Best low-interest business loans in December 2023
Business loans can get you the cash you need to start, grow or keep your business up and running. But rising interest rates have increased the cost of borrowing and made it harder for business owners to find affordable financing.
Our top picks for low-interest business loans offer affordable solutions for many types of borrowers. Banks and credit unions will offer the lowest rates but typically only to those with good or excellent credit. That’s why we’ve also selected online lenders who offer affordable business loans to businesses with fair credit and may even be able to help you if you have bad credit.Compare the best low-interest business loans in December 2023
| LENDER | BEST FOR | LOAN AMOUNT | APR |
|---|---|---|---|
| SBA 7(a) loans | Long-term loans | Up to $5 million | Up to 12.75% |
| SBA Microloans | Startups | Up to $50,000 | 8.00% to 13.00% (average) |
| SMB Compass | Secured business loans | $250,000 to 10 million | Starts at 5.25% |
| Triton Capital | Bad credit | $10,000 to $500,000 | 5.99% to 24.99% |
| Bank of America | Bank term loans | Starts at $10,000 | As low as 7.25% |
| Wells Fargo | Unsecured line of credit | $10,000 to $150,000 | 10.25% to 18.25% |
| Bluevine | Fast line of credit | $5,000 to $250,000 | Starts at 6.20% (simple interest) |
| Accion Opportunity Fund | Accessible loans | $5,000 to $250,000 | 5.99% to 18.99% |
| Creditfy | Equipment financing | Up to $5 million | 4.90% to 22.00% (simple interest) |
| Kiva | Interest-free microloans | $1,000 to $15,000 | N/A |
A closer look at our top low-interest business loans
SBA 7(a) loans: Best for long-term loans
Overview: SBA 7(a) loans are backed by the U.S. Small Business Administration and feature high loan amounts and interest rates that are capped by the SBA. They’re affordable options that are meant to make it easier for business owners to get the funds they need to help their business. There are several types of 7(a) loans including the Community Advantage loan, which offers up to $350,000 to business owners in underserved communities.
Why SBA 7(a) loans are the best for long-term loans: These loans come with high limits, in excess of $5 million, and terms as long as 25 years.
Who SBA 7(a) loans are good for: SBA loans are good for business owners need to borrow very large amounts but don’t need fast business loans, as it can take up to 90 days to receive funds.SBA microloans: Best for startups
Overview: SBA microloans are available to any small business owner but have been especially helpful to underserved communities that lack access to traditional financing. In 2022, $82.6 million in SBA microloans helped over 5,000 small businesses — 76 percent of those were businesses in underserved communities.
Why SBA microloans are the best for startups: Eligibility for SBA microloans are more lenient than the requirements of many other lenders. Eligible microlenders like AltCap work with businesses at any stage of development, including startups.
Who SBA microloans are good for: SBA microloans can cover a range of needs, including working capital and long-term costs. The low interest rates make them a good fit for any small business owner that needs funding of $50,000 or less and has struggled to qualify for traditional loans.
SMB Compass: Best for secured loans
Overview: SMB Compass is an online lender that offers nine types of loans, each with low starting interest rates.
Why SMB Compass is the best for secured loans: From asset-based financing and equipment loans to SBA loans and inventory financing, SMB compass offers plenty of secured loans options — some with limits as high as $10 million.
Who SMB Compass is good for: The best rates are reserved for business owners with good or excellent credit, but this lender does have options for borrowers with poor credit.Triton Capital: Best for bad credit
Overview: Triton Capital has several loans available, including equipment loans, which have rates between 5.99 percent to 24.99 percent.
Why Triton Capital is the best for bad credit: Working capital and equipment loans require a credit score of 600, which is fairly low compared to other lenders. The maximum interest rate for equipment financing is also lower than the average rates offered to business owners with poor credit.
Who Triton Capital is good for: Startups and business owners with bad credit may find the equipment financing they need.Bank of America: Best for bank term loans
Overview: Bank of America is one of the largest banks in the United States and offers a variety of financial services to businesses, including deposit accounts and lending.
Why Bank of America is the best for bank term loans: Bank of America’s business loans have large limits and low starting rates. It also has a huge footprint, meaning businesses can find a branch almost everywhere, making it easy to apply for a loan in-person.
Who Bank of America is good for: Established businesses with good or excellent credit that want an in-person lending experience will get the best value. It’s also good for companies that already bank with Bank of America and can take advantage of the lender’s Preferred Rewards for Business.Wells Fargo: Best for unsecured lines of credit
Overview: Wells Fargo offers three business lines of credit, including an unsecured option for businesses that have been around less than two years. Each has low interest rates, less fees compared to other lenders and offers the chance to earn rewards that can be redeemed for travel, gift cards and more.
Why Wells Fargo is the best for unsecured lines of credit: Business owners will find two unsecured business lines of credit: Wells Fargo BusinessLine® line of credit has rates as low as 10.25 percent APR and is for businesses that have been open for two or more years. Wells Fargo Small Business Advantage® line of credit has rates that start at 13.00 percent APR but is accessible to businesses that have been open for less than two years.
Who Wells Fargo is good for: You’ll need a credit score of 680 or higher and will have to apply by phone or in person for loan amounts higher than $100,000.Bluevine: Best for fast line of credit
Overview: Bluevine is a fintech company that focuses purely on banking and lending for small businesses. It offers a business line of credit open to borrowers with credit scores as low as 625 and interest rates starting at 6.20 percent simple interest.
Why Bluevine is the best for a fast line of credit: Bluevine’s application process is quick. You can be approved in as little as five minutes and receive funding as soon as 24 hours.
Who Bluevine is good for: Business owners that can meet its eligibility requirements. Bluevine has a high annual revenue requirement of $480,000 and isn’t available in Nevada, North Dakota or South Dakota.Accion Opportunity Fund: Best for accessible loans
Overview: The Accion Opportunity Fund is a nonprofit founded in 2020 to serve as “a financial support system” for small business owners. It offers a variety of loans but focuses on low-to-moderate income, women, and people of color who own businesses.
Why Accion Opportunity Fund is the best for accessible loans: The Accion Opportunity Fund used to offer business loans of $5,000 to $100,000 but have since bumped its maximum loan amounts up to $250,000 with interest rates of 5.99 percent to 18.99 percent APR. These loans are available to business owners no matter their credit score, as Accion looks beyond a number to determine your eligibility.
Who Accion Opportunity Fund is good for: Accion notes its client base is 90 percent women, people of color and low-to-moderate income. Minority business owners and other entrepreneurs from underserved communities may find Accion a better fit and more accessible than banks and lenders with strict eligibility requirements.
Creditfy: Best for equipment financing
Overview: Creditfy offers six small business loans, including a business line of credit, equipment financing, bridge loan and SBA loan. Most loans offer fast funding, flexible repayment terms and low starting rates.
Why Creditfy is the best for equipment financing: Creditfy equipment loans offer high loan amounts of up to $5 million with long repayment terms of up to seven years. Interest rates are low, ranging from 4.90 percent to 22.00 percent simple interest. You may also be able to qualify for financing with a credit score of 550 and $100,000 in annual revenue, and no down payment is required.
Who Creditfy is good for: Low-interest business loans for bad credit are hard to come by. If you have bad credit an equipment loan from Creditfy could end up being more affordable compared to other bad credit business lenders.
Kiva: Best for interest-free microloans
Overview: Kiva is a nonprofit organization that lets everyday people help fund microloans to businesses. Borrowers can get small amounts of financing at 0% interest.
Why Kiva is the best for microloans: Kiva offers loans of up to $15,000 with no interest or fees charged. Term lengths are from six months to three years. It doesn’t have a minimum credit score or other typical loan requirements because eligibility is based on your ability to invite friends and family to provide loans to you before you gain access to a wider pool of lenders.
Who Kiva is good for: Kiva is good for companies that don’t need much financing and who have a strong support community to help get them started with the platform.
What are low-interest business loans?
Low-interest business loans offer financing to business owners with lower-than-average interest rates. This helps keep borrowing costs low and makes it easier to pay down debt.
Loans with the lowest interest rates are reserved for businesses with excellent credit and a proven track record of generating revenue and maintaining sufficient cash flow. Depending on the type of loan, businesses with the best qualifications can get a loan with rates as low as 5.25 percent.
New businesses and business owners with bad credit likely won’t see rates this low but can take steps to secure as low a rate as possible. This includes providing collateral and generating enough income to cover your debts.
How does a low-interest business loan work?
Applying for a low-interest business loan is just like applying for any other loan. You’ll fill out an application and provide details about your business. The lender reviews that information and makes a decision about whether to approve your loan or business line of credit.
If you’re approved, you’ll get the funds and will need to repay the loan (including interest and fees) on a regular basis. The main difference is that some low-interest loans may have stricter credit requirements than loans with higher rates.
Requirements for a low-interest business loan
Each lender is free to set its own eligibility requirements for business loans. To find the best low-interest loan for you and to avoid getting denied, make sure you meet a lender's eligibility before applying. Common requirements relate to:
- Monthly or annual revenue
- Time in business
- Credit score
For example, it’s not unusual to see a requirement of six months in business and a 600+ credit score. To get a low-interest loan, the requirements may be higher, such as two or more years in business, annual revenue of $250,000 and credit scores of 700 or higher.
Types of low-interest business loan
There are many different types of low-interest business loans, each with pros and cons. Some may have stricter requirements while others may have faster funding. It’s important to consider your company’s needs before you select a type of loan.
SBA loans
SBA loans are loans insured by the U.S. Small Business Administration. These have the distinct benefit of large loan amounts. You can borrow upwards of $5 million and pay it back over the course of 25 years.
The SBA 7(a) loan program is the most common. It includes several types of loans, including:
- Standard 7(a) loan
- SBA Express loan
- Export working Capital loan
- CAPLines lines of credit
Other SBA loan programs include 504 loans and the Community Advantage Program, which offers small business loans in underserved markets.
Lenders can determine their own SBA loan rates, but can’t exceed maximum interest rate limits set by the SBA for most of its loan programs. SBA 7(a) loan rates are based on the prime rate plus a percentage known as a markup rate. Currently, SBA variable rates range from 10.75 percent to 13.25 percent, while fixed rates range from 13.50 percent to 16.50 percent.
The drawback of these loans is that they can take a very long time to get approved and funded — anywhere from 30 to 90 days. They might also be more expensive than some other low-interest loans.
Term loans
Term loans provide a lump sum of funds upfront that must be repaid over the course of months or years along with interest and fees. You can get these loans from almost any bank, credit union, or online lender.
Term loans tend to have the lowest rates and fees and higher loan amounts compared to other types of loans, especially compared to high-risk financing options like merchant cash advances.
Business lines of credit
A business line of credit gives you flexible access to a pool of cash when you need it. They are useful if your borrowing needs are unpredictable and the additional liquidity will help your company.
Keep in mind that business line of credit interest rates can vary. Banks and credit unions may offer the best rates, but typically only lend to business owners with good or excellent credit. Online lenders are far more acacessible but come with higher rates and fees.
Some lenders use factor rates to determine the cost of a loans, including lines of credit available to borrowers with poor credit scores. Factor rates are expressed as a decimal instead of a percentage, and they look much smaller compared to percentages found with interest rates and APRs. To see how costly they can be, always convert factor rates to an APR.
Equipment financing
Equipment loans are specialized loans you use to buy business-related equipment. These loans are secured by the equipment you’re purchasing, which lenders can seize if you fail to make payments. This makes them less risky compared to unsecured loans. And since the purchased equipment acts as collateral, equipment loans are appealing to business owners who can’t qualify for unsecured business loans and don’t own any assets to offer as collateral.
Microloans
Microloans, are very small loans, typically $50,000 or less. These often come from nonprofits or government entities like the SBA and have very limited eligibility requirements and low interest rates. Even startups and business owners with credit scores of 500 or lower may qualify for low-interest microloans.
Pros and cons of low-interest business loans
Pros:
- Low cost. Low-interest loans help you save money since you spend less on interest.
- Access to extra cash. Borrowing low-interest money can help you pay for unexpected costs or expand your business more quickly.
Cons:
- Harder to qualify. Some low-interest options will have strict eligibility requirements. This may include good-to-excellent credit, two years’ time in business and higher annual revenue requirements.
- Collateral requirements. To get the best interest rates, you’ll typically need to offer collateral.
Who should get a low-interest business loan?
Anyone who can qualify for a low-interest loan should look into these low-cost options. They’re typically reserved for established businesses with strong revenues and an established history of paying their debts. New companies whose owners have great personal credit may also qualify for a cheap business loan.
Even if you don’t have the best credit, it’s important to try and find the most affordable loan option available. Make sure to do your research and always compare multiple lenders to see who offers the best rates and terms for you.
Bankrate Insight
As you’re exploring low-interest business loans, watch out for these red flags:
- Upfront fees. Avoid paying application or other fees before your loan is approved. You might pay a fee and never hear from the lender again.
- Early repayment penalties. If there’s a chance you want to pay your loan off early and save on interest costs, make sure to avoid loans that penalize you for good financial habits.
- Lack of clarity. If you have questions about terms and conditions, and a lender isn’t helpful, get help from an attorney or look elsewhere before signing.
- Pressure tactics. Look for lenders that give you time to compare offers and don’t push you to make a decision before you’re ready.
Alternatives to low-interest business loans
If you need cash for your company but are not able to qualify for the best rates, consider these other options, which may be a more affordable option or have different features that are a better fit for you.
Where to get a low-interest business loan
If you’re looking for a low-interest business loan, consider these sources.
Banks and credit unions
Banks and credit unions are a popular choice for low-interest loans. According to the 2022 Small Business Credit Survey, low-risk borrowers were more likely to apply for business loans through banks. Even though the application process is slower than online lenders, the lower rates make them more appealing.
Online lenders
Business owners who don’t qualify for the best rates at banks and credit unions may still be able to get a low-interest loan through an online lender. These lenders tend to have faster and more streamlined applications and can fund your account in one to three days, which is typically much faster than banks and credit unions.
Community Development Financial Institutions
Community Development Financial Institutions (CFDIs) are special entities that focus on a broad base of low-income communities, such as urban or rural areas, Native American and other underserved minority communities. If you’re running a business in an eligible community, they can be a great way to get a low-cost loan or business grant.
Minority Depository Institutions
Like CDFIs, Minority Depository Institutions (MDIs) help communities that have historically lacked adequate access to financial opportunities found elsewhere. But MDI’s are institutions that are 51% or more owned by “socially and economically disadvantaged individuals” and serve minority communities, including Black, Latino/Hispanic, Native American and Asian American communities.
MDIs may have programs that offer low-interest business loans for minorities and other underserved communities. They can also be a good source of SBA loans, as a 2019 FDIC study found that MDIs originate more SBA loans to borrowers in these disadvantaged communities.
SBA lenders
SBA lenders can be banks, credit unions, CDFIs or MDIs. They’re supposed to help make loans more accessible since the SBA backs a large percentage of the loan, which makes the loans less risky for lenders.
Frequently asked questions about low-interest loans
Methodology
To choose the best low-interest business loans, we researched banks that offered low rates for term loans, business lines of credit and other loan types. We also looked for lenders with relaxed eligibility requirements and programs that are specifically geared toward helping borrowers with lower credit scores. We also considered features, including interest rates, whether the loans are secured or unsecured, minimum annual revenue and fees.
Additionally, lenders are reviewed using a 22-point scale. We measure quality in five key areas: Accessibility, affordability, transparency, customer service and flexibility. Based on the results, lenders are given a rating between 1 and 5:
- 4.5 or higher: Outstanding
- 4 to 4.5: Excellent
- 3.5 to 4: Good
- 3.5 and under: Average