The Best Small Business Loans in September 2023

Best Small Business Loans

A small business loan can help you start a business or fund various expenses that will help you expand your existing operation. From employee payroll to new equipment, a small business loan can help even out finances while until you have more revenue coming in.

There are many types of small business loans. Choosing the right one for your business comes down to understanding each loan type, how they work, costs and fees, and what lenders work best for your circumstances.

Top Lenders for Small Business Loans in September 2023

You can get a small business loan from a bank, credit union, or online lender. Online lenders offer an easier, faster, and more flexible experience in comparison to traditional bank loans, which is why the top lenders for small business loans are all online lenders.

1. LendingTree

LendingTree is an online loan marketplace, meaning it acts as a matchmaker between you and potential lenders. It offers both personal and business financial lending and can work with you even if your credit score is as low as 600.

LendingTree has been in business for over 25 years. During that time, it has worked on creating partnerships with a multitude of lenders, as well as buying other companies, so that it can offer a loan option to virtually anyone. It also has an army of free resources on its website which makes the loan shopping process understandable and accessible for all.

LendingTree comes highly rated because it provides an intuitive, fast prequalification process. To match with lenders who can meet your needs All you have to do is go to the homepage and enter your financial needs, business information, and personal information.

LendingTree has served millions of customers in all 50 U.S. states while maintaining consistently positive customer reviews. It may be notorious for allowing lenders to send unsolicited calls once you’ve entered your information, but this is easily remedied by getting on the do not call list.

For an in-depth look, see our full LendingTree review.

Compare Small Business Loans on LendingTree

2. Rapid Finance

Rapid Finance provides various business financing options through its online platform. It’s best for you if you’re in need of funding quickly, as loans can be approved as quickly as 24 hours. Once approved, you receive the funding within 1 business day. It offers funding from $5,000 to $10,000,000, depending on loan type.

Rapid Finance makes small business loans easily accessible through an all-online application process.  It can even work with you if you have a low credit score, though options will be more limited. It services all U.S. states except Montana, Nevada, New Jersey, or Rhode Island – these states are only able to take advantage of cash advance offerings.

Some products from Rapid Finance require 3 to 6 months in business, which makes it less than ideal for startups. It also only funds a portion of the loan options listed on its website, so you may be redirected to another lender after completing the prequalification process. Despite these downfalls, Rapid Finance is a great short-term lender, as evidenced by its stellar TrustPilot and Better Business Bureau ratings.

Discover all the pros and cons in our expert Rapid Finance review.

Compare Small Business Loans on Rapid Finance

3. Biz2Credit

Biz2Credit is an online loan marketplace that specializes in small business funding with over 14 years in business. It has provided more than $7 billion in funding for thousands of small businesses across the U.S. It has a TrustPilot score of 4.4 out of 5 stars and over 13,000 reviews.

Biz2Credit serves you through its proprietary platform, which matches your small business to the best loan option and lender based on your unique profile. The process takes minutes and is efficient and secure. Prices are transparent, so you know exactly what your cost will be. You can view your funding options within 24 hours of application and receive funds within 48 hours of final approval.

Biz2Credit offers loans from $25,000 to $6 million. To qualify, you must be in business for at least 6 months with an annual revenue of $250,000 or greater. You’ll need a credit score of 575 for working capital loans and 660 for CRO loans. With these barriers to entry, Biz2Credit is best for more established businesses.

Find out more in our in-depth Biz2Credit review.

Compare Small Business Loans on Biz2Credit

When Should You Take Out a Small Business Loan?

People take out small business loans for a variety of reasons. In short, you can take out a small business loan to cover any expenses, whether that’s to consolidate debt or to pay for expenses that will help your business grow.

You might consider getting a small business loan if you:

• Want to invest in equipment
• Are purchasing property or real estate
• Need to purchase inventory
• Want to hire more employees
• Need to provide new training for employees
• Are launching a new marketing campaign
• Have expenses that are exceeding income
• Are experiencing an unusual crisis, like a pandemic

In all of the above cases, a small business loan can help to even your cash flow now, with the expectation that you will have more income in the future to repay the loan. In some cases, that means that the investment you’re using the loan for will have a good return on investment and you’ll draw in more revenue. In other cases, you’re depending on business going back to normal to boost revenue.

Compare Small Business Loans on LendingTree

How Do Small Business Loans Work?

Small business loans are typically lump sums that you receive from a lender with the intention of funding various business expenses. Over a set term, you’ll pay back the principal as well as interest on that amount.

There are several types of funding for small businesses, not limited to small business loans. You may also consider a business line of credit, merchant cash advance, or invoice financing if a small business loan doesn’t work for your circumstances. These types of funding function differently than small business loans, which can provide some flexibility to meet your needs.

Lines of credit function much like a credit card, allowing you to borrow just what you need up to a certain limit. With this type of funding, you’re only expected to pay off and pay interest on the amount you use – not the full credit limit.

Merchant cash advances are similar to small business loans in that they provide you with a lump sum of money, however, you agree to pay the advance off by giving a percentage of sales to the lender.

Alternatively, invoice financing allows you to sell unpaid invoices to a lender at a discount, in which case the lender collects the payment from the customer, but you get immediate funds.

Compare Small Business Loans on Rapid Finance

Who Can Apply for a Small Business Loan?

Just like with personal loans, small business loans have a set of requirements that vary by lender. The requirements are set with certain minimums, which show the lender that your business is worth the risk of the investment. To find out if you can apply for a small business loan, you’ll need to determine how eligible you are based on those requirements. You can always use a website like LendingTree to quickly see what types of loans you’re eligible for.

These are some of the factors lenders typically review:

• Credit score: This is one of the most important factors for lenders. They will review your personal credit score, especially if you have a startup, though they may use your business credit score instead. The minimum credit score varies by lender, but generally speaking, most lenders will require a credit score of at least 600, though some may dip into the 500s.
• Business revenue: Most lenders have a minimum annual revenue requirement to be considered for a loan. This shows them that you have had consistent income and will continue to in the future: in other words, you’ll be able to pay the loan off eventually. For example, Biz2Credit requires a minimum annual revenue of $250,000 to qualify for loans.
• Time in business: Many lenders require a minimum amount of time in business. This is another measure that shows them that you have consistent revenue with which you can pay off the loan. For example, Biz2Credit requires 6 months in business. Rapid Finance requires 3 to 6 months. Startup businesses may need to choose alternative funding options instead of small business loans.
• Industry: Your industry can also affect your ability to get a loan. Since industries fluctuate, they can determine some level of risk for the lenders. Some industries also have certain reputations that lenders don’t want to be associated with, in which case they are less likely to provide loans to a business in that industry.
• Amount needed & business expenses: Lenders will review your DSCR, or debt service coverage ratio. That means they’ll look at your net operating income divided by your total annual debt, which includes the amount you’re looking to borrow. Lenders prefer borrowers with a DSCR of 1.35, though some will accept you with a ratio of as low as 1.0.

Compare Small Business Loans on Biz2Credit

Types of Small Business Loans

Term Loans

This is one of the most common types of small business loans. A term loan provides a lump sum payment, which you pay off over a fixed term. In addition to paying off the principal amount, you’ll also pay off the interest.

Loan amounts, rates, and terms vary by lender – you can easily compare different loans side-by-side on LendingTree. Generally speaking, term loans from online lenders range from $5,000 to $500,000. Short-term loans are available for as little as 3 months, all the way up to 18 months. Long-term loans offer repayment periods of 10 or more years. APRs can range from 7% to 100%.

A small business term loan may be right for you if you need a one-time payment for an isolated investment. There are other loan options for equipment and real estate, so you may want to choose one of those loans over a term loan if you’re making that type of investment.

SBA Loans

SBA loans are backed by the Small Business Administration. Since these loans are guaranteed by the government, lenders are willing to offer lower interest rates and longer repayment terms. Similar to term loans, you’ll receive a lump sum and provide monthly payments that go toward the principal and interest over a set term.

There are several types of SBA loans:

• SBA 7(a): The most common type, this loan can be used for short- or long-term working capital, expansion, furniture and supplies, acquisition, or real estate.
• SBA 504: This option provides fixed-rate financing for business growth, employment development, equipment, land purchase, and renovations It cannot be used to pay for or refinance debt or as working capital.
• Microloans: For small businesses and some non-profit childcare centers, the SBA backs microloans of $50,000 maximum.

SBA loans range from $25,000 to $5 million. Most SBA loans are limited to 10-year terms, though SBA loans for real estate and construction may have a term of up to 25 years. Interest rates generally range from 5% to 8%.

These loans might be best for you if you have strong business finances, a credit score of 690 or higher (though some lenders sometimes offer SBA loans to lower credit scores), and are not in a rush. The approval process for SBA loans can be time-consuming, taking up to 60 days.

Equipment Loans

Equipment loans are a type of term loan, in which the funding is used to purchase a large piece of equipment. This allows you to spread out the expense of the machinery over time. The equipment typically acts as collateral for the loan and would be used as repayment in the event that you are unable to repay the loan.

Equipment loan amounts go up to $5.5 million, with interest rates starting at 3%. These loans are typically more lenient since they’re secure loans – meaning you sometimes don’t need as much documentation and may not need a down payment. You may be able to finance up to 90% of the price of the equipment with the loan. Terms range from 18 months to 10 years.

This type of loan is right for you if you need to break down the cost of expensive equipment over a longer period of time. These loans can also be useful if you need to purchase vehicles, computers, or furniture.

Commercial Real Estate Loans

Commercial real estate loans are used to purchase, develop, or refinance commercial property. Also known as CRE loans or commercial mortgages, these loans function like term loans. You receive a lump sum and pay it off over a set term, including interest.

CRE loans range from $150,000 to $5.5 million. Rates start as low as 2.231% but can go up to 18%. Terms range from 12 months to 40 years.

This type of loan is right for you if you need to buy, develop, or refinance a commercial property like a warehouse, office, retail center, or mixed-use building.

Microloans

Microloans provide you with a small lump sum of up to $50,000. You can use the funding for working capital, equipment, furniture, supplies, inventory, or machinery. These loans cannot be used to purchase real estate or pay off existing debt.

Many microloans are offered through the SBA or through nonprofits. You can expect a maximum amount of $50,000 and a maximum repayment term of 6 years. Interest rates range from 8% to 13%.

Microloans may be right for you if you don’t need a huge amount of cash and aren’t looking to use the funds for real estate or existing debt. They also have a fairly short repayment term, so you’ll need to be able to meet that deadline.

Franchise Loans

You can use a franchise loan for standard business opening expenses or franchise-specific costs, like franchise fees or marketing costs. This type of loan is specifically designed for franchisees, as you have to pay these fees upfront when opening the business.

Franchise loans can require an interest rate of 9% to 99% and a minimum credit score of 600. Funds are available up to $5 million.

This type of loan is best for you if you’re looking to open a new franchise and need funding to cover the fees associated with that venture. You may also find funding through the franchisor, traditional loans, or SBA loans.

Compare Small Business Loans on LendingTree

How to Choose the Best Small Business Loan for Your Needs

With so many different types of loans and so many lenders to choose from, choosing a loan can be overwhelming. As you’re comparing loans on sites like LendingTree or Rapid Finance, focus on the following key factors to determine which is right for you.

Loan Types and Options

First, narrow down which loan types you’re interested in. Some loan types will be easy to eliminate from your options. For example, if you’re buying real estate, you won’t be using an equipment loan or microloan. As you narrow it down, be sure to review the loan limits and terms to make sure they align with your needs.

Eligibility Requirements

Next, look at the eligibility requirements from various lenders to determine if you can apply. You’ll want to review the minimum requirements for revenue, credit score, and years in business.

Costs

At this point, you should have nailed down your loan type and moved on to comparing lenders. Consider the costs of the different vendors by reviewing:

• Down payment: Small business loans usually require an equity investment or collateral as a down payment. This amount will vary between lenders but usually ranges from 10% to 30% of your capital.
• Annual percentage rate: Also known as APR, this is the interest percentage, fees, and costs that come with the loan. Many lenders showcase their lowest rates online, but you’ll need to provide personal information and prequalify to find out what rates apply specifically to your circumstances.
• Fees: Additional fees may apply, depending on the lender and loan type. Underwriting, origination, and SBA loan guarantee fees may be required.
• Factor rate: The factor rate only applies to short-term business loans and merchant cash advances. It’s used to determine what you’ll owe in interest, in decimal form rather than the percentage rate that you see with APRs. The factor rate is determined by time in business, stability of the business, industry, and monthly credit card payment revenue.
• Prepayment penalties: These are fees that lenders charge when you pay off the loan early. Paying the loan off early can save you money on interest, so you should avoid loans with prepayment penalties if possible. Know that some lenders actually reward you with a discount if you repay the loan early.

Customer Approval

How do current and previous customers view the lender? The lender’s reputation will speak volumes about the lender and is especially important if you’re signing a long-term loan. You don’t want to be stuck with a lender that provides poor customer service for years down the line. Look at online reviews and ratings, like TrustPilot and Better Business Bureau. You can also test out the customer service yourself by using the lender’s chat, phone, or email customer service.

See Business Loan Offers on Biz2Credit

Why Should You Consider an Online Lender?

You can get a small business loan through a traditional bank or credit union – or through an online lender. The products offered are essentially the same. The biggest difference between the two is the application process. Online lenders like Biz2Credit and Rapid Finance don’t have brick-and-mortar offices that you can visit, so all communication and processes are completed through their websites or via mail.

Online lenders offer easy application processes through intuitive, easy-to-follow digital platforms. Rather than experiencing the pressure of collecting all of your documents and bringing them to an in-person meeting, you can fill out the questionnaires online, in the comfort of your own home. Though it’s best to get your documents together ahead of time, you have the convenience of shuffling around for anything you may have forgotten.

Rates and fees with online lenders are more competitive than with banks and credit unions, so you’ll likely find a better rate online. Online lenders also offer faster funding than some banks, since the online application quickly provides you with approval status, with funds released after that. In some cases, you can receive funding within 24 hours.

Banks usually work with larger businesses, so they are more tailored to well-established businesses. Banks tend to show favor if you have an existing relationship with them, like through a business bank account, or if you are applying for an SBA loan. In comparison, online lenders work with most businesses and sometimes offer lower requirements on credit score and time in business.

Compare Online Lenders on LendingTree

How Do You Apply for a Small Business Loan?

Although the process varies between lenders, they all require the same documentation. You’ll start by filling in an application form and then providing documentation that supports what you’ve entered on the application. If you’re applying with an online lender like LendingTree or Rapid Finance, you’ll apply through a secure online platform and submit documentation digitally.

Documentation typically includes:

• Licenses, articles of incorporation, leases, and any other relevant legal documents
• Personal background information
• Income tax returns from the last two years at minimum
• 12 months of business and personal bank account statements
• Any documentation on current or past business loans
• Information on how you’ll use the loan
• Business plan
• Debt schedule
• Information on value and cost of business or personal property that might be used to secure the loan

Apply for a Small Business Loan on Biz2Credit

How Much Does a Small Business Loan Cost?

The cost of a small business loan will vary depending on the type of loan, lender, credit score, and how much you need to borrow. Ideally, you’d wait to apply for a loan until your credit score and earnings were in place for the best rates, but that isn’t always the case. When it comes to cost, focus on choosing the best interest rates and fees offered to you.

Interest rates can range from 2.231% to over 100%. The normal range changes based on the loan type, but be sure to shop around for the best interest rate you can get. You should expect higher rates if you have bad credit.

Small business loan fees can come from several places, including origination fees, prepayment fees, and underwriting fees. Prepayment fees allow the lender to charge you additional fees for early repayment. Underwriting and origination fees are administrative fees associated with the cost of evaluating and processing the loan.

SBA loan guarantee fees are required with SBA loans and though paid by the lender, may be passed off onto you. These fees can be 2% to 3.75% of the loan value.

You may also encounter an application, monthly administrative, annual, or late payment fees. Be sure to read the fine print or ask your lender what fees are required with your chosen loan.

Compare Small Business Loans on LendingTree

What Can You Do If Your Small Business Loan Application Is Denied?

Just because one lender denies your small business loan application doesn’t mean that you have no financial options. Check with the lender to find out why you were denied, then use that information to guide your next steps in finding financial assistance. Consider the following options:

Reapply with other lenders. Start by reapplying with other lenders – just be sure to review their requirements to make sure you’re eligible for the loan. You can also use platforms like LendingTree and Biz2Credit, both of which are matchmaking platforms that will connect you with lenders that fit your circumstances.

Get a personal loan. If you’re still struggling to get approved, consider taking out a personal loan. Just be sure that your personal loan does allow business use, as some do not.

Use a business credit card, line of credit, merchant cash advance, or invoice factoring. Although these options can be more expensive with higher interest rates, they can provide immediate funding when your business is in need.

Get a small business grant. Various grants are available for small business owners, including grants specifically created for minorities, women, and certain industries.

Check out local resources. Most communities offer resources for local businesses. Reach out to SBA district offices, veteran’s business outreach centers, women’s business centers, and Score chapters. These organizations offer financial assistance, free counseling, and entrepreneurial development resources.

FAQ

Which loan is best for small businesses?

There are several loan types for small businesses, including short and long-term loans, SBA loans, equipment loans, franchise loans, business lines of credit, and merchant cash advances. The best type will depend on your specific needs and circumstances, including the amount you need to borrow, credit score, desired term, and more. You can easily compare available loans side-by-side on Rapid Finance.

What credit score is needed for a small business loan?

The minimum credit score required for a small business loan varies from lender to lender. Some lenders will accept credit scores as low as 530, but on average they ask for at least 600. Even if you have a low credit score, you might be able to find a loan on LendingTree.

Are small business loans hard to get?

Being approved for a small business loan depends on your personal and business financial information. Most lenders require that you meet a minimum credit score, annual revenue, and time in business. These factors vary from lender to lender, with some offering more lenient standards.

What’s a good APR for a small business loan?

Depending on the loan type, APRs can range from as little as 2.23%, up to 100% or more. Online lenders’ average APR hovers around 7% to 8%.

Can I get a business loan with a 500 credit score?

Although hard to come by, some lenders may approve you with a credit score of 500. You’ll need to shop around – loan marketplaces like LendingTree and Biz2Credit are made to match you with a lender based on your circumstances. However, your options will be limited and you’ll likely pay a higher APR.

How can I get a business loan with no money?

Secure loans, or loans that are backed by collateral, often have more flexible standards and may not require that you put any money down. Since you’re backing the loan with a high-value item, you risk losing that collateral if you fail to repay the loan.