Best Small Business Loans Of March 2024 – Forbes Advisor

Best Small Business Loans Of March 2024 – Forbes Advisor

Best Business Loans Of February 2024

Best for Short-term Loans

OnDeck

OnDeck

Why We Picked It

OnDeck busines loans offer business owners a line of credit of $6,000 to $100,000 with a 12-, 18- or 24-month repayment term. The line of credit resets after each withdrawal. OnDeck also has a term loan in amounts of $5,000 to $250,000 with repayment terms of up to 24 months.

Pros & Cons

  • Term loans from $5,000 to $250,000; lines of credit from $6,000 to $100,000
  • Same-day funding
  • Low minimum credit score requirement
  • $100,000 minimum annual revenue requirement
  • Must have been operating for at least one year
  • Does not lend to businesses in Nevada, North Dakota or South Dakota.

Details

Overview
OnDeck was founded in 2006 and has since been a leading provider in the business lending space, offering both term loans and lines of credit. To date, the company has extended $14 billion in funding to small businesses.

OnDeck doesn’t lend to businesses in Nevada, North Dakota or South Dakota. What’s more, while it lends to over 700 industries, there are some industries it cannot serve.

Turnaround time

You can apply and receive a decision from OnDeck on the same day.

Best for Lender Comparison

Lendio

Lendio

Lendio

Why We Picked It

Lendio’s online business loan marketplace connects prospective borrowers with more than 75 traditional banks and nonbank online lenders. By filling out a single application, business owners are matched with numerous lenders, offering a one-stop shopping experience.

Pros & Cons

  • One application connects you to more than 75 lenders
  • Wide variety of loan products, including term loans, lines of credit and SBA loans
  • Some lenders charge prepayment penalties
  • Terms and funding times vary depending on specific lender

Details

Overview

Lendio is an online business loan marketplace that connects prospective borrowers with traditional banks and nonbank online lenders. Over its existence, Lendio has helped small business owners receive over $12 billion in funding nationwide.

Applicants may see Lendio as a one-stop shop. You can apply for business loans, lines of credit, SBA loans, equipment financing, merchant cash advances (MCAs), commercial mortgages, invoice factoring and business acquisition loans. However, because Lendio is a marketplace and not a lender, it doesn’t publish specific terms. Instead, you’ll have access to its lending partners while helping you find the best offer for your needs.

Funding time

Applying through Lendio takes 15 minutes. After you review your offers and are approved by your lender, you can receive your funds in as little as 24 hours.

Best for Fast Funding

QuickBridge

QuickBridge

APR range

Factor rates start at 1.11

QuickBridge

Factor rates start at 1.11

Why We Picked It

QuickBridge small business loans can fund within 24 hours for qualifying borrowers with fair to excellent credit. The lender is especially attractive to business owners who need short-term loans with high loan amounts.

Pros & Cons

  • Flexible loan terms
  • Quick application and fast funding deposited to a bank account
  • Early payoff discounts
  • Origination fee
  • Loan interest may be high
  • $250,000 minimum annual revenue requirement for small business loans

Details

Overview

QuickBridge offers small business loans in all 50 states. Interest on loans from QuickBridge is expressed as a factor rate. To determine the cost of borrowing, multiply your desired loan amount by the factor rate. For example, if you borrow $30,000 at a factor rate of 1.11, you would owe $33,300 in total with $3,300 in interest. With a loan term of six months, your interest rate would be 22%, but that doesn’t include lender fees.

Turnaround Time

QuickBridge provides funding within 24 hours to well-qualified borrowers.

Best for Lines of Credit

American Express® Business Line of Credit

American Express® Business Line of Credit

Minimum Credit Score

660 FICO at the time of application

American Express® Business Line of Credit

660 FICO at the time of application

Why We Picked It

The American Express® Business Line of Credit from American Express Business Blueprint™ gives business owners the chance to secure funding from American Express® Business Line of Credit. Repayment terms include six, 12, 18 and 24 months.

All businesses are unique and are subject to approval and review.

Pros & Cons

  • Backed by American Express
  • No prepayment penalty
  • Monthly fees on unpaid balances
  • Requires personal guarantee

Details

Overview

American Express Business Blueprint™ is formerly Kabbage from American Express and Kabbage Funding™. In addition to its line of credit, American Express Business Blueprint provides other tools beneficial to small business owners, including its own mobile app that provides comprehensive cash flow insights.

Line of credit customers incur a loan fee for each month they have an outstanding balance. Total monthly fees incurred over the loan term range from 3% to 9% for six-month loans, 6% to 18% for 12-month loans, 9% to 27% for 18-month loans and 12% to 18% for 24-month loans.

All businesses are unique and are subject to approval and review.

Turnaround Time

Funds can take up to three business days to appear in your account, depending on your bank.

Best for Flexible Lines of Credit

BlueVine

BlueVine

BlueVine

Why We Picked It

BlueVine small business loans offer a line of credit business owners can tap as needed for funds ranging from $6,000 to $250,000. BlueVine offers two payment structures: Flex 6 or Flex 12. Customers who choose Flex 6 make weekly payments over 26 weeks while Flex 12 customers make monthly payments over 12 months. After 45 days of payment on Flex 6, or 90 days of payment on Flex 12, you may be eligible for a credit line increase.

Pros & Cons

  • Can get a decision within five minutes and funding within hours
  • Lines of credit up to $250,000
  • Low credit score requirement
  • No mobile app for its line of credit
  • Monthly revenue requirement
  • Not available to businesses in North and South Dakota, Puerto Rico and U.S. territories

Details

Overview

BlueVine is a financial technology company that provides financing solutions to small businesses nationwide. It specializes in business lines of credit and checking accounts. As of December 2021, BlueVine no longer offers invoice factoring as one of its financing methods.

BlueVine’s line of credit is available in most U.S. states except North and South Dakota, Puerto Rico and U.S. territories.

Eligibility

Eligibility varies on the specific program a business owner chooses.

Turnaround time

After you submit your application, you can receive a decision in as quickly as five minutes.

Best for Small- to Mid-sized Businesses

National Funding

National Funding

National Funding

Why We Picked It

National Funding business loans stand out because they offer small to mid-sized business owners flexibility with working capital small business loans ranging from $10,000 to $500,000. The loans come with early payoff discounts and are available in terms of four months to two years, paid daily or weekly. Plus, National Funding offers equipment financing up to $150,000, but applicants must have a minimum personal credit score of 575 to qualify.

Pros & Cons

  • Financing up to $500,000
  • Early payoff discounts
  • Requires daily or weekly payments
  • Potentially high borrowing costs
  • Requires minimum gross annual sales of $250,000

Details

Overview

National Funding offers small business loans in all 50 states and allows borrowers to use their funds for all working capital needs, including inventory, payroll, marketing, taxes and more.

Unlike most business lenders, National Funding offers early payoff discounts. Small business loan customers can get a 7% discount off their total remaining balance when repaying the total remaining balance in full within the first 100 days of the contract. Equipment financing customers can receive a 6% discount off their total remaining balance when repaying the total remaining balance early.

Turnaround Time

Most loans are funded within 24 hours of approval, subject to receipt of required documentation, underwriting guidelines and processing time by your bank.

Best for Quick Approvals

Fundbox

Fundbox

Fundbox

Why We Picked It

Fundbox business loans stand out for their speed, providing line of credit business loan decisions in just three minutes and next-business-day funding. Thanks to its AI-powered business lending platform, Fundbox can fast-track the application, decision-making and funding process, saving borrowers time.

Pros & Cons

  • Receive a decision within three minutes
  • Low minimum credit score requirement
  • Next-day funding
  • Only short-term repayment terms are available
  • Relatively low lines up credit of up to $150,000

Details

Overview

Fundbox is an AI-powered business lending platform that speeds up the application, decision-making and funding process. It offers decisions within three minutes and funds as soon as the next business day.

Funding time

If you’re getting a line of credit, your funds transfer to your bank account as soon as the next business day.

Best for Healthcare Professionals

TD Bank

TD Bank

Loan amounts

$10,000 to $1 million

up to $5 million for small business loans

TD Bank


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From participating partners via businessloans.com’s website.

$10,000 to $1 million

up to $5 million for small business loans

Why We Picked It

TD Bank business loans shine for their offerings for healthcare professionals, including dentists, veterinarians, physicians and eye care professionals. They offer lending solutions up to $12 million with 100% practice financing plus working capital, in addition to partnership buy-ins and buy-outs, equipment purchase, and practice mergers and acquisitions.

Pros & Cons

  • Offers term loans, lines of credit and SBA loans
  • Online application and mobile banking
  • Customized financing options for healthcare professionals
  • Must apply in person for loans over $100,000
  • Branches located in only 16 states

Details

Overview

TD Bank offers traditional term loans and lines of credit, U.S. Small Business Administration (SBA) loans and other products like credit cards and checking accounts. TD Bank’s business loans range from$10,000 to $1 million with terms of one to five years. Credit lines range from $25,000 to $500,000.

Although online applications are available for business loans up to $100,000, you must apply in person for loans over that amount. TD Bank has branches in Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and Washington, D.C.

Turnaround Time 

Although TD Bank offers same-day approval for its business loans and lines of credit, it may take up to two business days to receive your funds. SBA loans, on the other hand, may take several weeks to fund.

Best for Established Businesses

Funding Circle

Funding Circle

Funding Circle


Learn More

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From participating partners via businessloans.com’s website.

Why We Picked It

Funding Circle’s business loans provide fast, affordable funding for businesses who’ve been operating for at least two years. The lender offers a simple application process and funding in as little as 48 hours. Prospective borrowers have three financing options: business term loan, line of credit or SBA loan.

Funding Circle term loans range from $25,000 to $500,000 with repayment terms from six months to five years. With a business line of credit, you can access credit lines from $6,000 to $100,000, but repayment terms are not specified. Funding Circle’s SBA loans range from $25,000 to $500,000 with terms up to 10 years.

Pros & Cons

  • Loans from $25,000 to $500,000
  • Funding in as little as 48 hours
  • No minimum annual revenue requirement for most loans
  • One-time origination fee between 3.49% to 6.99% of the approved loan amount
  • Requires two years in business, so it’s not ideal for startups
  • Not available to Nevada businesses

Details

Overview

Funding Circle has been a direct lender specializing in small business loans since 2010. It has helped 135,000 businesses in 700 industries and lent $20.2 billion globally.

Turnaround Time

Depending on the loan type, you can receive your funds within two days. However, SBA loan funding may take up to two weeks.

Best for Loan Options

Biz2Credit

Biz2Credit

Loan amounts

Up to $1M+

Varies depending on product and qualifications

Minimum Credit Score

600*

*See Website For Details

Biz2Credit

Up to $1M+

Varies depending on product and qualifications

600*

*See Website For Details

Why We Picked It

Biz2Credit stands out for its product variety. The business financing platform provides three funding options—term loans, revenue-based financing and commercial real estate (CRE) loans. Biz2Credit can connect business owners with revenue-based financing  from Up to $2M+, and its term loan amounts are between Up to $1M+. Biz2Credit also offers interest-only commercial real estate (CRE) loans from Upt to $2M+, with terms between 12 and 36 months.

Pros & Cons

  • Less stringent qualification requirements for revenue-based financing
  • Minimum annual revenue requirement of $10,000+
  • Quick online application, approval and funding process*
  • Stricter qualification requirements for term and CRE loans
  • Revenue-based financing require daily, weekly or bimonthly payments
  • Some products not available in all states

Details

Overview

Biz2Credit lends in all 50 states. The lender has a streamlined online application and in the event that Biz2Credit cannot provide a financial product, it may present third-party options to qualified prospective borrowers. However, Biz2Credit confirms that “in the vast majority of cases, [it] will make a financing decision without referral to any external party.”

Turnaround Time

Approval and processing times for Biz2Credit loans vary by loan type.

Summary: Best Small Business Loans Of March 2024

Tips for Comparing Small Business Loans

Consider these tips when comparing small business loans:

  • Where possible, prequalify. Some business financing lenders offer a prequalification process. This means prospective borrowers can share details about their financing needs, revenue and other relevant information to find out what loan amounts, rates and repayment terms they may qualify for. This process typically only requires a soft credit inquiry, which has no impact on your credit score.
  • Determine how you want to receive your funds. Two of the most common ways you can receive and access your business funds are through a lump-sum payment or on an as-needed basis. If you want to receive your funds up front, choose a traditional working capital or term loan. However, if you want to use funds only as you need them, consider a business line of credit.
  • Consider the repayment terms and flexibility. Each business financing lender has its own repayment structures. While some types of financing require monthly payments, others may require daily or weekly payments. Take this into account when choosing your preferred lender and business loan.
  • Look out for additional fees. Some lenders offer fee-free business loans that don’t require borrowers to pay origination fees, late payment fees, prepayment penalties or any other common loan costs. However, this is not always the case. Be sure to confirm a lender’s fee structure when shopping for the best terms. Factor in additional fees into your decision-making process.
  • Evaluate the lender’s customer support options. If you’ve found a lender that’s prepared to offer the money you need at acceptable terms, consider the lender’s support options before signing the loan agreement. Customer support can make a huge difference down the line if you encounter issues with repayment. Research the lender’s customer service resources and read reviews to make sure it’s a good fit.


Pro Tip

Before applying for a business loan, check lender websites for eligibility requirements. Sometimes lenders will list minimum business revenue and credit requirements on the website that you can review to determine whether you’re a good candidate for a loan.

Complete Guide to Small Business Loans

What Is a Small Business Loan?

A small business loan is a source of funding business owners can access to cover the costs associated with operation and growth. Like personal loans, business owners can get small business loans through traditional banks and credit unions as well as online lenders—including those backed by the U.S. Small Business Administration (SBA). Depending on the type of loan, you can use funds for everything from working capital and equipment acquisition to larger purchases like real estate.

How Do Small Business Loans Work?

Small business loans help companies make large purchases and cover the cost of doing business. Loans generally are issued as a lump sum that can be used to make a specific purchase or manage cash flow and then repaid with interest. However, there are other types of small business loans—like lines of credit, merchant cash advances and invoice financing—that can be used to access cash more quickly and on an as-needed basis.

The best loan for a business depends on a number of factors, including its creditworthiness, how much it needs to borrow, what the funds will be used for and how quickly it needs access to loan proceeds.

Read More: How Do Business Loans Work?

Common Types of Small Business Loans

In general, small business loans help businesses access the money they need to operate and grow. However, there are several types of small business loans, and it’s important to find the best fit for your needs.

SBA Loans

SBA loans are small business loans that are guaranteed by the Small Business Administration, including the SBA 7(a), 504, CAPLines, Export, Microloan and Disaster loan programs. These loans typically range from $30,000 to $5 million and come with low interest rates and extended repayment terms—up to 25 years. That said, qualification requirements are more demanding than for other loans not backed by the government, and the application process typically takes longer.

Common types of SBA loans  include:

  • SBA 7(a) loans. With maximum loan amounts up to $5 million, the SBA 7(a) loan program is the SBA’s main offering. Loans are commonly used to purchase real estate but may also be used for working capital , debt refinancing and the purchase of business supplies. Current interest rates, as of Oct. 7, for SBA 7(a) loans range from 5.5% to 11.25%.
  • SBA 504 loans. Available up to $5 million, SBA 504 loans must be used for major fixed assets, like existing buildings or land, new facilities and long-term machinery and equipment. As such, 504 loans may not be used for working capital, inventory or other common business uses. Rates on SBA 504 loans are lower than those imposed by the 7(a) program, and range from about 2.81% to 4%.
  • SBA microloans. SBA microloans extend up to $50,000 and are intended to help small businesses start or grow. This may involve using the funds for working capital, inventory, machinery, equipment and other fixtures and supplies needed to do business. Rates typically range from 8% to 13%, but this varies by lender.

Term Loans

Terms loans are a traditional form of financing that’s repaid over a set period of time. In general, short-term loans range from just three to 18 months, whereas long-term business loans may be extended for up to 10 years. While some term loans are designed for specific uses—like financing equipment or inventory—term loans traditionally can be used to fund most large business-related purchases. Business term loans are typically available up to around $500,000, and annual percentage rates (APRs)  start around 9%.

Lines of Credit

Unlike a term loan that’s paid out in a lump sum, a business line of credit  is a set amount of money that a business owner can access on a revolving basis. This means the borrower can draw against the line of credit for a set period of time—usually up to five years. If the borrower pays back a portion of the line of credit early, they can access it again until the draw period ends.

Once the draw period is over, the borrower enters the repayment period and can no longer access the revolving funds. Rather than pay interest on the entire amount, as with a term loan, a business owner who accesses a line of credit is only charged interest for what they actually use.

Lines of credit are a good option for businesses that want to access cash on an as-needed basis for things like unexpected expenses and other cash-flow issues. Borrowing limits generally range from $2,000 to $250,000 and come with APRs from 10% to 99%.

Invoice Factoring and Financing

Invoice factoring  is the process of selling a business’ outstanding invoices in exchange for a lump sum cash payment. Invoices are sold to a third-party factoring company at a discount, so you won’t get paid for invoices in full. And, once you sell an invoice to a factoring company, the factoring company assumes responsibility for collections.

However, this form of financing can be an effective way to access cash quickly without having to wait the 30 to 90 days customers usually have to pay invoices. For that reason, invoice factoring is a helpful strategy when you need short-term financing or help managing cash flow. In general, invoice financing amounts can extend up to $5 million with APRs between 10% and 79%.

Merchant Cash Advances

Merchant cash advances (MCAs) let business owners access a lump sum of cash by giving the lender—often a merchant services company —a portion of future sales receipts. In contrast to a traditional business loan, a merchant cash advance and related fees are repaid from the business’ individual sales or through automatic clearing house (ACH) payments on a daily or weekly basis.

Under this strategy, a business owner borrows a set amount of cash at a factor rate usually between 1.2 and 1.5. To repay the loan, the business must repay the advance with a set percentage of daily credit card sales over an estimated repayment term. A merchant cash advance may be a good option for businesses that experience a high volume of sales and need to access cash quickly—without qualifying for a traditional business loan.

Equipment Financing

Equipment financing is a form of small business loan that helps businesses purchase the equipment and machinery needed to start and maintain operations. This flexible financing can typically be used for everything from office furniture and electronics to manufacturing equipment.

Equipment loans are collateralized by the items being purchased, so the size of a loan depends on the value of the equipment and the size of the down payment. However, the best equipment financing companies  offer terms and limits of up to 25 years and $1 million or more.

Interest rates on equipment financing may be lower than available through other types of financing and typically range from 8% to 30%. As with other small business loans, rates vary by lender and borrower creditworthiness.

Commercial Real Estate Loans

Commercial real estate loans are used to purchase property for business use. These loans differ from residential mortgages since they’re not backed by a government entity and may be more difficult to qualify for—especially for smaller businesses.

Interest rates for commercial real estate loans are generally lower than other forms of financing, ranging from 5% to 15%. Lengthy repayment terms—up to 20 years or more—are often available.

That said, some business owners also opt for shorter-term balloon mortgages, which have lower interest rates but require a lump sum payment at the end of the term. Commercial real estate loans may come with additional costs like appraisal and legal fees.

Bank Loans

Borrowers can acquire bank loans through traditional banks, credit unions and online lenders. Bank loan amounts vary depending on the lender but can range from thousands to millions of dollars. They can be used for various business purposes, including working capital, equipment purchases and real estate acquisitions.

Bank loans are typically repaid in fixed monthly payments over a set period and may include origination fees and prepayment penalties. This type of financing usually comes with lower interest rates than other alternatives—usually between 5% and 13%—but may also come with stricter eligibility requirements and longer application processes.

Find the Best Startup Business Loans of 2024

Pros and Cons of Small Business Loans

Pros of Small Business Loans

  • Provides funds you can use to start, grow or expand your business
  • Receive funding without losing equity
  • Repayment terms extend up to 25 years
  • Loan amounts up to $5 million

Cons of Small Business Loans

  • Most lenders require a personal guarantee or collateral
  • Lenders typically require a minimum credit score of 670
  • Approval and funding may take up to several weeks
  • May charge high interest rates and other processing fees

Best Place To Get a Business Loan

Small business loans are available from a variety of traditional banks and credit unions as well as online lenders. However, each lender is limited by its own financial products and lending requirements.

1. Banks & Credit Unions

Traditional banks and credit unions typically offer a limited range of small business loans, including those backed by the SBA. While traditional banks often have tighter borrowing standards than online lenders, small business owners may still find it easier to qualify at an institution where they have an existing banking relationship.

Not only will the bank already have the business’ financial statements on file, but it may also be easier to get approved with a local lender who is familiar with your operation.

2. Online Lenders

In general, online lenders may have more flexible borrower qualifications than larger, traditional banks. And, while APRs may be higher through online banks than traditional lenders, approval rates also are higher and borrowers are less likely to need collateral. What’s more, many online lenders provide faster funding speeds than their brick-and-mortar counterparts, making them a good option for businesses that need a fast personal loan.

Related: Best Same-Day Business Loans

How to Get a Business Loan

How To Choose a Small Business Loan

Just as certain types of loans are more appropriate for certain businesses, some lenders may be better suited to your business than others. Consider these factors to choose a small business loan:

  • Lender reputation. Check online reviews so you’re aware of any red flags or potential issues before you sign on the dotted line. If you plan to work with a local bank or credit union, check with other local business owners to see which institutions have the best reputation.
  • Qualification requirements. Most small business loans are underwritten based on the business owner’s personal credit score and are personally guaranteed. The minimum credit score required to qualify for a small business loan depends on the lender and the type of loan. So, it’s generally a good idea to check your personal credit score and then research each lender to compare minimum credit score requirements.
  • Available loan amounts. Loan amounts vary by lender and loan type. Before choosing a small business lender, evaluate your business’ borrowing needs and shop for a loan that fits those parameters.
  • Underwriting and funding speed. The amount of time it takes to process an application and receive funds varies widely by lender and loan type. In general, it can take anywhere from a couple of days (in the case of a merchant cash advance) to several months (for an SBA loan) to receive funds after submitting an application. If you need a loan quickly, choose a loan type and lender that can meet those time constraints.
  • Annual percentage rate. APRs also vary by loan type and lender, but generally range anywhere from 5% to 99%. The most creditworthy applicants qualify for the lowest rates, but some lenders are more competitive than others.
  • Additional costs. Many lenders charge origination fees that cover the costs of processing applications and underwriting loans. Likewise, some lenders charge prepayment penalties for borrowers who opt to pay off their loans early, while others charge draw fees on lines of credit. However, borrowers should not be charged application fees, and any fees levied prior to loan approval are a red flag.


Pro Tip

Having limited business credit history doesn’t necessarily mean you can’t get approved for a business loan. Lenders may look at personal credit to determine if you qualify for business financing, and having strong personal credit could help you get approved.

How To Qualify for a Business Loan

The requirements for small business loans can vary by lender. But in general, lenders may review the following information to approve you for a loan:

  • Personal credit. You may be able to qualify for a business loan with a credit score as low as 500. However, a good score of at least 670 could give you a better shot at getting approved for a competitive rate.
  • Time in business. Lenders typically require that you be in business for at least six months to two years to qualify for a loan.
  • Business checking accounts. Lenders may require that you have a business checking account with several months of transactions to show cash flow.
  • Business revenue. Most lenders require that you have between $100,000 to $250,000 annual business revenue to qualify.

How To Get a Small Business Loan in 5 Steps

The business loan application and underwriting process varies by lender, but most banks and lenders follow the same general guidelines. To get a small business loan, expect to follow these general steps:

  1. Determine the type of loan you need. Some lenders limit what industries they’ll finance or how loan funds may be used, so determine how you’ll use the cash before applying for a loan. Also evaluate how much you need to borrow, as this may impact the type of loan you apply for and the best lenders to approach for funds.
  2. Familiarize yourself with your credit profile. Lenders typically look at a business owner’s personal credit score when evaluating a loan application. You should have a score of at least 680 to qualify for an SBA loan or a traditional bank loan, and 630 for equipment financing or business lines of credit. Short-term financing and merchant cash advances typically have less stringent requirements—averaging around 600 and 550, respectively.
  3. Research lenders. When shopping for a small business loan, determine whether your current bank offers small business loans that meet your needs. This can streamline the application process because the bank will already have your financial information on file. Next, research other banks, credit unions and online lenders to compare available loan amounts, repayment terms and rates.
  4. Gather required documentation. Required documentation varies by lender. However, most lending institutions require a business plan, at least 12 months of personal and business bank statements, tax returns for at least two years and details about any current and past business loans. Lenders also require copies of applicable business licenses and legal documents, details about available collateral and a description of how loan proceeds will be used.
  5. Submit a formal loan application. Once you research the best small business loans and prepare your business for due diligence, submit a formal loan application. The process varies by lender, so familiarize yourself with the application process and contact customer service with questions.

How To Get a Business Loan With Bad Credit

It can be tough to qualify for a business loan with bad or limited credit. If possible, giving your business time to become more established can make qualifying for a loan easier.

If you can’t wait, start by looking for online lenders as they can have more flexible qualification requirements. Nonprofits that focus on microloans can also be an option to fund a new business venture.

Lastly, business partners that are willing to invest in your business or co-sign on a loan can be another option to fund your business.

Alternatives to Small Business Loans

Business Line of Credit

While a business loan disburses funds as a lump sum, you have access to a predetermined credit line with a business line of credit. You can draw on this credit line during the draw period, and you only owe interest on the amount you borrow, not the full credit line. Once the draw period ends, you enter the repayment period, when you’re required to repay your outstanding balance plus interest and any fees.

Business lines of credit  are more flexible than business loans and are handy as a rainy day fund.

Business Credit Card

Business credit cards  work similarly to consumer credit cards, except you use the card to pay only for business-related expenses. In some cases, business credit card rates may be higher than business loan rates; however, they tend to have more flexible qualification requirements.

A business card may be better than a business loan if you don’t need to borrow a large sum. Plus, some cards offer cash back or points-based rewards programs. You may even be able to find a card with no-interest financing for a certain period of time, which can be equivalent to an interest-free loan if you repay your balance during the introductory period.

Crowdfunding

Crowdfunding can help you reach your funding goals without taking out a loan. You can use popular sites like Kickstarter and Indiegogo to raise money for your business or product. On these sites, you’ll set a funding goal and typically create reward tiers for people who pledge funds. However, if you don’t reach your goal, you usually get nothing.
¹The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.

Personal Loans for Business

Some lenders allow you to take out a personal loan to fund your business. This loan is tied to your personal credit, not the business credit score, which means you’ll be personally liable to repay the loan.

A personal loan can be a good option to fund your business if you don’t have sufficient revenue or time in business to qualify for a business loan. The funds from a personal loan can be used however you need to fund your business, but the amounts may be lower than what’s offered on many business loans.

Small Business Grants

Unlike loans, grants don’t need to be repaid. Small business grants can provide financial aid for specific projects or purposes that align with the grant’s criteria. However, securing a grant can be highly competitive and requires extensive research and preparation.

You will need to demonstrate how your project or business aligns with the mission of the grant provider and show a solid financial plan for using the funds.

Business Loan Statistics Survey

Forbes Advisor surveyed 500 Americans who have applied for a business loan to get insights into which loans businesses are applying for and how the funds are being used. The survey found that business owners seek out a wide range of business loans, with term loans and lines of credit being the most popular options.

Types of Financing Businesses Are Applying For

Businesses have a wide range of financing options, each of which can best serve different financial needs. Over the past five years, 49% of businesses that applied for financing applied for an SBA loan and 48% applied for a business line of credit.

Traditional business loans, including those from online lenders and banks, were the third and fourth most popular options, with 40% and 30% of businesses applying for them, respectively. 

How Business Loan Funds Are Used

In most cases, business financing doesn’t restrict how funding can be used if it’s business-related. With their most recent loan, 32% of businesses used the funds on equipment purchases, while 26% allocated their funds toward startup costs.

Survey Methodology

This online survey of 500 Americans who have applied for a business loan in the past was commissioned by Forbes Advisor and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected from January 12 to 19, 2024. The margin of error is +/- 4.4 points with 95% confidence. This survey was overseen by the OnePoll research team, which is a member of the MRS and has corporate membership with the American Association for Public Opinion Research (AAPOR). For a complete survey methodology, including geographic and demographic sample sizes, contact pr@forberadvisor.com.

Methodology

We reviewed 25 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the nine best lenders based on the weighting assigned to each category:

  • Loan cost: 35%
  • Loan details: 25%
  • Customer experience: 20%
  • Eligibility and accessibility: 10%
  • Application process: 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like online applications, prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

Recap: Best Small Business Loans Of March 2024

Frequently Asked Questions (FAQs)

Can you get a small business loan with bad credit?

As with personal loans, it’s possible to get a small business loan with bad credit—scores as low as 580. However, you’ll have to demonstrate strong cash flow, and banks are more likely to require collateral to reduce the risk of lending. Small business borrowers with bad credit also qualify for less competitive rates and pay more in interest over the life of the loan. If you have a low credit score—under 580—an alternative option like invoice factoring may be your best bet.

What credit score is needed for a small business loan?

Traditional banks generally prefer a credit score of around 700 or higher for a small business loan. However, online lenders and credit unions might consider scores as low as 500. The specific requirements can vary significantly depending on the lender and your financial history.

What can you do if you’re denied a small business loan?

There are a number of steps you can take if you’re denied a small business loan. First, try to find out why your application was denied. If your SBA loan application is denied, you’re entitled to a notice of denial that details the reasons; you may receive this directly from the SBA or from your lender.

If, instead, you are denied a small business loan through an online lender or other financial institution, contact them to find out why you were not approved. They may be able to provide insight into how to improve your future approval odds.

Once you know why your loan application was rejected, take steps to rectify the underlying issues. For example, you may need to improve your credit score, establish more consistent sales or reassess the amount you need to borrow.

What documents are needed to apply for a small business loan?

When applying for a small business loan, expect to provide business bank statements, personal and/or business tax returns, business licenses and permits, proof of business registration and your business’ Employer Identification Number (EIN) or Federal Tax Identification Number (TIN).

To obtain financing for your business, you may also have to provide a business plan and copies of financial statements, including a profit and loss statement, balance sheet and cash flow statement. Likewise, expect to furnish information regarding current accounts receivable and accounts payable as well as the specifics of existing debt. Depending on your creditworthiness and the type of loan, you may also need to provide proof of collateral.

How hard is it to get a small business loan?

Getting a small business loan may prove more challenging than other financing options like business credit cards. Although qualification requirements vary by lender, most lenders typically look at the business owner’s personal credit score and the business’ annual revenue. Many lenders require a minimum personal credit score of 600 to 660 and annual revenue between $100,000 and $250,000.

We recommend confirming the qualification requirements with your preferred lender before applying.

How much can I get for a startup business loan?

Startup business loans typically range from $1,000 to $250,000. However, the loan amount you receive depends on your and the business’ creditworthiness. Most lenders require businesses to have been in operation for at least six months to two years and meet minimum annual revenue requirements. Be sure to check with your desired lender to ensure your startup is eligible.

What is the easiest way to get a small business loan?

The easiest way to get a small business loan may be through online lenders instead of traditional banks because borrower requirements may be more flexible. With an online lender, you may be able to quickly prequalify and get funding as soon as the same business day as long as you meet eligibility requirements.

How much income do you need to get a business loan?

Typically, lenders require businesses to have an annual revenue of between $100,000 and $250,000. If your business makes less than that, there are business loans for low-revenue companies that may offer funding options for your business.

Next Up In Business Loans

Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.

Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.

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About Caroline Vega 228 Articles
Caroline Vega combines over a decade of digital strategy expertise with a deep passion for journalism, originating from her academic roots at Louisiana State University. As an editor based in New Orleans, she directs the editorial narrative at Commercial Lending News, where she crafts compelling content on commercial lending. Her unique approach weaves her background in finance and digital marketing into stories that not only inform but also drive industry conversations forward.