Small Business Loans from Banks & Online Lenders: The Best Options

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Financing your business is a big decision, and you want to be sure you're working with the right lender and right product for your business. Navigating the small business lending landscape isn't easy, and it gets tough to figure out exactly what the right move is for you. To help you with this decision, we've researched more than 80 different lenders and compiled a list of some of the best small business loans available.

Small business loan overview: Is it hard to qualify?

Small business loans, also known as “term loans” or “commercial business loans,” are lump-sum forms of financing that are best used to spread out large purchases over a period of time. Loans will incur interest charges the moment you borrow, so you'll want to be sure you have a plan for how you'll use them before you apply.

Applying for a small business loan can take quite a bit of time. Generally, traditional lenders like banks will often take weeks or months to go through the end-to-end application process, while online and alternative lenders are able to process loans within a single business day. A large factor here is how prepared the applicant is before the application process starts.

Different lenders will have different requirements, but most lenders will prioritize your personal credit score, annual revenue, profitability and age of business. The general rule of thumb is that online lenders tend to be more lenient with their requirements but charge higher rates and lend out smaller loans, while banks tend to be stricter but lend out much larger loans at cheaper rates.

Summary: Our top picks

In the table below, we’ve summarized our top picks for the best small business loans for the most common use cases.

Best For

Recommended LenderMax Loan Amount
OverallSnapCap$600,000
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on SnapCap, another LendingTree affiliate

Lower Credit ScoresKabbage$250,000
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Good Credit ScoresNational Funding$500,000
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on LendingTree's secure website

Excellent Credit ScoresBanksVaries by lenderLearn More
StartupsUpstart$50,000
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Unsecured LoansCredibly$400,000
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Commercial Real Estate LoansSmartbiz$5,000,000
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on SmartBiz's secure website

Equipment FinancingOnDeck$500,000
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Best For

Recommended Lender
OverallSnapCap
Learn More

on SnapCap, another LendingTree affiliate

Lower Credit ScoresKabbage
See Offers

on LendingTree's secure website

Good Credit ScoresNational Funding
See Offers

on LendingTree's secure website

Excellent Credit ScoresBanksLearn More
StartupsUpstart
See Offers

on LendingTree's secure website

Unsecured LoansCredibly
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on LendingTree's secure website

Commercial Real Estate LoansSmartbiz
Learn More

on SmartBiz's secure website

Equipment FinancingOnDeck
See Offers

on LendingTree's secure website

Our top pick overall: SnapCap

SnapCap
SnapCap

Consider this if you want to compare multiple offers quickly.

Financing Cost 19.99% - 49.99% APR
Loan Amount Range $5,000 - $1,000,000
Loan Term Range 3 - 36 months
Repayment Daily or weekly
Funding Time As fast as 24 hours

Why we like it: SnapCap isn't necessarily a lender but a marketplace where with a single application, borrowers are matched with multiple offers, depending on the strength of their application. Having to apply separately to multiple lenders can often take time and effort, even with streamlined applications that lenders are adopting. Furthermore, SnapCap's list of partners seems to be one of the strongest that we've reviewed, ensuring that borrowers are matched with the top lenders in the space.

We also recommend SnapCap as a first stop because SnapCap's requirements are relatively low, which makes it a viable option for many prospective borrowers. Additionally, SnapCap adopts a concierge approach where most applicants (depending on the specifics of their application) are paired with experts who give guidance as to which offers best fit each business's case. SnapCap is unique in offering this service.

Drawbacks: Borrowers who have a clear idea of which lender they'd like to apply with should apply directly with said lender. SnapCap is best utilized when you'd like to quickly compare multiple offers at once. Depending on which lender you proceed with, you might be subject to a hard credit pull, which can impact your credit score. Because SnapCap isn't the lender in this case, this would be out of SnapCap's control.

Highlights:

  • Minimum personal credit score: 600
  • Rates: 19.99% - 49.99% APR
  • Maximum loan: $600,000

Best business loan for bad credit: Kabbage

Kabbage
Kabbage

Consider this if you have a low credit score but need financing quickly.

Financing Cost 20.00% - 80.00% APR
Loan Amount Range $2,000 - $250,000
Loan Term Range 6 or 12 months
Repayment Monthly
Funding Time As fast as same day

Why we like it: Kabbage is the perfect option for those with low personal credit scores since it's one of the few lenders that doesn't require a minimum credit score. Instead, Kabbage looks for businesses that can demonstrate alternative metrics of success like a strong cash flow. Additionally, Kabbage processes applications extremely quickly, sometimes within hours of submission.

Kabbage's financing is moderately sized when compared with other alternative lenders with a maximum financing of $250,000. Additionally, Kabbage offers a Kabbage card for access to your approved business line of credit. This makes Kabbage's financing one of the most liquid recommendations on our list as it's the only lender to offer anything of the sort.

Drawbacks: Kabbage's rates are one of the highest we've seen among online lenders. Kababge incurs an increased risk by removing the emphasis from personal credit scores, and that risk is reflected back to the borrower in the form of higher rates. However, if extra financing, no matter how expensive, can help your business, we'd always recommend it.

Highlights:

  • Minimum personal credit score: 560
  • Rates: 20.00% - 80.00% APR
  • Maximum loan: $250,000

Best business loan for good credit: National Funding

National Funding
National Funding

Consider this if you're a strong borrower and need large financing.

Financing Cost 5.99% - 29.99% APR
Loan Amount Range $5,000 - $500,000
Loan Term Range 6 - 60 months
Repayment Daily or weekly
Funding Time As fast as one business day

Why we like it: National Funding offers larger unsecured working capital loans for those with good credit scores (600+). Eligibility requirements are more lenient than what you'd find at a bank, and the size of financing that National Funding offers is on the larger side compared with other alternative lenders. Additionally, we recommend National Funding for anyone looking for varied products with a single lender as it offers several different financing options. Those who need financing quickly should consider National Funding as its application processing times are on par with other alternative lenders.

Borrowers who pay off their loans within 100 days are eligible to receive a 7% discount off their remaining balance, which could mean significant discounts depending on the specific loan. Borrowers also don't have to worry about collateral as National Funding offers unsecured financing. National Funding provides unique flexibility as first-time borrowers can extend their loans once they've paid off 50% of their loan.

Drawbacks: National Funding only provides minimal information about its rates, fees, and terms without actually applying. The cost of National Funding's financing isn't well publicized; the info that we've been able to gather are combined with borrower data and are based off of our own calculations. However, the cost of National Funding's financing is relatively low compared with other online lenders if our calculations are correct.

Highlights:

  • Minimum personal credit score: 600
  • Rates: 5.99% - 29.99% APR
  • Maximum loan: $500,000

Best business loan for excellent credit: Banks

Why we like them: For those with excellent credit scores, we recommend banks that have the highest frequency in lending out Small Business Administration (SBA) loans because SBA loans are 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 SBA "guarantees" a portion of these loans to lenders, making them more appealing to lenders, and also sets interest rates caps.

LenderAverage Loan Amount
Wells Fargo$323,298
The Huntington National Bank$200,000
JPMorgan Chase Bank$224,246
U.S. Bank$243,963
BBVA Compass$194,182
Celtic Bank$344,025
Live Oak Bank$1,331,838
KeyBank$430,399
Newtek Small Business Finance$772,133
Byline Bank$1,105,347

Drawbacks: Banks tend to only approve borrowers with the strongest profiles. This means borrowers must display exceptionally strong credit scores (720+), profitability, strong cash flows and a longer age of business. Another downside to banks is that they process applications far slower than online lenders.

Best startup loan: Upstart

Upstart
Upstart

Consider this if you have a new business and a fair or good credit score.

APR Range 7.54% - 35.99%
Loan Amount Range $1,000 - $50,000
Loan Term Range 3 or 5 years
Funding Time 1+ days

Why we like it: While it may be a bit unconventional, we'd recommend Upstart's personal loans for those looking for startup financing. As a startup, it's very difficult to obtain small business loans since you likely won't have strong financials or a lengthy age of operations, which are major metrics that lenders look to. We specifically recommend Upstart because they offer large financing compared with other personal loan lenders and its rates are better than many small business loan lenders you'll find online.

Similar to other small business loan lenders, Upstart's application processing time is extremely quick and they advertise that you'll be able to check your personalized rates within five minutes. Since Upstart qualifies borrowers based on their personal finances and application rather than their business, it may be easier to qualify for a loan with Upstart versus a small business lender.

Drawbacks: While it may be more likely to get approved for a loan with Upstart rather than a more traditional business loan lender, Upstart's loans are much smaller than those of a traditional business loan. Additionally, if you don't have the strongest financials and your credit score is below 620, you won't be able to qualify.

Highlights:

  • Minimum personal credit score: 620
  • Rates: 7.54% - 35.99% APR
  • Maximum loan: $50,000

Best unsecured loan: Credibly

Credibly
Credibly

Consider this if you need a larger unsecured loan.

Financing Cost 1.15x - 1.49x Factor rate
Loan Amount Range $5,000 - $400,000
Loan Term Range 6 - 17 months
Repayment Daily or weekly
Funding Time As fast as 48 hours

Why we like it: Credibly offers one of the largest working capital loans among alternative lenders. The biggest draw is that any loan under $100,000 is unsecured. Even when it is secured, it's likely that Credibly will apply a blanket lien, which is a general lien against the entire business and its assets. Therefore, Credibly won't likely be looking for individual items to claim as collateral.

In addition, Credibly offers other forms of financing like a business expansion loan or merchant cash advance (MCA) financing. Borrowers who need or want to consider more than one type of financing should consider Credibly. Borrowers with weaker credit scores will also be pleased to see that Credibly requires lower credit scores than most other alternative lenders.

Drawbacks: Credibly's biggest drawback is that it displays rates for its working capital loan in factor rates, which is very difficult to convert to APRs. This makes it difficult to shop around and compare different options with each other.

Highlights:

  • Minimum personal credit score: 500
  • Rates: 1.15x - 1.49x Factor rate
  • Maximum loan: $400,000

Best loan for commercial real estate: SmartBiz

SmartBiz
SmartBiz

Consider this if you need a loan for commercial real estate.

Financing Cost Prime Rate + 1.50% - 2.75%
Loan Amount Range $500,000 - $5 million
Loan Term Range 25 years
Repayment Monthly
Funding Time 30+ days

Why we like it: SmartBiz is a marketplace for SBA loans that allows for comparing multiple options at once. If you're on the hunt for a commercial real estate loan, you likely won't find a better deal than a SBA loan. SBA loans are sponsored by the Small Business Administration, the federal group in charge of all things small business, and they're typically the most competitively priced options in the market.

If you're in the market for SBA loans, SmartBiz is the fastest way to get matched with multiple offers. The only alternative is to individually approach banks and lenders separately. SmartBiz also specializes in commercial real estate loans, and it's helpful to have an experienced lender in a complicated process.

Drawbacks: The biggest downside to SmartBiz has nothing to do with SmartBiz but rather the fact that SBA loans are very hard to qualify for. SBA loans are usually issued by traditional lenders like banks, which have the strictest requirements in the market. In order to qualify, you cannot be a startup and you must have a strong credit score.

Highlights:

  • Minimum personal credit score: 675
  • Rates: Prime Rate + 1.50% - 2.75%
  • Maximum loan: $5,000,000

Best loan for equipment financing: OnDeck

OnDeck
OnDeck

Consider this if you need fast equipment financing.

Financing Cost 9.30% - 99.70% APR
Loan Amount Range $5,000 - $500,000
Loan Term Range 3 - 36 months
Repayment Daily or weekly
Funding Time As fast as 24 hours

Why we like it: OnDeck offers some of the largest financing we've seen among alternative lenders. Additionally, they also offer some of most competitive rates compared with other lenders who offer similar products. OnDeck likely won't be as cheap as financing from a bank but with rates that start in the single digits for its term loans, it's tough to ignore especially given its large financing that can easily cover most large machinery and equipment.

Additionally, OnDeck is fairly easy to qualify for. Like many other online lenders, OnDeck bases its approvals on numerous factors, which removes the heavy focus from the borrower's personal credit score. However, keep in mind that those with weak applications will be subject to high fees as OnDeck's financing can get very expensive.

Drawbacks: While OnDeck provides large financing for an alternative lender, it might still not be enough for the few use cases that require more than $500,000. Additionally, OnDeck's rates spiral well into the double digits for the weakest applicants, which makes it tough to justify for the weakest applicants.

Highlights:

  • Minimum personal credit score: 600
  • Rates: 9.30% - 99.70% APR
  • Maximum loan: $500,000

How small business loans work

Small business loans help provide an influx of cash that can be used for growth or to help keep operations running. There's a few different types of small business financing and it's important to understand how different loan types work in order to best determine which option fits your business.

There are also several different types of lenders. The most common are traditional lenders like banks but there's been a recent rise in alternative or online lenders. Traditional lenders will usually offer the best rates and terms but are typically much harder to qualify for. Online lenders are better suited for businesses that don't have the strongest credit scores or cash flows but still need financing.

Term loans

Term loans are the most common form of loans where a lender provides a borrower with a lump sum and that amount is then paid back over time with interest. Because you start paying for financing from day one, we'd recommend only using term loans for large purchases when it's advantageous to spread out payments over a length of time.

Business lines of credit

Business lines of credit are similar to credit cards with large credit limits. They're revolving, which means they're replenished as you pay off your balance. They're often smaller than term loans but their revolving nature makes them ideal for ongoing projects like marketing campaigns.

Business credit cards

Business credit cards are usually the smallest form of financing you can obtain but they're ideal for small, daily expenditures. Properly leveraging business credit cards for their rewards can often result in high cashback returns or travel credits. Modern-day business credit cards now also come with extended warranties, special repayment terms and more.

Equipment financing

Equipment financing is often identical to term loans but the key difference is that the equipment purchased is often used as collateral for the loan. Heavy machinery and large equipment can get very expensive, and equipment financing is an effective way to help your business absorb those large costs. Because equipment financing revolves around the equipment you plan on purchasing, you can often secure a loan that's up to the full value of the equipment.

Commercial real estate loans

Similarly to equipment financing, commercial real estate loans utilize the commercial property being purchased as collateral. Most lenders require that your business owns at least 51% of the property in order to secure a loan. Many lenders will allow you to borrow up to 65-75%, and the rest would have to come out of your pocket as a down payment.

Merchant Cash Advances (MCA)

MCAs are when lenders provide an upfront loan against your expected sales. In most cases, lenders will only lend MCAs based on your business's credit card sales because they take a small percentage of your daily sales as repayment for your loan. This is most commonly done at the credit card processing level. MCAs are most typically used by retail businesses but should only be used if your business doesn't qualify for other forms of financing because of the high cost of MCAs.

Invoice financing

Invoice financing is best suited for businesses that often face late or delayed invoice payments. Lenders pay borrowers up to 90% of their outstanding invoices, and use the invoice as collateral, which allows for the borrower to have access to capital faster. It's a useful method if you constantly run into overdue payments but can also use that expected capital to grow your business.

How to get the best small business loan

When applying for a small business loan or financing, you should consider a variety of factors before committing to a loan. Initially, you’ll need to assess what you need the loan for (equipment, real estate, working capital, business expansion, etc.), as this will also inform what type of loan or line of credit you need to apply for.

1. Figure out how much you need and how you want to repay

You’ll need to determine how much money you need. You don’t want to overestimate or underestimate the amount you need, as you want to make sure you can get approved for a loan and have enough money to cover what you need. A good place to start is at roughly 10-20% of your annual revenue and adjust up or down based on what you think you’ll need. You should also think about what kind repayment schedule works for you, whether that’s monthly, daily or weekly. Some borrowers find making a large payment every month is a greater burden on their business than weekly or daily payments.

2. Get your personal and business finances in shape

Before you apply, you’ll want to make sure your personal and business finances are in shape. Most lenders will care about your personal and business credit scores, so it’s helpful to check both before approaching a lender (and take the necessary steps to improve them if they aren’t great). Lenders will also want to see a strong business plan, which will normally include financial statements, such as balance sheets, cash flow and tax returns. A great business plan should act as a pitch for your business and convince a lender to give you money.

3. Shop around

When you’re ready to apply, it’s in your best interest to shop around. Based on how much money you want and when you need it, different lenders will be better than others. If you own an established business and need a large loan, a bank or an SBA loan might be the best fit. You should check with national and community banks and credit unions in your area. Don’t forget that your relationship with the bank will matter and can help you get approved even if your application has holes. Newer businesses or businesses that need funds quickly may be better off applying through an online lender. Online lenders can sometimes be a better choice if you need less than $100,000.

4. Compare loan offers carefully

Once you have loan offers, you should, at minimum, compare the loans based on the APR, which shows the total amount of interest and fees you will pay on the loan; the repayment schedule, which includes how long the loan term is for and how frequently you will need to make payments; and any loan restrictions, which may include what the loan can be used for. If you don’t need funds quickly, it’s also best to shop around at different banks, credit unions and alternative lenders before committing. Make sure to read the loan contract carefully before signing or have your lawyer or legal advisor review it.

Our methodology

In our review of government, bank and online small business loans, we considered the following criteria:

  • Competitive interest rates: When it comes to business financing, getting a good interest rate on a loan is crucial, and it pays to shop around. We looked for lenders that offered reasonable interest rates based on the credit profile of borrowers. In general, borrowers with poor credit won't qualify for the same APRs as borrowers with healthy credit, but they still shouldn't be paying exorbitant interest on a loan.
  • Wide range of amounts and terms: Did the lenders offer a wide range of loan amounts and terms? 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.
  • Few restrictions on loan use: With the exception of commercial real estate loans, we looked for loans that businesses could use for a variety of purposes: equipment or machinery purchases, working capital, inventory, etc. Being able to use funds flexibly makes a loan a more attractive option for many business owners.
  • 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. Otherwise, it's a waste of your time. We looked for lenders that offered specifics on the types of businesses and owners they look for.
  • 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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