Small Business Loans

Last updated Dec. 17, 2024
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Welcome and congratulations! If you’re joining us here, then that means you belong to a community of our economy’s often unsung heroes—small business owners.
Whether you’re here with the sparkle of a business idea and are wondering how to get started, you’ve been in business for years and you’re looking for financing to help your business reach its next level, or any scenario in between, Fundera is here to guide and support you.

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Where to Get a Small Business Loan

Today, there are more options than ever for small businesses to get access to capital. The benefits and drawbacks of each largely revolve around qualification requirements, funding speeds, and interest rates.

Banks

➡️ Start your search here if you have good-to-excellent personal credit, solid annual revenue, and a bank you’re already happy working with.
Traditionally, most small business owners have turned to banks (and credit unions) to apply for financing. In most cases, your local bank will be able to offer you some of the best rates and terms, particularly if you already have an established relationship (i.e. a personal or business bank account) with the bank. Typically, you’ll apply for a bank loan over the phone or in person, which is another reason it can be helpful to find a local branch when comparing bank loans.
Along with SBA loans, bank loans tend to be some of the tougher loans to qualify for, requiring good-to-excellent personal credit scores, at least a couple of years of business history, and fairly high annual revenue amounts. But shop around at your local banks to see what’s on offer. If you can qualify, a bank loan will be one of the most competitive and reliable financing options.

SBA Lenders

➡️ Continue your search here if you have good-to-excellent personal credit, have tried and failed to get financing elsewhere, and don’t require immediate or fast funding.
Loans backed by the U.S. Small Business Administration (SBA) are some of the most sought-after small business loans—and with great reason. SBA loans typically offer competitive interest rates (maxing out around 16%), lengthy repayment terms (10-25 years) and large loan amounts (up to $5 million).
These appealing benefits, of course, come with tradeoffs: high qualification requirements and slow funding speeds.
While the SBA itself is not a lender, it partially guarantees SBA loans, which gives banks, credit unions, and even some online lenders the incentive to fund small businesses. If you meet the qualification requirements and have been unsuccessful with your small business loan application elsewhere, turn your efforts to these loans.
Great news! The SBA also funds microloans. These are term loans capped at $50,000 and with terms up to seven years. SBA microloans are designed for startups, and the credit requirement is a bit lower than other SBA loans.

Online Lenders

➡️ Begin your search here if you’re a startup business (open less than two years), have a personal credit score that needs improvement, and/or you need fast funding.
Online lenders are a viable alternative when small business owners can’t qualify for an SBA or bank loan. They often have more flexible qualification requirements and the ability to approve and fund a loan within days rather than weeks or months. As you might expect, these benefits come at a cost: typically much higher interest rates and shorter terms than bank or SBA loans.
Online lenders offer a variety of loan types, from term loans and lines of credit to equipment financing and invoice financing.

Microlenders

➡️ Start your search here if you need only a small loan and don’t have the credit score or time in business to meet the qualifications for a bank loan.
Microlenders frequently operate in the nonprofit space, and many of them concentrate their lending efforts on communities that have historically faced challenges in securing funding, such as women, veterans, and minorities.
A microloan is typically a term loan of no more than $50,000. Depending on the lender and the amount, you may be able to get an interest-free microloan or one without collateral. This type of loan can be a great option for startups and business owners with low personal credit scores.

Merchant Cash Advance Companies

➡️ Turn to this option only if you can’t get any other small business loan or grant and you need capital right away.
You may already be well aware that merchant cash advances, sometimes called business payday loans, are a financing option to be wary of. This part of the financing world is ripe for predatory lenders, so proceed cautiously if you’re entertaining a cash advance. Interest rates can be outrageous (sometimes reaching three digits), contracts can be particularly confusing and sometimes intentionally misleading, and these companies may require a daily repayment schedule. All of these factors can lead you into a cycle of business debt that’s difficult to break out of.
You’ll know a merchant cash advance company is worth your consideration if it’s transparent with its rates and fees and upfront about its products and services.
Always read any agreement carefully and thoroughly before signing, no matter the loan or lender.

Types of Small Business Loans

SBA Loans

Term Loans

Business Lines of Credit

Microloans

Equipment Financing

Invoice Financing

Merchant Cash Advance

Startup Business Loans

Compare Your Small Business Loan Options

With so many lenders and loan types available, it can feel overwhelming as you begin your small business loan search. Depending on your business needs and circumstances, though, certain loan types will be a better fit for you than others. These details should help you narrow your focus:

SBA Loan

Best for: Any small business with at least two years of established business history.
1 to 3 months, depending on the lender.
10 to 25 years, depending on the loan type.
SBA loans are some of the slowest to fund. But they’re well worth it if you don’t require quick or immediate financing.

Term Loan

Best for: A lump sum of cash with flexible uses and the option for longer repayment terms.
1 business day to several weeks, depending on the lender.
  • Short- and medium-term loan: 6 months to 5 years.
  • Long-term-loan: 5 to 25 years.
Terms, rates, and qualifications will vary depending on the type of lender you borrow from.

Business Line of Credit

Best for: Access to a revolving line of capital that can be used for a variety of needs.
1 business day to several weeks, depending on the lender.
6 months to 5 years, depending on the lender.
Interest rates can vary dramatically, depending on the lender you choose. Take a close look at whether a lender charges additional fees, such as draw or maintenance fees.

Microloan

Best for: A small sum of capital, particularly for small businesses operating in underserved communities.
1 week to a few months, depending on the lender.
A few months to 7 years, depending on the lender.
Loan amounts max out at $50,000 and often lower.

Equipment Financing

Best for: Purchasing business equipment, hardware or software.
Same day to a couple of weeks, depending on the lender.
3 to 10 years, depending on the lender.
This loan type requires a down payment, but the equipment you’re financing serves as the collateral, so you won’t need additional physical collateral to secure the loan.

Invoice Financing

Best for: Business-to-business companies with outstanding invoices, typically between 30 and 90 days past issue date.
1 day to a couple of weeks, depending on the lender.
Outstanding invoices up to 90 days.
Like equipment financing, the invoices serve as collateral on this type of loan. Lenders often give more weight to the credit scores of your customers than to your own when considering your loan application.

Merchant Cash Advance

Best for: Businesses that can’t qualify for any other loan type. MCAs should be a last-resort option.
Same day to 3 days, depending on the MCA company.
3 to 18 months, depending on the company.
Interest rates can be astronomical, and MCAs can often lead to a cycle of debt that’s difficult to break. Proceed with caution.

How to Qualify for a Small Business Loan

The requirements to qualify for a business loan largely depend on the individual lender you’re working with and the specific loan product you’re applying for. Overall, however, lenders will likely first look at three metrics to determine whether or not you qualify:
Calculator and invoice with pink background.
Personal Credit Score680+ will put you in the ring for SBA or bank loans. Many online lenders will look for a min. score of 570-660.
Dollar bills with pink background.
Annual RevenueTypically, the range is anywhere from $50,000 to $250,000 in annual revenue.
Invoice with blue background.
Time in BusinessMost lenders will want to see 2+ years of business history, unless the loan or lender caters to startups.
Generally, the better your personal credit, the stronger your annual revenue, and the longer your time in business, the more likely you are to qualify for a small business loan—and one with the most desirable rates and terms. But if your qualifications aren’t ideal, don’t lose hope! There are still options for you to consider.

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How Fundera Helps Small Businesses Get a Loan

Fundera connects you to your best loan options through our online marketplace of vetted business lenders. With one simple application, you can see all the products and lenders you qualify for, and start evaluating which small business loan is best for your business.

How much do you need?

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application

Frequently asked questions

Your business’s qualifications will dictate how hard it is to get a loan. If you have good credit, a few years in business, and a strong annual revenue, it shouldn’t be hard for you to qualify for an affordable loan. On the other hand, if you have poor credit, haven’t been in business long, and have low annual revenue, you’ll find it more difficult to get a small business loan.

Additionally, the type of small business loan you’re applying for will play a role in how hard it is to get. Generally, bank loans—which require top qualifications and lengthier processes—are more difficult to get than other products, like invoice financing or an online loan.

Eligibility requirements vary by loan type and lender, but to get one of the more desirable small business loans—one with competitive interest rates and longer terms—you’ll need a good-to-excellent personal credit score (680-850), two to three years in business, and a strong annual revenue that you can prove with your business financial documents.

It depends on the type of loan you’re looking for and the qualification requirements of the lender. To get an SBA or bank loan, typically the most sought after small business loans, you’ll need a minimum credit score of 680-700. Many online and alternative lenders will consider borrowers with a minimum credit score of 600.

Short-term loans and lines of credit from online and alternative lenders are typically the easiest loans to qualify for. Requirements may be as low as a 570 credit score, three months in business, and $30,000 in annual revenue.