Best small business loans in May 2023

Written by
Allison Martin
Edited by
Helen Wilbers
Reviewed by
Kenneth Chavis IV
May 24, 2023
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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.

Below, 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.

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Best for working capital

4.6

Bankrate Score
Loan amount
$25k- $400K
Term: 3 - 15 months
Interest rate
1.11 factor rate
Fastest funding
1 business day

Best for early payoff discount

4.4

Bankrate Score
Loan amount
$10k- $400K
Term: 4 - 18 months
Interest rate
Varies
Fastest funding
1 business day

Best for short-term loans

4.6

Bankrate Score
Loan amount
$25k- $500K
Term: 6 - 84 months
Interest rate
Starting at 7.90% simple interest
Fastest funding
2 business days

Best for the bank experience

4.3

Bankrate Score
Loan amount
Starting at $10k
Term: 12 - 60 months
Interest rate
Starting at 6.75%
Fastest funding
Not disclosed

Best for line of credit

4.5

Bankrate Score
Loan amount
$2k- $250K
Interest rate
Varies
Fastest funding
Not disclosed

Best for startups

4.5

Bankrate Score
Loan amount
$1k- $150K
Term: 3 - 6 months
Interest rate
Starting at 4.66%
Weekly Fee
Fastest funding
1 business day
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Compare the best business loans in May 2023

LENDER AND LOAN TYPE BEST FOR MIN. FICO CREDIT SCORE LOAN AMOUNT MIN. TIME IN BUSINESS
Credibly working capital loan Working capital 550 $25,100-$400,000 6 months
National Funding working capital loan Early payoff discounts 600 $10,000-$500,000 6 months
Fundbox line of credit Startup loan 600 $1,000-$150,000 6 months
Funding Circle term loan Short-term loans 660 $25,000-$500,000 2 years
Bank of America Business Advantage term loan The bank experience 670 $10,000 and up 2 years
American Express Business Blueprint™️* Line of credit 640 $2,000-$250,000 12 months

A closer look at our top business loans

Credibly working capital loan: Best for working capital

Overview: Established in 2010, Credibly currently operates as a direct lender of working capital loans and cash advances. It also partners with other lenders to offer business lines of credit, long-term loans, equipment financing, SBA loans and invoice factoring.

Why Credibly is the best  for working capital: Credibly offers a fast application, approval and funding process, allowing borrowers to rapidly address urgent funding needs. Plus, borrowers that repay early may qualify for a 20 percent discount on remaining factor, though conditions apply.

Who Credibly is good for: You could get approved with a personal credit score as low as 550. However, your business will need $25,000 in average monthly deposits during the previous three months — so these loans will best fit businesses with challenged credit but healthy revenue.

National Funding working capital: Best for early payoff discounts

 Overview: National Funding was founded in 1999 and claims to have worked with hundreds of industries and communities. National Funding offers working capital loans, short term business loans and equipment financing and leasing. 

Why National Funding is the best for early payoff discounts: National Funding offers up to $500,000 for its working capital loans. Repayment terms only range from four to 24 months, which could be a challenge for businesses with low cash flow. But for those who can pay their loan off early, this lender offers early payoff discounts if you're able to pay your balance in full. 

Who National Funding is best for: Any business with high cash flow, like laundromats or SaaS businesses, may appreciate National Funding’s large unsecured loans.
 

Fundbox line of credit: Best for startups

Overview: Fundbox was founded in 2013 and provides working capital loans for small businesses. Unsecured line of credit amounts range from $1,000 to $150,000, so you don't have to borrow more than you need. The company does not use traditional interest rates, instead relying on an amortized weekly fee. 

Why Fundbox is the best for startups: Startups may struggle with working capital while establishing a steady revenue stream. A line of credit like Fundbox’s may be a great solution. The application is online, and approval can come in as little as three minutes. You can request funds via Fundbox’s app and receive them as soon as the next business day.

Who Fundbox is best for: Fundbox may work for home-based or new businesses that need regular but small infusions of cash, such as a kitchen-based bake shop, or businesses that need fast approval and steady cash flow. 

Funding Circle term loans: Best for short-term loans

Overview: Secured loans require some form of collateral, letting lenders offer lower rates and easier qualification. Funding Circle has a low revenue requirement gives businesses between six months and seven years to pay their loans back. The company offers fast approval and funding in just 48 hours. Funding Circle also offers lines of credit.

Why Funding Circle is best for short-term loans: Funding Circle is a strong choice for companies that may not qualify for loans from lenders focused on bigger businesses so long as they have collateral to secure the loan.

Who Funding Circle is best for: Funding Circle’s loans may suit newer companies with no established revenue, or revenue that is hard to predict, such as weather-based seasonal businesses like snow plow services.

Bank of America Business Advantage term loan: Best for the bank experience

Overview: Bank of America is one of the nation's largest originators of commercial loans. The bank, an SBA Preferred Lender, offers many business loan products, from term loans and lines of credit to healthcare practice and equipment loans. Its unsecured Business Advantage Term Loan offers a reasonable starting rate and up to five years to repay.

Why Bank of America is the best for the bank experience: Its many locations across the U.S. make it an accessible option for many of the nation's small business owners. Plus, you can apply for its unsecured Business Advantage term loan online (so long as you have an online banking ID with the bank) by phone or in person, making it a convenient option among bank loans.

Who Bank of America is best for: Bank of America’s wide variety of small business loan products mean that even if this product isn't a fit, it likely offers a funding solution for your needs. Most products are better for well-established businesses; this one requires at least two years in business.
 

American Express Business Blueprint™️ line of credit: Best for line of credit

Overview: Business Blueprint, formerly Kabbage, is a service from American Express offering lines of credit. Small business owners can access from $2,000 to $250,000 to keep operations running smoothly. The minimum draw amount is $500 for three- and six-month loan terms if your balance is greater than $500 or $100 for three- and six-month loan terms if your balance is less than or equal to $500. For 12- and 18-month loan terms, the minimum draw amount is $10,000. A fee is charged instead of interest each month there’s an outstanding balance; it ranges from 3.00% to 9.00% on six-month terms, 6.00% to 18.00% on 12-month terms and 9.00% to 27.00% on 18-month terms.

Why Business Blueprint is the best for lines of credit: Business Blueprint takes the hassle out of securing the cash you need with its seamless online application process. Another reason this lender stands out among the rest is its accessibility. Most traditional lenders require a much higher credit score, extensive business experience and hefty revenue to access a line of credit. 

Who Business Blueprint is good for: This loan may suit smaller and young businesses that need access to a generous cash flow as they grow their operations.

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

What is a small business loan?

A small business loan is a loan product used by business owners looking to open the doors to their new business, expand operations, acquire inventory or equipment, resolve cash flow issues or use for other business-related needs. These loans are available through traditional banks, credit unions and online lenders.

How does a small business loan work?

Small business loans work much like any other loan type: You apply, the lender approves you and then you receive it, use it and pay it back. Lenders set minimum requirements that must be met, like a certain time in business, credit score or annual revenue. Unlike a personal loan, you often have to prove your business is viable by providing business bank account information and other data.

If a lender approves you for a loan, you can negotiate the details and sign documentation to finalize it. With some lenders, this process might take a few days; with others, several weeks. Depending on the loan type, you might have a revolving amount you can borrow from, or cash may come in one lump sum. 

After receiving the funds, you must start repaying them. You may do that in equal payments over a given term at regular intervals. Monthly payments are common, though anything from daily to quarterly payments is possible. Or you might repay your loan through a percentage of your daily or weekly sales, a model that’s common with merchant cash advances.

 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. But startup loans exist, too.
  • 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:

Types of small business loans

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

Lines of credit operate 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 90 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, non-profits or traditional banks and online lenders offering their own microloan programs outside of the SBA. With most microloans, you can access up to $50,000 in working capital or startup funding 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 hefty 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.

Pros and cons of business loans

Small business loans can be a good or less-optimal option, depending on your situation.
 

Pros

  • A small business loan can help provide a regular level of cash flow, even during slow periods or downturns
  • Can mean more access to more capital, which can help business owners expand their businesses
  • Making on-time payments on a business loan may help improve your credit rating

Cons

  • Loan repayments can create an additional financial strain on the business, especially if the business does not qualify for lower rates due to credit score or revenue issues
  • Defaulting on the loan can mean losing business assets if the loan is secured, and even risking personal assets if you’ve signed a personal guarantee
  • Newer businesses or businesses with poor credit may not qualify, especially with traditional lenders

Alternatives to small business loans

Below are some alternative options if you decided small business loans are not for you:

Where to get a small business loan

Don’t limit your options — investigate loans from multiple lender types to get the best rates.

  • Banks and credit unions: Banks and credit unions typically offer a variety of products, from lines of credit to SBA loans. Requirements tend to be strict, however, and approval can sometimes take months. However, these institutions can offer a face-to-face experience. And bank employees should be skilled at helping you navigate the application process.
  • Online lenders and fintech: These lenders often specialize in lending to less established businesses, as requirements are often less stringent. Approval and funding may take only a day or two. An all-online experience means navigating the loan right at your fingertips on devices. However, you need to be careful that the lender is established and legitimate by reading reviews, checking Better Business Bureau ratings, and looking at the lender's background. 
  • Non-profits: Some non-profits specialize in helping small businesses access capital. Some, such as Kiva, operate crowdfunding platforms. They may also run microloan programs.

 In general, banks and credit unions are best for more established businesses because of the stricter approval requirements. Online lenders and non-profits may be more forgiving of less established businesses, as some are even geared toward businesses that could not secure funding from more traditional banking options. 

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Bankrate Insight

If the business loan you’re considering presents the following red flags, consider going with a different option.
  • Fees or other points of the contract are not clearly stated or vague
  • Terms to pay back the loan or draw periods are very short
  • You cannot pay off the loan early
  • Borrowing limits are smaller than what you need
  • Lender isn’t forthcoming when answering questions

Small business loan news

During the ongoing COVID-19 pandemic, the Federal Reserve has been raising lending rates to try to slow inflation. Rates went up in 2022 at a rate not seen since the 1980s. In 2023, the Fed is signaling it plans to raise rates at a slower pace — but they are still rising. 

In March, the Federal Open Market Committee bumped the Fed rate’s target range up by another quarter percentage point. It now sits at 4.75 to 5 percent.

The federal funds rate reflects how much it costs for banks to lend money. It also influences benchmark interest rates like the Wall Street Journal prime rate. Many lenders base their interest rates on the prime rate, so other loan rates often increase when it increases. That includes business loan rates.

FAQs about small business loans

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.
 
When evaluating lenders, we use a 22-point scale to 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