Get unbiased advice Loan up to $5,000,000
Best Small Business Loans: Summed Up
How We Compare Small Business Loans
Customer Questions & Answers
What are the different types of business loans?
There are many different types of business loans. To understand which is the best one for you, first choose the amount and purpose of the loan, how soon you need it, how long it will take to repay, length of time you’ve been in business, its current financial shape, and the amount of collateral you have available.
The answer to these will give you a better idea of the loan type that’s best for you, and whether you should pursue a government-backed loan, a bank loan or line of credit, or seek out an alternative lender for a line of credit, loan, or cash advance. Loans can be used for obtaining working capital, equipment or building purchases, remodels or construction, and in some cases, to refinance business debt. Other types of loans are merchant cash advances (loans based on on the volume of your business’ credit card transactions), professional practice loans (designed specifically for providers of professional services like healthcare, accounting, or engineering), and franchise startup loans.
Government-backed Small Business Administration (SBA) loans provide a guaranty that enables a bank or alternative lender to extend credit it might otherwise have declined. They can be used for a wide variety of purposes, but have generally strict qualifying requirements, additional paperwork, extra fees, and take longer for approval.
Bank loans or lines of credit are the traditional way to fund businesses, but since the Great Recession of the late aughts, getting approval has become more difficult. They tend to carry low interest rates, and approval is slightly faster than SBA loans. However, repayment terms are generally shorter, and often include balloon payments of the outstanding principal sum, interest-only having been paid until then.
Alternative lenders have gradually become pervasive in the lending marketplace, offering loans to startups and small businesses with less than stellar credit history. Their approval requirements are considerably less stringent than for the two previous types of loans, applications are typically fully completed online, approval decisions are quick, and funding can arrive in less than five business days. Interest rates and associated fees can be substantially higher than with traditional lenders, however, as these loans generally carry higher risks.
Do I need to have good credit to get a loan for my business?
You must have both good personal and business credit scores in order to qualify for an SBA-backed or traditional bank loan. Alternative lenders, while they do take credit history into account, generally have more lenient requirements, and place more emphasis on the business’ cash flow and track record.
What do I need to qualify for a small business loan?
You may need a guarantor if your loan application is weak in one of the five following areas: collateral, degree of personal investment, business cash flow and repayment ability, business ownership and management credentials, and credit history. A guarantor can serve to strengthen the application, if he or she has a solid personal financial statement and an excellent credit history.
It’s important to note that a guarantor automatically becomes responsible for satisfying the loan’s terms in case of the business’ liquidation. Their personal assets are therefore at risk, but this can be offset by Personal Guarantee Insurance, which can cover up to 70% of the guarantor’s net liability.
What can business loans be used for?
Business loans can be used for a number of different operational needs. Some traditional bank loans may have specific conditions or limits on usage, but loans and financing designed specifically for small businesses can be used for nearly everything, including equipment purchases, inventory, daily expenses, and payroll.
Other uses can encompass the purchase of new technology, hiring, marketing or advertising, education and training, and finally, expansion. In the case of loans guaranteed by the Small Business Administration (SBA), there are generally specific permitted usages.
SBA 7(a) loan proceeds can be used to pay long and short-term operational expenses, to purchase real estate, as revolving funds, to renovate or construct a new building, to establish a new business, and under some circumstances, to refinance existing business debt. These funds cannot be used to refinance existing debt where the lender would receive a loss, to repay delinquent taxes, to affect a partial change of business ownership, to reimburse funds to any owner, or for any purpose that the SBA doesn’t consider sound.
SBA 504 loans, or Community Development Corporation (CDC) loans, are strictly for real estate and equipment purchases. This program is unique in that it pairs a CDC with a lender, and they finance the loan jointly. Finally, the SBA also features microloans, in which they provide funds to nonprofit organizations, who in turn, lend the money to the business.
What is a business line of credit?
A business line of credit is an arrangement between a financial institution and a business that establishes a maximum loan balance that the lender permits the borrower to access or maintain. Borrowers can access funds at any time, as long as they don’t exceed the agreed-upon maximum amount, or any other requirements set by the financial institution.
Lines of credit are revolving accounts generally unsecured by collateral. This means that borrowers can spend the money, repay, and then spend it again, in a virtually never-ending cycle. Repayment can be adjusted as needed, opting for minimal monthly payments or settling the entire outstanding balance at once. This differs from installment loans, in which borrowers receive a lump sum, and repay it in equal monthly installments.
How does invoice factoring work?
Invoice factoring is a type of accounts receivable financing that converts outstanding invoices due within 90 days into immediate cash. Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money, while the lender limits its risk by not advancing the full invoice amount.
Invoice factoring can work in various different ways, but the most common is known as factoring. In this case, the company sells its outstanding invoices to a lender, who then pays them between 70% and 85% of what the invoices are worth. When the lender receives the remaining balance, it then remits the remaining 15% to 30% to the business, which in turn, pays interest and/or fees for the service.
Another alternative is invoice discounting. This is structured similarly to factoring, but the business itself collects the invoice payment, not the lender. The lender can advance up to 95% of the total amount, and upon customer payment, the business then repays the lender, minus a fee.
What is a merchant cash advance?
A merchant cash advance is a lump sum of capital that is repaid automatically using a fixed percent of your daily credit card transactions. They are not loans, but rather an advance based on a business’ future revenues.
Merchant cash advances view risk differently than lenders of traditional loans do, focusing daily receivables or credit card receipts rather than on credit criteria. Rates are typically higher than for other small business financing options, such as loans, but qualifying is substantially easier.
Why choose an online lender over a traditional bank?
Online lenders are great options over banks, when businesses are younger, or can’t meet a bank’s requirements for borrowing. To qualify for SBA-backed and traditional bank loans, businesses need excellent credit, strong business revenue, and zero defaults on taxes or government loans.
Online and alternative lenders analyze both traditional credit standards, (such as personal credit score, revenue records, and cash flow), as well as nontraditional metrics like social media and vendor payments. This emphasis on alternative qualifiers enable non-traditional lenders to fund so-called higher risk businesses, such as startups or clients with poor credit scores. These loans are also easier to apply for, as the whole process can be completed from the comfort of your home or office computer. Approval or denial also tends to process much quicker than with traditional lenders.
How much do business loans typically cost?
Business loans costs are different for each borrower, as rates depend on a number of factors, unique to each business. However, borrowers should always keep in mind all the associated costs of the loan, including interest rates, APR, factor rate as applies, and any fees for costs such as origination, application, guarantee, late payment or prepayment penalty, check processing, and underwriting.
SBA 7(a) loans also require a guaranty fee of between .25% to 3.75% for the part of the loan that is guaranteed by the agency, depending on the size and maturity date of the loan. Since SBA loans are government regulated, interest rates are set. For June 2017, maximum interest rates on SBA 7A Loans range from 6.25 % to 8.75 %, and currently range from 3.84% to 4.39 % including fees for the CDC portion of CDC / 504 loans.
As a general rule of thumb, the company’s expected profits from the use of the business loan should be greater than the loan’s total cost, and the business should generate enough cashflow to be able to easily cover the monthly payments. Repayment terms also vary depending on the lender and the loan purpose, which affects the total sum the borrower must repay.