12 Best Small Business Loans (and Which Type of Loan to Choose) in 2020

Finding and evaluating the best small business loans can be a tedious process.

To make this journey easier for you, here’s our side-by-side comparison of every top small business loan on the market today, and which types of loans you should be considered depending upon what your needs are—and where your business is at today.

But first, let’s talk about what exactly a small business loan is.

What Are Small Business Loans?

Small business loans are loans made by banks, credit unions and online lenders, to businesses, which can be used for a variety of growth purposes. They’re typically used for expanding a business into new markets or geographic areas, purchasing new inventory or equipment, acquiring real estate that has an expected future return, or other growth activities.

And the good news, is those small business owners (like you) are no longer confined to traditional banks anymore.

Now, online lenders offer multiple options in the small business loan world—including SBA loans, online term loans, merchant cash advances, line of credit loans and more.

12 Best Small Business Loans (and Which Type of Loan to Choose) in 2019

  1. SmartBiz SBA Loan
  2. Wells Fargo SBA Loan
  3. TD Bank SBA Loan
  4. JP Morgan Chase SBA Loan
  5. Street Shares Online Term Loan
  6. OnDeck Online Term Loan
  7. LendingClub Online Term Loan
  8. Funding Circle Online Term Loan
  9. Street Shares Line of Credit Small Business Loan
  10. OnDeck Line of Credit Small Business Loan
  11. Kabbage Line of Credit Small Business Loan
  12. BlueVine Line of Credit Small Business Loan

Alright, let’s dive in!

What Are the Best Small Business Loans?

1. SmartBiz

SmartBiz is the leading online bank marketplace for SBA loans. Grew out of the 2008 financial crisis, it helps facilitate optimized financing options and matches small businesses with the banks that align best with their Small Business Administration (SBA) loan requirements. Businesses from CBD to coffee shops can find loans at great rates with SmartBiz.

Smart Biz Small Business Administration Loans

Estimated APR: 7.43% – 11.04%

Min Credit Score: 650

Loan Amount: $30,000 – $5 million

Repayment Term: 10 – 25 years

Minimum qualifications for SmartBiz’s SBA loans:

  • At least 2 years in business
  • Annual revenue of over $50,000
  • Need to provide a personal guarantee
  • 600+ personal credit score for loans ranging from $30,000 to $150,000
  • 650+ personal credit score for loans over $150,000
  • No Bankruptcy in the past 3 years

SmartBiz is the best option for your small business if you have the following requirements:

  1. Need to refinance the debt or expand your business: You can receive SBA 7(a) loans of up to $350,000 at an estimated annual percentage rate (APR) of 9.7% to 11.04%.
  2. Need to finance a real estate purchase: You can receive SBA 7(a) commercial real estate loans ranging from $500,000 to $5 million at APRs of 7.38% to 7.43%.
  3. Need quick cash (within several weeks): Naturally, receiving a loan takes a substantial time-period. However, sometimes you can receive loans in as little as a week.

Reasons to use SmartBiz:

  • Low rates of SBA financing
  • Low-cost financing for commercial real estate
  • Fast funding process

2. Wells Fargo

Touted as “America’s leading small business lender,” Wells Fargo is one of the most popular SBA loan programs available. This popularity can be attributed to long term and low interest rates of the SBA loans.

Wells Fargo Small Business Loans

Estimated APR: Starts at 8%

Min Credit Score: 600+

Loan Amount: $350,000 – $6,500,000

Repayment Term: 7 – 25 years

Minimum qualifications for Wells Fargo SBA loans:

  • Must exist as an on-going, profitable business entity
  • The average net income should not exceed $5 million over the past 2 years.
  • Net worth should not exceed $15 million
  • At least 2 years in business
  • No defaults on debts (including student loans)

The types of SBA Loans offered by Wells Fargo:

  1. Wells Fargo SBA 7(a) Loan Program: You can secure an SBA 7(a) loan of up to $5 million at an estimated annual percentage rate (APR) of 6% to 13%. Repayment terms can range anywhere between 7 to 25 years.
  2. Wells Fargo SBA Express Loans: An extension of Wells Fargo SBA 7(a) Loan Program, this program is more suited for those who need a loan more quickly and/or are looking for low cash. The maximum loan amount is $350,000 and can be approved within 36 hours or less.
  3.  Wells Fargo CDC/504 Loan Program: The maximum loan amount is $6,500,000 and can be acquired in as little as three weeks. This loan can be used to purchase real estate or funding business-related renovations.

Reasons to use Wells Fargo:

  • Low rates of SBA financing
  • Long repayment terms
  • Fast funding process

3. TD Bank

TD Bank is one of the most reputed national banks with its branches spreading all across the country and is famous for offering large loan amounts at fixed repayment terms.

TD Bank Small Business Administration Loans

Estimated APR: 7.25% – 12.00%

Min Credit Score: N/A

Loan Amount: Up to $5 million

Repayment Term: Up to 25 years

Minimum qualifications for TD Bank loans:

  • Should have assets to offer as a collateral
  • Need to talk with the loan officer in person
  • Need to have a credible business plan

TD Bank offers two types of SBA Loans:

  1. SBA 7(a) Loans: Through SBA 7(a) loans offered by TD Banks, you can secure a loan amount of up to $5 million. The loan amount can be utilized for real estate purchase, refinance, business acquisition or expansion, equipment purchase, franchise financing, and partner buy-out. The repayment term ranges up to 25 years.
  1. SBA 504 Loans: TD Bank’s SBA CDC/504 Loan program is ideal for those who need funds to purchase large-scale business assets. The funds are typically used for real estate purchases, business construction, refinancing, and purchasing business equipment. A maximum of $5 million to $5.5 million of loans can be secured and repayment term ranges up to 20 years.

Reasons to use TD Bank:

  • Online appointments
  • No balloon payments
  • Large loan amounts
  • Fixed-term of up to 25 years

4. JP Morgan Chase

JP Morgan Chase is one of the most prominent banks in the country and is known to approve the highest number of SBA loans. In 2016 alone, the bank approved a total of 1,497 SBA loans.

Chase for Business SBA Loans

Estimated APR: 7.0% – 11.5%

Min Credit Score: 620-640

Loan Amount: $350,000 – $5 million

Repayment Term: 7 – 25 years

Minimum qualifications for JP Morgan Chase SBA loans:

  • At least 2 years in business
  • Should be able to provide considerable collateral/assets
  • Credible financial history
  • Should not be delinquent on any other loan

Types of SBA loans offered by JP Morgan Chase:

  1. SBA 7(a) Loan Program: One can acquire up to $5 million in loan amount via Chase’s SBA 7(a) Loan Program. Ideal for business acquisition, purchase of the real estate, or business expansion. The repayment term ranges from 7 years to 25 years, depending upon how you plan to use the funds.
  1. SBA 504 Loan Program: The loan amount varies depending upon the project, but can be up to $12.5 million. The funds are ideally used for construction, refinancing debt, and purchasing business equipment.
  1. SBA Express: Under this program, one can get quick loans of up to $350,000. Typically used for low-scale business acquisition and expansion, working capital needs, and small real estate.

Reasons to use JP Morgan Chase:

  • Large loan amounts, as high as 12.5 million
  • Low interest rates
  • Long term repayments

What Are the Best Online Term Loans for Small Businesses?

If you are looking for a quick, small-amount of loan that you can repay over a fixed and small period of time ( 3-36 months for short-term and up to 10 years for long-term), then online term loan is a great option for you.

1. Street Shares

Owned and operated by the veterans themselves, Street Shares is particularly a good option for veteran business owners. Besides that, Street Shares is excessively popular for their affordable term loan.

Small Business Loans by StreetShares

Estimated APR: 9.14-39.99%

Min Credit Score: 600

Loan Amount: $2,000 to $250,000

Repayment Term: 3 – 36 months

Minimum qualifications for Street Shares’ online term loans:

  • At least 1 year in business or 6 months with a revenue of $100K
  • Annual revenue of over $25,000
  • No bankruptcy in the past 3 years

StreetShares for Online term loans (Pros):

  • No prepayment penalty
  • The loan can be approved in as fast as one business day
  • Offers multiple product lines for funding flexibility
  • A great option for veterans and established businesses

StreetShares for Online term loans (Cons):

  • Weekly repayments
  • You are not allowed to borrow more than 20% of your total annual revenue

2. OnDeck 

OnDeck offers a perfect blend of speed, less stringent qualifications, and convenience when it comes to securing online term loans. However, in some cases, it might charge a high APR.

onDeck Term Loans for Small Businesses

Estimated APR: 9% — 99%

Min Credit Score: 500

Loan Amount: $5,000 to $500,000

Repayment Term: 3 – 36 months

Minimum qualifications for OnDeck’s online term loans:

  • At least 1 year in business
  • Annual revenue of over $100,000
  • At least one owner with a 600+ personal credit score

Types of Online term loans offered by OnDeck:

  1. Short Term Rates: It is a great option for a business that requires quick cash for various purposes, including inventory deals with a quick turnaround, marketing campaigns, seasonal hiring, and more. Needs to be repaid within 3-12 months, thus one should have an immediate return on investment to apply for this loan.
  2. Long Term Rates: With a repayment term of 15-36 months, it can be used to fund larger projects like business expansion, large scale inventory or equipment purchases, and new product development such as website development. The annual interest rate can be as low as 9%.

OnDesk for Online term loans (Pros):

  • Get approval within minutes and funds in as fast as 24 hours
  • High approval rates, owing to fewer requirements & paperwork
  • Low minimum personal credit score

OnDesk for Online term loans (Cons):

  • Fixed repayment fees
  • Daily or weekly repayments

3. LendingClub 

LendingClub is one of the most eminent credit marketplaces in America. With a wide range of annual rates, you can opt for the funds you need vis-à-vis monthly repayment you can afford.

Best Small Business Loans from Lending Club

Estimated APR: 9.8 – 35.7%

Min Credit Score: 599

Loan Amount: $5,000 – $500,000

Repayment Term: 1 – 5 years

Minimum qualifications for LendingClub loans:

  • At least 1 year in business
  • Annual revenue of at least $50,000
  • The borrower must own at least 20% of the business
  • Minimum 600 personal credit score
  • No bankruptcies or tax liens in the last 3 years
  • Not live in Iowa or West Virginia

LendingClub (Pros):

  • Fast approval and funding
  • Low rates for borrowers with high credit scores
  • No collateral required for a loan amount of less than $100,000

LendingClub (Cons):

  • Higher qualification standards than some of its counterparts
  • Financial statements and tax documents required

4. Funding Circle

Funding Circle is a peer-to-peer business loan lender that connects small businesses in need of financing to appropriate investors. Using a good pitch deck template can make all the difference when reaching out to investors.

Get the Best Small Business Loans from Funding Circle

Estimated APR: 10.91 – 35.5%

Min Credit Score: 620

Loan Amount: $25,000 to $500,000

Repayment Term: 6 months – 5 years

Minimum qualifications for Funding Circle’s online term loans:

  • At least 2 years in business
  • No Bankruptcy in the past 7 years
  • Require personal guarantee of 20% from all owners
  • Business lien required

Funding Circle (Pros):

  • No minimum annual revenue requirement
  • No prepayment penalty
  • Fast approval and funding is done in as little as 10 days

Funding Circle (Cons):

  • Higher qualification standards
  • Higher minimum credit score required than most of its counterparts

What Are the Best Line of Credit Small Business Loans?

1. Street Shares

Street Shares was founded by army veterans in 2014 to cater to the funding needs of veteran business owners and other small business owners.

Small Business Loans by StreetShares

Estimated APR: 8% – 39.9%

Min Credit Score: 600

Loan Amount: $5,000 to $250,000

Repayment Term: 3 – 36 months

Minimum qualifications for Street Shares’s line of credit loans:

  • At least 1 year in business or 6 months if your annual revenue is $100K
  • Annual revenue of over $75,000
  • No bankruptcy in the past 3 years
  • No current tax liens
  • A majority owner with a 600+ personal credit score

Street Shares for line of credit loans (Pros):

  • Great for established businesses
  • No prepayment penalty
  • Offers multiple product lines for funding flexibility
  • Especially a good choice for veterans as it is founded and operated by veterans themselves

Street Shares for line of credit loans (Cons):

  • Weekly repayments
  • Limited outreach
  • You are allowed to borrow only 20% of your total annual revenue

2. onDeck 

If you are looking for some funds to tide over uneven cash flow, then OnDeck’s line of credit loan has you covered. From fast approval and funding to low minimum credit score requirement, it is a great option for small business owners.

onDeck Line of Credit Small Business Loans

Estimated APR: 14% — 40%

Min Credit Score: 600

Loan Amount: Up to $100,000

Repayment Term: Up to 6 months

Minimum qualifications for OnDeck’s line of credit loans:

  • At least 1 year in business
  • Annual revenue of over $100,000
  • No bankruptcy in the past 2 years
  • A majority owner with a 600+ personal credit score

OnDesk for line of credit loans (Pros):

  • Get approval within minutes and funds in as fast as 24 hours
  • High approval rates, owing to fewer requirements & paperwork

OnDesk for line of credit loans (Cons):

  • Fixed repayment fees
  • Weekly automatic repayments
  • A personal guarantee is a requirement

3. Kabbage

Kabbage Small Business Loans for Companies

Kabbage is a great option for small business owners who require quick funding but don’t mind paying higher annual percentage rates. On top of that, borrowers don’t have to worry about bad credit scores and tons of paperwork either.

Estimated APR: 24% to 99%

Min Credit Score: 560

Loan Amount: $2,000 to $250,000

Repayment Term: 6 or 12 months

Minimum qualifications for Kabbage’s line of credit loans:

  • At least 1 year in business
  • A business checking or online payment platform is required
  • Annual revenue of over $50,000 or $4,200 per month over the last 3 months

Kabbage for line of credit loans (Pros):

  • No application cost
  • Low minimum credit score
  • In-house customer support
  • Access a line of credit loan within minutes
  • Monthly fees from 1.5-10% with no hidden charges

Kabbage for line of credit loans (Cons):

  • High annual percentage rates
  • The fee structure is a bit complicated
  • Must have online checking or PayPal account to verify cash flow

4. BlueVine

If you are grappling with a need for quick funds and don’t mind paying for the speed, then BlueVine is a perfect option for you. You can get approved for a line of credit pretty fast and get access to the funds within 24 hours of the approval.

Bluevine Small Business Loans for Entrepreneurs

Estimated APR: 14% – 78%

Min Credit Score: 600

Loan Amount: $5,000 to $250,000

Repayment Term: 6 or 12 months

Minimum qualifications for BlueVine’s line of credit loans:

  • At least 6 months in business
  • Annual revenue of over $100,000

BlueVine for line of credit loans (Pros):

  • No prepayment fees
  • Low credit score requirement
  • No fees to open or maintain your line
  • Quick approvals in as fast as 10 minutes
  • Access to funds within 24 hours of approval

BlueVine for line of credit loans (Cons):

  • High annual percentage rates
  • A personal guarantee is required
  • Need to provide 3 months of most recent bank statements

What are the Types of Small Business Loans for Established Companies?

Startups operating for less than a year have a hard time getting funds for their business. However, seeking a business loan for your established small businesses with a year or more of history is decidedly easier. There are plenty of options to choose from, including SBA loans, lines of credit, term loans, and more.

1. SBA Loans

SBA loan is a great option if you are looking for low interest rates and long-term repayment. However, the path to acquire SBA loans isn’t short or easy by any means. The whole process entails long-drawn-out paperwork and stringent requirements. On top of that, one needs to have a stellar track record and mostly a credit score of 690 or higher is required.

So, it’s better to apply only if you are willing to wait and have a great credit score.

Skip If:

You have a bad credit score or are in a hurry to acquire funds for your business

Key characteristics:

  • APR range: 6.5% to 9%
  • Great for large-scale investments
  • The typical loan amount ranges from $30,000 to $5 million

2. Small Business Line of Credit

Lines of credit creates a safety net that you can fall back on in case of uneven cash flow and emergency funds requirement. The best part about this type of loan is that you don’t get charged until you utilize the funds. However, just like SBA loans, business lines of credit are not easy to acquire and requires a lot of paperwork.

Skip If:

You have a bad credit score or are launching a new business.

Key characteristics:

  • APR range: 8% to 99%
  • Typical loan amount ranges from $2,000 to $500,000
  • Great for covering unexpected expenses and managing a steady cash flow

3. Invoice Factoring

Invoice factoring is perfect for business owners who regularly grapple with unpaid invoices. It resolves all your cash flow problems that are stemming from pending invoices. In this type of loan, you receive a percentage of (usually around 85%) your outstanding invoice as a loan to cover your uneven cash flow while waiting to get paid. Once you get your payment, the lender will return the remaining percentage (minus the APR).

Skip If:

You do not invoice customers or are a B2C enterprise

Key characteristics:

  • APR range: 16% to 77%
  • The typical loan amount ranges from $500 to $500,000
  • Great for short-term financing and resolving unsteady cash flow problems

4. Small Business Term Loan

Most business owners prefer term loans if they are looking for a large business loan amount and long-term repayment schedule. That said, one can also opt for a short-term business term loan, with the repayment term ranging from 6 to 12 months. Long-term loan repayment can extend as far as a decade, sometimes even more.

Skip If:

If you have a bad credit score and/or are launching a new business

Key characteristics:

  • APR range: 6% to 99%
  • The typical loan amount ranges up to $500,000
  • Great for long-term financing and investing in real estate, business expansion, business inventory purchase, and more

5. Startup Business loan

Startup business loans are secured by new businesses to scale up their business or maintain steady cash flow. It is an ideal loan option for startups with little to no business history. The best part is that you get quick access to cash at a low annual percentage rate. However, you would be required to offer a collateral to secure the loan.

Skip If:

You don’t have any collateral to offer since you are approaching the banks without any credit score

Key characteristics:

  • APR range: 7.9 – 19.9%
  • Typical loan amount ranges from $50,000 up to $150,000
  • Ideal for brand new businesses that need some additional funds to keep their business going

6. Short Term Small Business Loan

Owing to its low qualification standards and fast approval, short term business loan is one of the most popular loan types. You can easily get a small number of funds to fulfill your short-term business needs and pay back daily or weekly, typically up to 18 months or less. However, since they are so easy to get, the interest rates can be a bit pricey sometimes.

Skip If:

Naturally, this is not a great option for you if you are looking for long-term financing

Key characteristics:

  • APR range: 6% to 99%
  • Typical loan amount ranges from $2,000 to $250,000
  • Great for short-term financing and purchasing quick supplies, hiring extra workforce, and more

How Do I Get a Small Business Loan?

Naturally, to secure any type of loan, you need to have a solid credit score, reliable annual income, and a stellar business.

Similarly, to approve your small business loan, lenders take into account several factors like your personal credit score, annual revenue, and time in business. If you have a less than pristine credit score, then also you are likely to secure the loan but with considerably higher interest rates.

When Should I Use an Online Lender?

Getting approved for a loan from prominent banks is a tedious task and they often reject applications seeking a loan.

Thus, when you are having a hard time securing a loan from a conventional bank or are tired of long-drawn-out paperwork, then you can switch to an online lender in order to simplify the process and accelerate the loan securing process.

What is a Startup Business Loan?

When you have little to no business history, securing a loan becomes tricky.

However, this problem is easily solved by startup business loans. SBA microloans are one of the most popular options for such types of loans.

The loan amount typically ranges up to $150K and the usual APR is 7.9 – 19.9%.

To secure a startup business loan, you need to either offer some collateral or an asset since you don’t have any credit score to show.

What Are the Types of Small Business Loan Fees to Watch For?

It may come as a surprise to you but different types of fees also affect the annual percentage rate. Here’s a list of the additional fees you need to consider when applying for small business loans.

1. Application Fee

Applying for a loan requires tons of paperwork on the borrower’s end. However, things are not any different from the lender’s end. A lot of time, money, and resources are utilized to run background and credit checks, verify the documents, and then to finally underwrite a loan. That’s why some lenders tend to charge an extra application or processing fee to make up for all the paperwork.

2. Origination Fee

Often quoted as a percent of the principal, the origination fee refers to the extra cost and resources incurred by the lender in order to approve/make the loan. For instance, administrative work, overseeing legal documents, and more utilizes extra cost and time.

3. Guarantee Fee

If you are seeking an SBA loan, then you are most likely to be asked to pay a guarantee fee. Guarantee fee makes it less risky for lenders to approve the loans for small business. That is why Small Business Administrations charge an amount of up to 75% to 85% of the total loan amount from the lenders. However, most lenders tend to pass this fee onto the borrowers themselves.

4. Late Payment Fee

Some lenders tend to charge an extra fee in case the borrower is late on a payment. In some cases, they automatically draft up the fee from your account. And sometimes, if you miss a deadline, you will be notified firsthand about the extra amount to be deducted.

5. Check Processing Fee

If you are making your payment through a check, then some lenders may decide to charge an extra fee to process it. Most of the time, you will be informed about the check processing fee beforehand, however, it is still a great idea to discuss the payment methods and the ensuing fee before you sign the agreement.

6. Pre-Payment Fee

You might think that paying off your loan earlier than the designated time is a good thing. But in some cases, you might get penalized for this. Pre-payment fees are charged by some of the lenders to recover the cost from underwriting/servicing the loan. That’s why these fees usually entails paying off the outstanding principal at the time you pay off your complete loan.

Final Thoughts.

We discussed all the ins and outs of some of the best small business loans out there today.

As you can discern though, before applying for a small business loan, you need to consider everything beforehand.

Because the answer to, what is the best small business loan, depends quite a lot on your own unique situation.

From your credit score to your annual revenue and business history—each and every single aspect of your small business has a sizable impact on what it takes to acquire a loan. And even this isn’t nearly enough to decide which small business loan is right for you.

You also need to consider the interest rates and repayment terms, so that you don’t drown in debt and are able to pay off your loan on time.

Before moving forward, consider whether you will be able to repay the loan in the designated repayment term or not, or are you comfortable with the daily, weekly, or monthly payment.

There’s a lot to consider, so make your decision carefully, keeping every possibility in mind.

And when in doubt, I always recommend seeking advice from either a mentor who’s been in your shoes before—or a professional that’s helped small business owners navigate financially and tax issues before.