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The Best Small Business Loans for 2018

Finding the right loan for your small business can be complex. To help you find the best financing option for your business, we've pored through over 50 different lenders and compiled a list of the best small-business loans and small-business lenders. We considered multiple financing options specifically designed for small businesses and different scenarios.

Table of Contents

Compare Small Business Loans

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Best Online Term Loans

Many businesses cannot qualify for loans from banks or for SBA loans, which is why we recommend loans from online lenders. These may be more expensive given the more lenient requirements, but we picked out ones that are still extremely competitive cost wise. Term loans are recommended for large purchases where it'll be advantageous to spread a large payment over a course of months or years.

Best for

Lender

Highlight

Borrowers with Bad Credit

  • Doesn't require a minimum personal credit score
  • Cost per dollar: $1.10 - $1.79

Startups

  • More lenient eligibility requirements and interest rates capped at 10.5%
  • Bank prime rate + 6%

Unsecured Loans

  • Largest unsecured loan we've seen
  • Cost per dollar: $1.20 - $1.48

Equipment Financing

  • Largest variety of specific products created solely for equipment financing
  • Cost per dollar: $1.03 - $1.20

Commercial Real Estate Loans

  • Below-market interest rates, long repayment terms, low down payments and high loan amounts
  • Cost per dollar: $1.05 - $1.06

Borrowers with Good Credit

  • Competitive rates from online lenders
  • Cost per dollar: $1.08 - $1.30

Best for Borrowers with Bad Credit

  • Doesn't require a minimum personal credit score
  • Cost per dollar: $1.10 - $1.79

Best for Startups

  • More lenient eligibility requirements and interest rates capped at 10.5%
  • Bank prime rate + 6%

Best for Unsecured Loans

  • Largest unsecured loan we've seen
  • Cost per dollar: $1.20 - $1.48

Best for Equipment Financing

  • Largest variety of specific products created solely for equipment financing
  • Cost per dollar: $1.03 - $1.20

Best for Commercial Real Estate Loans

  • Below-market interest rates, long repayment terms, low down payments and high loan amounts
  • Cost per dollar: $1.05 - $1.06

Best for Borrowers with Good Credit

  • Competitive rates from online lenders
  • Cost per dollar: $1.08 - $1.30

Best Business Lines of Credit

Business lines of credit are revolving, which means once a balance is paid off, that amount is then replenished and available for you to draw again. Lines of credit are often smaller than term loans so they're more appropriate for more regular and ongoing purchases. Additionally, lines of credit typically don't incur any fees until the fund is drawn against meaning you can leave your line of credit alone until you need to actually use it. Click here to see all our business line of credit recommendations.

Best for

Lender

Highlight

Startups

  • Lower cost per dollar compared to other lenders with similar lenient requirements
  • Cost per dollar: $1.20 - $1.80

Borrowers with Poor Credit

  • No minimum credit score required
  • Cost per dollar: $1.10 - $1.69

Low Fees

  • Lowest consistent cost per dollar
  • Cost per dollar: $1.08 - $1.40

Fast Cash

  • Same day funding available
  • Cost per dollar: $1.15 - $1.78

Best for Startups

  • Lower cost per dollar compared to other lenders with similar lenient requirements
  • Cost per dollar: $1.20 - $1.80

Best for Borrowers with Poor Credit

  • No minimum credit score required
  • Cost per dollar: $1.10 - $1.69

Best for Low Fees

  • Lowest consistent cost per dollar
  • Cost per dollar: $1.08 - $1.40

Best for Fast Cash

  • Same day funding available
  • Cost per dollar: $1.15 - $1.78

Best Business Credit Card

Business credit cards are ideal for smaller, everyday purchases. They provide the greatest amount of flexibility and liquidity but are often the smallest forms of financing as the credit limits are lower than those of traditional loans. On top of their ease of use, business credit cards also come equipped with rewards programs and unique benefits. We don't recommend using business credit cards to consistently carry month-to-month balances as we have shown exceedingly better financing options with lower fees and costs per dollar. You can see all our business credit card recommendations here.

Best for

Lender

Highlight

Cash Back Rewards

  • 2% cash back on all purchases
  • APR: 18.74% (Variable)

Borrowers with Poor Credit

Business Secured Credit Card
  • Easy to qualify for and offers rare 1.5% cash back
  • Ongoing APR: 11.9%

Business Travel

  • No foreign transaction fees
  • Ongoing APR: 17.49% - 26.49% Variable

0% Intro APR Offer

  • 0% intro APR for 12 months combined with 5% cash back on first $25,000 spent in certain categories
  • Ongoing APR: 14.99% - 20.99% Variable

Best for Cash Back Rewards

  • 2% cash back on all purchases
  • APR: 18.74% (Variable)

Best for Borrowers with Poor Credit

Business Secured Credit Card
  • Easy to qualify for and offers rare 1.5% cash back
  • Ongoing APR: 11.9%

Best for Business Travel

  • No foreign transaction fees
  • Ongoing APR: 17.49% - 26.49% Variable

Best 0% Intro APR Offer

  • 0% intro APR for 12 months combined with 5% cash back on first $25,000 spent in certain categories
  • Ongoing APR: 14.99% - 20.99% Variable

Best Invoice Factoring

Invoice factoring allows for borrowers to "sell" their invoices to lenders for a discount in exchange for cash upfront. Only businesses that need cash faster than their invoices are being paid should use this. Invoice factoring is easier to qualify for, but the high costs are something to be careful of. Read more about invoice factoring here.

Best for

Lender

Highlight

Fast Approvals

  • Lenient requirements and fastest end to end funding process
  • Cost per dollar: $1.15 - $1.68

Startups

  • AltLine welcomes startups and new businesses and doesn't take the borrower's personal credit into account making the lender ideal for startups
  • Cost per dollar: $1.39 - $2.82

Maintaining Client Relations

  • Fundbox is unique in that they don't contact your clients
  • Cost per dollar: $1.10 - $1.79

Best for Fast Approvals

  • Lenient requirements and fastest end to end funding process
  • Cost per dollar: $1.15 - $1.68

Best for Startups

  • AltLine welcomes startups and new businesses and doesn't take the borrower's personal credit into account making the lender ideal for startups
  • Cost per dollar: $1.39 - $2.82

Best for Maintaining Client Relations


  • Fundbox is unique in that they don't contact your clients
  • Cost per dollar: $1.10 - $1.79

Best Merchant Cash Advance

Merchant cash advance is another niche financing tool that should only be used as a last resort due to its high expenses. This is when a lender provides funds to small-business owners in exchange for a percentage of the business’s income (usually credit card transactions) over time. If your business needs funding immediately and cannot qualify for other loans, consider applying, but be wary of the high cost per dollar. Read more about merchant cash advances here.

Best for

Lender

Highlight

Newer Businesses

  • Will consider businesses with only 3 months of credit card sales
  • Cost per dollar: $1.11 - $1.55

Fast Cash

  • Can approve and issue cash advance within 48 hours
  • Cost per dollar: $1.15 - $1.49

Large Advances

  • Largest merchant cash advances compared to other online lenders
  • Cost per dollar: $1.10 - $1.40

Best for Newer Businesses

  • Will consider businesses with only 3 months of credit card sales
  • Cost per dollar: $1.11 - $1.55

Best for Fast Cash

  • Can approve and issue cash advance within 48 hours
  • Cost per dollar: $1.15 - $1.49

Best for Large Advances

  • Largest merchant cash advances compared to other online lenders
  • Cost per dollar: $1.10 - $1.40

Best Micro / Personal Loans

The administrative and underwriting costs for a lender to underwrite a $25,000 loan are the same as costs to underwrite a $500,000 loan so many lenders may not approve loans of such a small size. In those instances, micro or personal loans should strongly be considered. Be aware that interest rates tend to be higher compared to other loans with the exception of SBA microloans. See all our personal loan recommendations here.

Best for

Lender

Highlight

Fair to Average Credit

  • Federal credit unions in particular have rates capped at 18%.
  • Cost per dollar: $1.10–$1.18

Good Credit

  • One of the cheapest lenders especially when compared to other similar options.
  • Cost per dollar: $1.05–$1.14

Debt Consolidation

  • Marcus by Goldman Sachs allows for borrowers to consolidate debt of various forms with easier to manage rates.
  • Cost per dollar: $1.07–$1.24

Fair to Average Credit

  • Federal credit unions in particular have rates capped at 18%.
  • Cost per dollar: $1.10–$1.18

Good Credit

  • One of the cheapest lenders especially when compared to other similar options.
  • Cost per dollar: $1.05–$1.14

Debt Consolidation

  • Marcus by Goldman Sachs allows for borrowers to consolidate debt of various forms with easier to manage rates.
  • Cost per dollar: $1.07–$1.24

Best Banks for Small-Business Loans

We recommend banks that have the highest frequency in lending out Small Business Administration (SBA) loans because these are, most often, the most competitive loans you'll find in the market. They come in various forms and may be more difficult to qualify for, but the government "guarantees" a portion of these loans to lenders, which is why banks charge lower interest rates.

Lender

SBA Loans Issued

Average SBA Loan Amount

Wells Fargo5,446$323,298
The Huntington National Bank4,065$200,000
JPMorgan Chase Bank3,298$224,246
U.S. Bank2,090$243,963
BBVA Compass1,602$194,182
Celtic Bank1,417$344,025
Live Oak Banking Co.1,055$1,331,838
KeyBank739$430,399
Newtek Small Business Finance525$772,133
Byline Bank360$1,105,347

How to Choose the Best Small Business Loan?

Most businesses will find their financing needs best met by term loans, business lines of credit or business credit cards. These three products will usually provide the most flexible spending terms and options. If you can't qualify for a term loan or business line of credit at a bank because you don't have the cash reserves, apply for one from an online lender as they emphasize cash flow over cash reserves. If you cannot qualify for one from an online lender, seriously determine if you'd be able to pay back any loan you take out. In most cases, we'd recommend instead focusing on increasing your personal credit score or solidifying your cash flow.

Business owners who cannot qualify for the aforementioned loans but still need funding should consider a merchant cash advance or invoice factoring. They are easier to qualify for but be wary of the high costs that often come attached. It is extremely difficult to qualify for affordable rates with these products, and they are also known for sending borrowers into debt spirals because of the high expenses. We only recommend these loans as last measures.

Be wary of advertised fees and expenses, and try to compare different loans apples to apples. Unfortunately, regulations around small business loans are sparse at best and standardized costs aren't enforced. Many lenders, especially online lenders, like to use different types of rates and fees that really make it difficult to compare different loans side by side. Rather than solely relying on the costs lenders communicate, we converted all rates into costs per dollar.

For a more in depth comparison of the different financing options, take a look here.

Banks vs. Online Lenders

Many small-business owners default to seeking financing from traditional banks given how ubiquitous they are. However, financing from banks can be difficult to qualify for, which makes them out of reach for many small businesses. If your business can qualify for financing from traditional banks, we fully recommend doing so as you'll often find better rates and terms. Credit unions will also offer competitive rates but can be just as difficult to qualify for.

If you do not qualify for financing from a bank or a credit union, you still have the option of online lenders. Online lenders will typically have lower application requirements but higher fees and less attractive terms. This is a given as these lenders are incurring higher risks given the more lenient requirements they're setting for applicants. Online lenders also have the benefit of often providing faster funding times and simpler applications. This can be crucial for small businesses who need funding quickly.

Shop Around

One thing we don't recommend borrowers do is settle for a single quote from a single lender. Take your time to shop around and measure your options. The underwriting process differs from lender to lender, so even if you qualify for an expensive loan from one lender, another might give you substantially better rates. One word of caution is to be wary of lenders who perform hard pulls if they check your credit score. This will negatively impact your score and will also affect the loan you can qualify for with other lenders. Most lenders today will only perform soft pulls, which don't negatively impact your score, but we'd still recommend double checking.

You should always compare loans side by side and make sure you compare apples to apples. Some lenders use annualized interest rates (AIR), others use APR. If you can, have a lawyer review you loan contract before signing. You'll want to look out for hidden fees or terms that are different than previously communicated.

Is a Small Business Loan Right for You?

Every business needs capital to grow. Ideally, capital would always originate internally from retained earnings but if that's not the case, businesses need to consider external funding. You'll need to decide what form of financing you want to pursue, whether it's venture capital, crowdfunding, small business loans, etc. Each path will have different pros and cons as they're all substantially different financing methods in nature. You'll need to compare each option side by side and decide which is right for you.

You'll also need to assess a projected ROI of the loan. There are very few instances where we'd recommend taking out a loan if your loan's costs will be heavier than the projected benefits.

Our Methodology

In order to compile a comprehensive list of the best loans for your small business, we compared different loans based on the following metrics:

  • Competitive rates and fees:To make comparisons simple, we converted all fees to cost per dollar. In general, borrowers with poor credit won't qualify for the same rates as borrowers with healthy credit, but we don't recommend paying above a cost per dollar of $1.60. There are plenty of cheaper financing options.
  • Wide range of amounts and term lengths: Small-business financing is a lot more complex than a simple "one size fits all." Therefore, we highly considered the range of loan size. Businesses need to borrow varying amounts depending on the planned use of funds, and some businesses may prefer shorter maturities to longer ones when it comes to paying back the loan.
  • Clear eligibility requirements: Did a lender include clear eligibility criteria for its loans? Before you even apply for a loan, you should know whether you meet a lender's basic eligibility criteria.
  • Lender credibility: With the advent of online lending, it's now easier than ever for a business owner to get a loan from a less-than-reputable source—and that's a problem. We looked for lenders that had positive customer reviews or Better Business Bureau (BBB) ratings and had been in business at least several years.
  • Funding time: We looked for lenders that either offered quick funding time or were transparent about the time to receive money. Many lenders now understand the importance of getting funds to businesses quickly, so we favored lenders that offered fast approval and funding, where possible.
  • Application process: We consider the convenience and ease of a lender's application process in tandem with the borrower's needs. For instance, we prioritized speed and ease when evaluating loans for borrowers who need funds quickly. In contrast, speed and ease were less important for borrowers looking for a conventional commercial real estate loan.
Justin Song

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

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