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Written by Carissa Chesanek and Melissa Wylie | Edited by Kurt Adams | Updated on December 12, 2022
Small business loans can cover real estate, equipment, payroll or nearly any need. For this guide, we selected the best small business loans that offer transparent rates and repayment terms, maximum loan amounts of at least $150,000, funding within two weeks or less and lenient requirements for personal credit scores and time in business. Learn more about how we chose the best small business loans here.
We chose small business loans from online lenders that could cover small, medium or large expenses. Small business lenders that appear on this list meet the following criteria:
Small business loans help entrepreneurs build, maintain or expand their companies. Getting business loans for your company doesn’t always require walking into a bank and securing funds — there are also a variety of online small business lenders to consider, which may have easier qualifications and faster applications.
Small businesses account for a significant chunk of American economic activity — the U.S. Small Business Administration (SBA) estimates that there are 32.5 million small businesses across the country. While the nature of each one varies, many hold one major thing in common: the need for business financing.
Women entrepreneurs can apply for business grants or debt financing reserved for women-owned businesses. Women-owned businesses have grown at a faster rate than U.S. businesses overall in recent years, but when women are approved for business loans, the average annual loan size is about 33% less than men.
Capital is available for business owners of color in the form of business grants or loans. Compared to their counterparts, those in historically marginalized communities face more entrepreneurial hurdles related to funding. Organizations and lenders across the U.S. allocate funds to support minority-owned businesses.
There are several resources and funding options for veteran business owners. After leaving the military, many veterans often have trouble transitioning their military training to civilian careers and instead choose to start their own ventures. Business loans for military veterans are among the keys to success.
TIME IN BUSINESS
In general, a business that’s been around for a couple of years is more stable than a startup. This is key for lenders, as a business that has a proven track record of revenue over the past two years is a more attractive borrower than a company with spotty revenue over the past six months.
CREDIT SCORE
Your credit score is a data point lenders use to determine your reliability as a borrower. In most cases, you’ll need a credit score in the 600s to qualify for financing, although certain lenders and loan types may allow scores as low as 500.
CASH FLOW
A cash-flow projection shows when money is collected, when cash goes out and what’s left. Lenders typically like to see that the borrower has a thorough understanding of the financial operating cycle of the business.
COLLATERAL
Collateral is an asset that lenders can legally seize if you can’t make payments, including company buildings, equipment and accounts receivable. Some business owners choose to use their personal assets — including their homes — as collateral on a business loan.
DEBT-TO-EQUITY RATIO
Your company’s debt-to-equity (D/E) ratio measures the proportion of your company’s debt divided by shareholders’ equity. This metric helps a lender understand how likely you are to cover new debt based on the debt you’re already paying. While high D/E’s are common in some industries, your goal should be to keep your business’s D/E ratio as low as possible.
WORKING CAPITAL
Your working capital refers to the available money you have to fund your company’s day-to-day operations. You can calculate your working capital by subtracting the business’s debt liabilities due within a year from current assets that you can convert to cash.
Business owners can take out small business loans — generally between $5,000 and $500,000 or more — to finance expenses like payroll, inventory, equipment and other costs. Repayment terms could be as short as three months or as long as 25 years. Both traditional financial institutions and alternative online lenders offer small business loans.
Several types of business loans are available for small business owners, including term loans and business lines of credit for general business expenses. Financing is also available for specific purchases like equipment and commercial real estate. In addition, invoice factoring and accounts receivable financing are available for businesses that collect a high volume of invoices.
Yes, bad credit business loans are available for business owners with personal credit scores as low as 500. However, lenders may assign high interest rates to low-credit borrowers.
A personal guarantee is a common feature of small business loans, which requires the business owner to be personally responsible for their company’s debt in case of default. A personal guarantee lowers the risk for a lender, but for the business owner, it may limit any protections your business structure offers.
Online lenders may be the best option for a startup business loan. They typically require only a few months in business, as opposed to brick-and-mortar banks that often have stricter eligibility requirements. Other options for startup capital include crowdsourcing, self-funding or grant funding.
It depends. Each lender will have its own criteria, sometimes varying based upon the loan type. The lowest interest rates are often reserved for applicants with higher credit scores, however. If this doesn’t fit your business, online lenders may be more lenient with credit score requirements.
If your application for a business loan is denied, revisit the reason why. Focus on repairing your credit if your credit score was too low; if you haven’t operated in business long enough, simply wait until you’re eligible. In the meantime, consider a small business credit card to get access to the capital you need.