Company |
Max/Min Loan
|
Loan Rates |
Special Requirements |
Fundbox |
Up to $150K |
4.66 - 8.99% |
$100K+ in annual revenue, 6+ months in business |
Biz2Credit |
$25K - $6M
|
Starting from 10% |
$250K+ in annual revenue |
Fundera |
$5K-$5M |
Varies |
Varies based on the lender |
Fora Financial |
$5K-$750K |
1.1 to 1.3 factor rate |
$12K in gross sales, 6+ months in business, no open bankruptcies |
Credibly
|
$5K-$400K |
8% - 25% |
$15K+ average monthly bank deposits, 6+ months in business, and $50K+ in annual revenue
|
BlueVine |
Up to $250K |
0.25 - 25% |
$10,000+ in monthly revenue, and 6+ months in business |
Kabbage |
$1K-$150K |
9.00-36.00% |
12+ months in business, and, a valid business checking account |
Torro |
$3,000 / $575,000 |
Varies |
680+ FICO credit score |
OnDeck |
$5k-250k |
11.98-46.06% |
Credit score: 600 Annual revenue: $100k Time in business: 1 year
|
What Is a Small Business Loan?
A small business loan provides the capital your business
needs to pay expenses or invest in growth. You are given a lump sum of money,
which you repay over an agreed-upon period of time, with interest. A small business loan may be used to hire
employees, buy inventory, pay bills, or rent or buy a property. Each small
business lender may have certain requirements to qualify for financing, including
credit scores, time in business, and annual or monthly revenue.
Types of Small Business Loans
There are actually several types of small business loans
available. Which you choose depends on your business needs.
- SBA Loans: These are loans backed by the Small Business Administration,
and come with some of the lowest interest rates and most favorable terms.
Generally speaking, you need to have good to excellent credit to qualify.
- Term Loans: These are offered by banks and online lenders and may range
in their criteria to qualify, as well as their rates and terms. There are term
loans available even for businesses with poor credit, though these may charge
more interest.
- Lines of Credit: Rather than getting all your money upfront, with a line of
credit, you have access to a certain amount of money, which you can borrow from
and repay again and again.
- Merchant Cash Advances: This isn’t a loan but rather an advance on future credit and
debit card sales. You repay this through automatic payments made daily or
weekly from card transactions.
- Invoice Factoring: With invoice factoring, you sell your unpaid invoices to a
factoring company, minus a fee. The factoring company then collects the payment
on the invoice.
- Equipment Financing: This is specifically for purchasing equipment like heavy
machinery or company vehicles. The equipment you purchase acts as collateral on
the loan, which may help you get a lower interest rate.
How to Get a Small Business Loan
Though the application process may vary a bit from lender to
lender, there are a few basic steps you can expect once you choose the right
lender for your business.
- Step 1: Gather Documents: Start by seeing what your lender
requires with the application. While each application may require different
things, many lenders will ask for:
- Photo ID
- Social Security number
- Bank or accounting records
- Business licenses
- Step 2: Apply: Each application may vary in its complexity.
Some may take just five minutes to fill out, while others may take a lot
longer. If you’ve gathered your documents, this step should be fairly
straightforward. Expect to be asked about:
- Business address
- Industry
- Annual revenues
- Time in business
- Personal details, including
address, Social Security number, income
- Amount you want to borrow
- Step 3: Wait: Some lenders approve loans instantly or within
a few hours. Others take a few days, and in the case of an SBA loan, even
longer.
- Step 4: Review Loan Agreement: Once you’ve been approved,
you will be sent a loan agreement that includes how much you are borrowing, the
interest rate, and repayment terms. If you agree with the terms, sign and
return to the lender.
- Step 5: Get Paid: Once the lender receives your signed loan
agreement, the loan funds will be deposited into your business bank account in
as little as one business day.
Where Can You Get a Small Business Loan?
We’ve discussed online lenders in this article, but they’re
not your only option for small business financing. Both banks and credit unions
also offer small business loans and lines of credit, though their requirements
may be more stringent than with online lenders.
Banks and credit unions may offer both term loans as well as
SBA loans, though typically you must be in business for at least two years with
high credit scores to qualify.
For those who don’t meet these requirements, there are many
online lenders like the ones we’ve discussed here who look at other criteria
besides credit scores or time in business. The caveat is that you may pay more
in interest to get the financing you need.
Which Industries Are Most Likely to Apply for Loans?
Small business loans are available for almost any industry. The type of funding that's available may depend on your specific business type.
According to the 2021 Small Business Credit Survey, (Source: Small Business Credit Survey, Federal Reserve Banks), manufacturing companies led the way with receiving the full amount of financing sought. Retail businesses reported receiving funding the second most, followed by healthcare and education organizations and leisure and hospitality industry.
Manufacturing - 47%
Retail - 36%
Healthcare and education - 32%
Leisure and hospitality - 32%
(Source: Small Business Credit Survey, Federal Reserve Banks)
What industry-specific loan are you looking for?
Conclusion
Your small business needs capital to thrive. Whether you
need money to get through a slow period or to expand your business by opening a
second location, there are financing options available. The good news is that
your credit score, if it’s not great, won’t keep you from getting the money you
need.
That being said, take the time to shop around because rates
and terms can vary wildly from one lender to the next. You want the loan with
the terms that best suit your business. Start with the list we’ve provided
here.