How We Chose the Best Low-Interest Business Loans
- Loan Features: We considered loan limits, payment options, and term flexibility, prioritizing lenders that allow you to choose your term.
- Application process: We compared the ease of the application process and whether rate checks are available without a hard credit pull. We also prioritized lenders that offer fast funding.
- Interest rates and fees: We compared the range of interest rates and fees required by each lender, eliminating lenders that charge prepayment penalties.
- Qualification process: We evaluated the strictness of the application criteria, including minimum credit score, annual revenue, and business history requirements.
- Customer support: We checked for extended customer service hours, digital support options, and website resources to make sure borrowers would have sufficient access to support
- Online user reviews: We compared customer ratings on third-party review sites like Trustpilot and ConsumerAffairs to assess customer satisfaction for each lender
- Perks and Bonuses: Lenders were given bonus points for offering payment flexibility, providing transparent information, and giving borrowers access to advanced technology.
What Is a Low-Interest Business Loan?
A low-interest business loan may refer to any loan or line of credit that comes with interest rates or fees below what is typical for the industry in current conditions. With a low-interest business loan, you’ll receive a sum of money and pay back what you borrowed, plus any finance charges, over time.
When to Get a Low-Interest Business Loan
Anytime you need funding for your business, it’s a good idea to shop around for the lowest-cost financing product. You may need a low-interest business loan for:
- Launching a startup or franchise
- Expanding to a new location
- Working capital
- Hiring new staff
- Buying inventory
- Buying equipment
- Investing in technology
- Enhancing or updating your space, equipment, or technology
- Debt refinancing
- Acquiring another business
How to Get a Low-Interest Business Loan
The process of getting a low-interest business loan varies from one company to the next, but in general, you can expect the following:
- See if you qualify and check your rate with a handful of lenders
- Choose the lender with the lowest rate that meets your needs
- Submit business documents and agree to a hard credit check
- Once approved, sign your loan documents
- Wait for the funds to be deposited into your account
- Begin repayment
Types of Low-Interest Business Loans
There are several types of low-interest business loans that meet different business needs. Most can be used in a variety of ways, but some are designed to be used for a specific purpose. Some of the most common types of low-interest business loans include:
- Business Term Loans: Business term loans provide a lump sum that is repaid in fixed monthly installments.
- Business Lines of Credit: A business line of credit is a revolving credit line you can draw from as needed. You’ll repay what you borrow over time with interest.
- Equipment Financing: Equipment loans are designed for the purchase of equipment and are secured by the equipment. They sometimes require a down payment.
- Revenue-Based Financing: With revenue-based financing, you repay a lump sum as a percentage of your revenue over time.
- SBA Loans: SBA loans are government-backed loans with competitive rates and terms. They sometimes also include support with running your business.
When to Consider Alternatives
Small business loans are a great way to fund the operations or expansion of your business, but they have some limitations, and they’re not always the best option for every business need. You should consider an alternative if:
- You’re launching a startup with no business history
- You only need a small amount
- Repayment will be unaffordable
Alternatives to Low-Interest Business Loans
There are other financing options that may be better for your business if you’re in a unique situation. For example, if you don’t qualify for a low-interest business loan or you can’t afford to repay the money with interest, consider one of the following alternatives:
- Business Credit Card: If you need to smooth out cash flow issues or you only need a few thousand dollars that you can repay quickly, a business credit card will be your best bet. You can even take advantage of a 0% introductory APR on some cards, which is helpful for making a large purchase, like a new appliance.
- Personal Loan: If you’re launching a business with no revenue or history, you can still qualify for a personal loan based on your personal credit score. Depending on the lender, you may be able to borrow up to $100,000 to start your business.
- Crowdfunding: If your business is in trouble and you’re worried about finance charges, or if you’re hoping to launch a new product or service with support from the community, crowdfunding can be a legitimate way to raise capital.
- Friends and Family: Getting a loan from friends and family can help you through a business emergency, and you can usually avoid paying any interest. Just make sure you have a plan to repay the money so you don’t damage the relationship.
Getting a loan for your small business can be costly, especially during times when the Prime rate is high. Fortunately, there are relatively low-interest financing options available to small business owners. Some online lenders we reviewed offer fees as low as 2% of the loan amount. When choosing the best business loan for you, it’s important to compare rates from a few different companies. Keep in mind that your credit score and business information will impact your interest rate with each lender.
*The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.