Best small business loans in February 2023
Allison Martin’s work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and Credit.com.
Helen Wilbers has been editing for Bankrate since late 2022. He values clear reporting that helps readers confidently land deals and make the best choices for their finances. He specializes in auto and small business loans.
Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers.
What To Know First
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Definition of Terms
Compare the best small business loans in February 2023
| LENDER AND LOAN TYPE | BEST FOR | MIN. FICO CREDIT SCORE | LOAN AMOUNT | MIN. TIME IN BUSINESS |
|---|---|---|---|---|
| Credibly line of credit | Bad credit business loan | 600 | Up to $300,000 | 6 months |
| Kabbage line of credit | Line of credit | 640 | $2,000-$250,000 | 12 months |
| Fundbox line of credit | Startup loan | 600 | $1,000-$150,000 | 6 months |
| Bank of America | Small business loans from a bank | Not disclosed | $10,000-$5 million | Varies by loan |
| Credibility Capital installment loan | Fast loan | 650 | $50,000-$500,000 | 2 years |
Credibly line of credit: Best for bad credit business loan
- Accessible to borrowers with low credit scores
- Online pre-qualification available with no impact on your credit score
- Funds in as little as 24 hours
- Loan origination fees assessed to some borrowers
- Not offered to borrowers in select states
- Interest range not disclosed
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You could be eligible for a Credibly secured or unsecured small business line of credit if you have a personal credit score of 600 or higher, your company’s annual revenue is at least $180,000 and you’ve operated in the United States for six or more months. You’ll also need to provide a personal guarantee. The application is accessible online, and if approved, you can access your business line as soon as the same day. This financing solution may not be available in all 50 states.
Kabbage line of credit: Best for line of credit
- Low minimum annual revenue requirement
- No origination or early repayment penalties
- Available to small business owners in all 50 states
- Only available to established businesses
- High borrowing costs for loans with longer terms
- Monthly fees make cost comparisons difficult
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This loan product is available to small business owners with a FICO score of 640 or higher who’ve been in business for at least 12 months and earn $3,000 or more of monthly revenue. A personal guarantee is also required to secure a business line of credit with Kabbage. You can apply online by completing the questionnaire and linking your business bank accounts for the lender to review. Most applicants receive a decision in minutes and access to funds in just one to three business days.
Fundbox line of credit: Best for startups
- Fast funds accessible by app
- Unsecured option
- Wide range of loan amounts
- Minimum annual revenue of $100,000 may be prohibitive
- Short repayment terms for each disbursement
- Weekly fee instead of interest makes rate comparison hard
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To qualify, you must be based in the United States, have a credit score of at least 600, make at least $100,000 in annual revenue, be in business for over six months and have a business checking account. You’ll need at least 25 percent ownership of your business to apply, and you must provide a personal guarantee. Fundbox charges a nonsufficient funds fee.
Bank of America: Best for small business loans from a bank
Overview: Bank of America is one of the nation's largest originators of commercial loans. With over 3,900 retail financial centers nationwide, it currently serves more than 3 million small business owners through an assortment of funding solutions. Borrowers also have access to a suite of small business resources, including free Dun & Bradstreet business credit score monitoring and interest rate discounts.
- Term loans: The Business Advantage Term Loan is an option if you’ve been in business for at least two years and earned $100,000 or more in gross sales in the prior year. Loans start at $10,000 with interest rates as low as 6.75 percent and terms from 12 to 60 months. An origination fee of $150 applies if you’re approved for funding.
- Business lines of credit: Bank of America offers secured and unsecured business lines of credit. The Cash Secured Line of Credit requires a minimum security deposit of $1,000, six months in business and $50,000 in annual revenue to qualify. Plus, you’ll have the option to have your deposit refunded and graduate to an unsecured line after demonstrating you can responsibly manage the account for two years and earning $100,000 in annual revenue. The Business Advantage Credit Line, an unsecured option, has more strict requirements. You’ll need two years in business and $100,000 in annual revenue. You can access a business line as small as $10,000, and interest rates start at just 8.75 percent.
- SBA loans: Bank of America offers three types of SBA loans. SBA 7(a) loans between $200,000 and $5,000,000 are available with fixed-rate terms of up to 25 years and down payments as low as 10 percent. The SBA 504 Loan Program also requires a 10 percent down payment and comes with the same loan terms, but the starting loan amount is $400,000. If you need fast funding, you can explore the SBA Express Loan, which offers between $25,000 and $500,000 with fixed-rate terms of up to 25 years. SBA loans are available to sole proprietorships, partnerships, LLCs and corporations. In 2022, Bank of America approved 506 SBA 7(a) loans worth $201,069,100.
- Health care practice loans: These loan products are reserved for doctors, dentists and veterinarians. Loan amounts and terms aren’t disclosed online.
- Other loans. Bank of America offers equipment loans and commercial real estate loans starting at $25,000. Vehicle financing is also available with loan amounts from $10,000 and terms ranging from 48 to 72 months.
Why Bank of America is the best for small business loans from a bank: Most traditional banks want two years of business experience before they’ll consider you for funding. However, Bank of America allows you to access capital after just six months in business and start building business credit with its secured business line of credit. Its many locations across the U.S. make it an accessible option for many of the nation's small business owners, and its wide variety of small business loan products mean that Bank of America likely offers a funding solution for your needs.
Pros
- Free access to business credit score monitoring through Dun & Bradstreet
- Interest rate discounts on select loan products through the Preferred Rewards for Business membership
- Line of credit available to six-month-old companies
- Most business financing solutions unavailable to new companies
- Origination fees assessed on most business loan products
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Bank of America's eligibility criteria vary by the loan product you select. You can apply online for the cash-secured line of credit if you currently do business with Bank of America and have a Small Business Online Banking login. Otherwise, you can make an appointment by calling or using the online scheduler to connect with a business lending specialist who can assist with your loan application.
Either way, you’ll need to provide your business tax ID number, the type of business you have, the date it was established, the number of employees you have, the annual gross sales and net profit, any outstanding business debt and identifying information for the individual providing the personal guarantee.
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Bank of America offers small business loans in all 50 states and Washington, D.C.
Credibility Capital installment loan: Best for fast loans
Overview: Credibility Capital is a direct lender offering lines of credit and installment loans (what the lender calls term loans). If you’re interested in the latter, loan amounts are between $50,000 and $500,000 with interest as low as 9.49 percent and terms of up to five years. Payments are made monthly.
Why Credibility Capital is the for fast loans: If you’ve been in business for at least 24 months, an installment loan from Credibility Capital could be a viable option. The application process is handled entirely online, and you can have the funds you need in as soon as three days. This loan comes with fixed monthly payments and a low starting interest rate for qualified applicants.
Pros
- Prequalify with a soft credit pull
- Fixed interest rates and flexible repayment options
- No early repayment penalties
- Online loan management unavailable
- Closing fee of 2.99 percent to 4.99 percent
- Loans not offered in Nevada, North Dakota, South Dakota and Vermont
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You can apply for an installment loan using the all-digital application found on the website. Here’s what you’ll need to qualify:
- Personal credit score of 650
- 24 months in business
- $200,000 in annual revenue
- No current delinquencies greater than $1,000
Applicants with bankruptcies within five years or outstanding judgments and liens may be denied funding.
Credibility Capital also requires a personal guarantee for all owners with a stake of more than 25 percent and places a lien on the business while the loan is outstanding. Most loans are approved and funded in three to five business days, and you’ll pay a closing fee of 4.99 percent if your loan is less than $100,000, 3.99 percent if it’s between $100,000 and $199,999 or 2.99 percent if it’s $200,000 or above.
This loan product is unavailable in Nevada, North Dakota, South Dakota and Vermont.
The Bankrate guide to choosing the best small business loan
Small business owners often need money to fill cash-flow gaps, fund operating expenses, make purchases and take advantage of growth opportunities.
But securing financing isn’t always straightforward — you’ll need to identify the right funding solution for your company and a lender willing to work with you. Above, you will find a list of the best small business loans on the market, details about each offering and an explanation of why they made the cut. Our top selections are based on the accessibility and affordability of the financing solution, funding speeds and other attractive features they offer.
What is a small business loan?
Types of small business loan
There are several types of small business loans to choose from. Some have more stringent requirements than others, particularly those offered by traditional banks. But if you’re a member of a credit union, you may find it easier to qualify off the strength of your relationship with the financial institution. Or you can try applying with an online lender, as their offerings are generally more accessible to a broader range of borrowers.
Here’s a closer look at the different business loan options available:
- Term loan: The most common type of business loan among startups and established companies, term loans let you borrow a lump sum to cover business expenses. Term loans are accessible through most banks and credit unions, and loan amounts range from $1,000 to the millions. Still, you’ll likely have to generate a sizable amount of revenue and provide a personal guarantee to qualify for funding. Furthermore, you can expect higher borrowing costs if you’re starting out in your business.
- Line of credit: This loan product operates like a credit card. But you’ll likely get a higher limit and a far lower interest rate than you would with a business credit card. There are drawbacks, including the lack of rewards and the limited draw period or time frame that you get to access the line of credit before it closes. The upside is some lenders allow you to make interest-only payments during the draw period, which could be beneficial if you’re trying to get your company’s cash flow back on track.
- Merchant cash advance: You can access funding to meet your company’s short-term needs with a merchant cash advance. Funds are disbursed in a lump sum and payable to the lender through a percentage of daily credit card sales — typically over a short loan term of one year or less. Lenders use your credit card sales volume to determine the amount you’re eligible to borrow, so bad credit isn’t necessarily a deal-breaker. However, this debt product comes with a steep factor rate instead of interest and fees, making it a costly funding option.
- Invoice financing and factoring: Both funding options allow you to borrow against your unpaid receivables. But there’s a key difference between the two. Invoice financing involves receiving an advance of up to 85 percent of your company’s accounts receivables, and you’ll repay the client the amount you borrow (plus fees) once the invoice is paid. But if you choose invoice factoring, you’ll sell the outstanding invoices directly to the lender in exchange for a lump sum of up to 85 percent of what’s owed. The client will pay the lender directly, and any amount that remains after fees are deducted will be distributed to you.
- SBA loan: Backed by the Small Business Administration, SBA loans are loan products featuring competitive rates and generous loan terms to meet the needs of small business owners. They’re accessible through SBA-approved lenders you can locate through the SBA Lender Match Tool, but they come with a few downsides. Despite the SBA’s intention to provide small business owners with the funding they need, SBA loans come with an application process that’s challenging to navigate. Plus, it could be several months before the loan proceeds are disbursed to you.
- Microloan: These loans are available through SBA-approved lenders or traditional banks and online lenders offering their own microloan programs outside of the SBA. You can access up to $50,000 in working capital for your business. Some lenders may charge higher borrowing costs than you’d get with standard business term loans as these loans cater to newer businesses and pose an elevated risk to lenders.
- Equipment financing: If your company needs pricey equipment to keep operations moving smoothly, this funding option may be ideal. Equipment loans are secured by the equipment purchased and often come with attractive interest rates. The loan term you’ll get is based on the amount you borrow and the useful life of the equipment. That said, your monthly payments could be on the higher end if you take out a larger loan.
- Commercial real estate loan: You can use a commercial real estate loan to purchase or lease a physical space for your company. Some lenders offer up to $5 million in funding with extended repayment periods and competitive interest rates. However, qualifying may be difficult if you’re starting out or your revenue is on the lower end. Plus, you can expect a lengthy application process.
Requirements for small business loans
Each lender has its own set of eligibility criteria for small business loans. That said, you’ll want to keep some general guidelines in mind as you research your options and prepare to apply for a business loan. Most lenders will typically evaluate the following to determine if you’re a good fit for a small business loan:
- Business revenue: You’ll likely need to generate a certain amount of gross annual or monthly revenue to qualify for a small business loan. Meeting this requirement demonstrates to the lender that you have the means to make monthly loan payments without disrupting your company’s cash flow.
- Business debts: Prepare to provide a list of your current outstanding business debt obligations and monthly payments to the lender. This information will be used to determine how much of your revenue is allocated to current debts and if you can afford to take on a new monthly loan payment.
- Time in business: Expect to provide the number of months or years you’ve been in business. In most instances, you’ll need at least six months of business to qualify for funding. Some traditional lenders require at least two years of business experience to secure a small business loan.
- Credit history: Most small business lenders will also check your personal credit score and history to determine the risk you pose. You’ll generally want to have a personal credit score in the mid-500s to secure funding, although a higher credit score means you’ll have better approval odds and lower interest rates with more lenders. Some lenders will also check your business credit score when evaluating your loan application.
- Industry: Lenders want to know you’re operating in a stable industry or one that isn’t at risk for a major downturn that could significantly affect operations and your ability to repay the loan.
It’s also helpful to have these documents handy when you apply:
- Business plan and loan proposal (if applicable)
- Business license and operating agreement
- Employer identification number (EIN)
- Recent personal and business tax returns
- Recent bank statements
- Proof of business insurance
- Payroll records
- Lease agreement
- List of accounts payable and accounts receivable
- Business financial statements (i.e., balance sheet, profit and loss statement)
How to choose the best small business lender
FAQs about small business loans
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Most lenders have a minimum time in business requirement to qualify for a small business loan. If you’re starting out, wait at least six months to apply or go with a lender that doesn’t have this requirement. Keep in mind that the lender will most likely require you to have a strong personal credit score. You may have to put up collateral to borrow for a startup that hasn’t yet opened its doors.
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If you meet the lender's funding requirements, you may be able to avoid difficulties when seeking small business funding. It helps to research borrowers to find possible good fits before formally applying so you’ll know what to expect.
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Gather your most recent personal and business bank statements, tax returns, business license and incorporation documents (if applicable). It also helps to have your company’s financial statements handy, along with a list of current debts, receivables, payables, your company’s operating agreement and a business plan if you’ve created one. The lender may not require all of these documents, but it doesn’t hurt to have them available if needed.
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A good or excellent credit score is ideal when applying for a small business loan to qualify for a competitive interest rate. However, some lenders offer funding solutions to borrowers with credit scores in the mid-500s. Be mindful that a lower credit score means your borrowing costs will likely be higher, and secured loans may be the only option available to you.
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This varies widely by lender. Many require an an annual minimum revenue of between $36,000 and $180,000, though some set their requirements higher still. The lender may still be willing to work with you if you don't quite meet the revenue requirement but have other signs of good financial health.
Methodology
To choose the best small business loans, we ensured all loans featured are broadly available across the United States. We then considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, required time in business, minimum annual revenue and fees. Additionally, the featured lenders were evaluated for notable qualities such as funding speed and nontraditional eligibility criteria.