Online Business Loans: Top Options and How to Apply
Last updated Jan. 21, 2025
Online business loans are debt financing options that allow business owners to secure capital while avoiding a visit to a brick-and-mortar bank. Applying for small business loans online is a convenient, accessible, and secure option for business owners.
Our guide covers the options available to you when it comes to taking out an online business loan, as well as the pros and cons and how to apply for a business loan online.
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Online Small Business Loan Options
Not every online business loan will meet your needs or fit your qualifications. You will likely need to do a bit of shopping and comparing to find the right product for your business. To help you do this, we’ve detailed below your six best options for an online business loan.
SBA Loans
SBA Loan Quick Facts
Repayment Term10 to 25 years
Interest Rates~10% to 16%
Loan AmountUp to $5 million
Funding SpeedWeeks to months
The U.S. Small Business Administration (SBA) isn’t a lender—but it’s dedicated to helping small businesses find better and bigger loans that wouldn’t be available elsewhere.
The SBA encourages lenders to work with small businesses by guaranteeing a portion of those loans. If a business defaults on the loan, the lender won’t lose all of its money thanks to the guarantee from the SBA. This helps to incentivize banks and other lenders to accept the risk inherent in lending to a small business.
An SBA loan is a great option for small businesses with strong credentials and those that have been in business for at least two years. SBA loans have extremely competitive interest rates—similar to what you’ll get from a bank loan. However, these low interest rates require high personal credit scores and strong business financials, so only top-notch borrowers will qualify for SBA loans.
The SBA offers a variety of loan programs and business resources, so the odds are good that you’ll find an SBA loan that fits your business type and matches your needs if you are one of those well-qualified borrowers.
Many SBA lenders tend to be banks and credit unions. However, there are some online lenders that offer these much-coveted business loans. iBusiness Funding, for example, participates in the SBA 7(a) loan program and comes in on the lower end of the credit score minimum scale, requiring a personal credit score of only 640.
Term Loans
Term Loan Quick Facts
Repayment Term6 months to 7 years
Interest Rates6% to 99%
Loan AmountUp to $5 million
Funding Speed1 day to several weeks
A traditional business term loan is the loan product you’re probably most familiar with: You receive a lump sum of money to finance your business needs, and then you pay back the lender, plus interest, over a fixed period of time.
Traditional term loans can fit a variety of business financing needs. They work best when you’ve got a specific business project in mind, and you have reason to believe that taking out this loan will help your business grow.
In the past, traditional term loans only came from financial institutions like your local bank or credit union. Your bank is still one of the best first stops to make in your search for a small business loan, but as with SBA loans, you’ll need fairly strong credit and a few years in business. If you don’t qualify for a term loan with a bank or credit union, then you have online business loan options as well.
Online lenders tend to offer short-term loans. These work like traditional term loans—they’re just for a smaller amount with shorter terms. Short-term loans are great for businesses that have immediate financing needs, like an unexpected cost or business opportunity.
Taking out a short-term loan is a good option when something comes up and you need money fast. But be aware that fast cash comes at a price. Often, short-term loans come with higher interest rates. On the upside, though, they have some of the most relaxed requirements as far as online business loans go.
Business Lines of Credit
Business Line of Credit Quick Facts
Repayment Term6 months to 5 years
Interest Rates10% to 99%
Loan AmountUp to $5 million
Funding Speed1 day to several weeks
Business lines of credit are some of the most flexible online loan products available. A business line of credit works like a more powerful credit card—borrowers have access to a pool of funds that can be used for business purposes when they need it. You won’t start accruing interest or making payments until you actually use the line of credit, and you’ll only pay interest on the funds you draw (though you may be charged a fee, called a draw fee, each time you take out money from your line).
A business line of credit is a type of revolving credit, so you won’t typically have to reapply for the loan. Once you repay the full amount, plus interest, the line of credit gets reset to its original value—again, as your traditional credit card would.
A line of credit is a great online small business loan for companies that want a cushion for their cash flow. If you’re a seasonal business, or you think you need a backup plan for an emergency, a business line of credit can be a sound option.
Equipment Financing
Equipment Financing Quick Facts
Repayment Term3 to 10 years
Interest Rates4% to 45%
Loan AmountUp to $10 million
Funding SpeedSame day to a couple of weeks
As a small business owner, you likely have equipment that’s essential to your business—think computers, machinery, or vehicles. Purchasing that equipment is a huge investment, and you likely don’t have the cash to pay for it out-of-pocket.
Instead of paying the full cost of equipment upfront, small business owners can use asset-based loans. In this scenario, lenders give stronger consideration to the cost of the new equipment and its rate of depreciation than to your personal credit score.
And with equipment financing, the equipment serves as collateral on the loan—meaning if you stop making payments the lender will seize the equipment and liquidate it to recoup their money. This built-in collateral means this type of financing is typically easier to qualify for.
But remember, if you go with equipment financing, you’ll actually end up paying more in the end than the piece of equipment actually costs. So before you take out this type of online business loan, make sure that the revenue you’ll get from the equipment outweighs the interest payments you’ll make on the loan each month.
Invoice Financing
Invoice Financing Quick Facts
Repayment TermUntil the customer pays the invoice
Interest Rates10% to 79%
Loan AmountUp to 90% of invoice value
Funding SpeedAs fast as 1 day
Invoice financing solves a common business problem: Your customers are slow to pay their invoices and your cash flow is suffering because of it. While you wait for your customers to pay, you can use invoice financing to gain early access to cash from unpaid invoices.
Invoice financing companies will usually advance you 80% to 90% of the total invoice value and hold the rest in reserve. Once your customers pay up, the lender gives back the remainder, minus lender fees. Typically these lenders charge a processing fee of 1% to 5% each week it takes your customers to pay their invoice.
Compared with other small business loans, invoice financing tends to be an expensive way to fund your business. You’re essentially paying for access to the money now instead of later, and you’ll end up losing part of what your customers owe you to interest rates.
Merchant Cash Advances
Merchant Cash Advance Quick Facts
Repayment Term~3 months to 2 years
Interest Rates40% to 350%
Advance AmountUp to $5 million
Funding SpeedAs fast as 1 day
If you need fast access to cash and you’re struggling to qualify for any other type of online business loan, then a merchant cash advance (MCA) may serve your needs. Merchant cash advance companies can typically approve your application and pay you the advance in as little as one day—with no need for you to provide lots of documentation.
To be clear, though, these are not loans. An MCA company (not a lender) advances you a lump sum of money and then takes a fixed percentage of your daily credit and debit card sales until the advance is paid back in full.
One advantage of this type of online financing is that, unlike other loan products, you aren’t punished by having slow revenue months. If you make less one month, the MCA company takes less. On the other hand, when your business is most successful, the company withdraws more from your account.
The biggest disadvantage to consider is that merchant cash advances are extremely expensive. They come with some of the highest rates around, which are listed as factor rates rather than interest rates—making it extra challenging for you to calculate the true cost of the advance and to compare it with other financing options. You can find MCA calculators online to help you calculate the actual cost of one.
A merchant cash advance may be a good short-term fix for your business’s finances (or perhaps the only option available to you at the moment), but proceed with caution and read any agreement thoroughly before signing.
Online Business Loans vs. Traditional Bank Loans
Even though commercial banks remain the most common providers of small business loans, the traditional bank loans they offer are still difficult for many small businesses to qualify for. This is where online small business loans come in. Here are the key differences to know between the two.
Online Business Loans Fund Faster
If you’ve already gone through an application for a traditional bank loan, you know that it isn’t a speedy process. The process tends to be much faster with online lenders.
Since they’re not banking institutions, alternative lenders providing online business loans don’t have to work with as much government regulation during their loan approval process.
You also won’t have to provide as much paperwork for your application as you would with a traditional bank loan. You’ll spend less time gathering documents, and the lender will spend less time processing them.
Online Business Loans Have More Flexible Requirements
You’ll generally find that in addition to offering speedier application processes and faster funding timelines, online lenders are more flexible on their qualification requirements than are banks and credit unions. This means that startup businesses and business owners with only fair credit may still be able to qualify for an online business loan, where they’d struggle to secure a traditional bank loan.
These benefits, of course, come at a cost, which leads to our final major point of comparison…
Online Business Loans Tend To Be More Expensive
The ease of qualifying and applying for an online business loan comes at a cost—they typically have higher rates and fees than traditional bank loans do.
Unfortunately, if you have a less-than-ideal credit score or you haven’t been in business for long, funding your small business is a risk for lenders. So to minimize their losses if you default on your small business loan, online lenders charge high interest rates and additional fees.
Not all online business loans will be expensive—you may luck out with an SBA loan from an online lender if you have a great credit score. If you don’t, though, you’re likely to find APRs in the higher double digits with many online loan products.
How to Apply for an Online Business Loan in 4 Steps
When you’re ready to apply for a business loan online, you can follow these steps:
1. Choose which online business loans to pursue.
First, weigh all of the online business loans available to you and your business.
Take into account your intended use of funds, your business’s qualifications, and how quickly you need the funding. Do your research, and check customer reviews.
It’s also a good idea to find out before applying whether a lender performs a hard credit inquiry as part of the pre-application process. Typically, lenders run a soft inquiry rather than a hard one in the early stage, before you’ve submitted all your documentation. But a hard credit check, which most lenders will run once you’ve submitted your application, does typically reduce your credit score (albeit temporarily), so you want to try to avoid multiple hard credit pulls in this process.
2. Review the online business loan requirements.
Once you’ve landed on your top online business loan options, focus on the business loan requirements that each potential lender has for borrowers. Do you meet each of the minimum requirements of all of the online lenders you intend to apply to?
Make sure you check all of their boxes before you go ahead and sink time and energy into applying for the loan. Otherwise, you may end up wasting your time.
3. Gather your online business loan application documents.
Once you’ve chosen which online business loans to apply for, start gathering all of your application materials. While some online lenders will only require that you provide your business’s accounting software login, many online lenders will ask for paperwork, like personal and business tax returns and bank statements.
Be sure to have these documents ready for your online business loan application.
4. Submit your online business loan application.
Finally, after you’ve prepared all of the paperwork, you’re ready to submit your online business loan application. With online business loans, this step will most often be as straightforward as pressing a button.
Fundera Can Help
We created Fundera to make the process of finding an online small business loan as simple as possible. With our free online marketplace, you can easily compare your options and figure out which small business loan is right for you.
You’ll be matched with one of our business loan experts who will help walk you through the process and find the best financing options 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