Ways To Get A Small-Business Loan Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Jacob Lund/Shutterstock February 08, 2022 Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo
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All business loans work in the same general way: They let small-business owners and entrepreneurs borrow money and pay it back over time. However, different kinds of lenders can work better for different types of businesses. Bank loans
Bank loans are offered by major players within the banking industry. They may come in the form of a fixed-rate loan or a . Funds can be used to open the doors to your company, cover a cash flow gap, make equipment purchases or expand operations. Regardless of which form of financing you choose, you should and their business loan offerings, along with the rates, terms and qualification criteria. Many will look at your personal and business credit scores, cash flow, collateral and time you’ve been in business. If you’re ready to apply for a bank loan, follow these steps to simplify the process: Narrow down your list of lenders. Contact each lender on your shortlist to learn more about the eligibility criteria for the loan products you’re considering. Select the best lender for your company. Gather the required documentation to save a ton of time when you apply. Complete the application and submit any documentation the lender needs to expedite the review process. Who it’s best for: Bank loans are best for small business owners who have bank accounts at brick-and-mortar banks that they enjoy doing business with. But if you have minimal business experience, limited reserves or less than perfect credit, an SBA loan or loan from an online lending marketplace could be a better fit. SBA loans
The U.S. Small Business Administration (SBA) works directly with over 800 lenders in all 50 states and U.S. territories to offer small business loans. Its loan products feature competitive rates and terms, and unique benefits like lower down payments and flexible overhead requirements. Many are also offered without any collateral required, and SBA loan limits can be as high as $5 million with select programs. SBA-backed loan options include: 7(a) loans: offers up to $5 million for business real estate purchases, working capital, business debt refinancing, and furniture, supply and fixture purchases 504 loans: offers up to $5 million in fixed-rate financing for major fixed assets Microloans: offers up to $50,000 to foster business expansion You can use the to connect with lenders offering SBA loans. Here’s how it works: Complete the online questionnaire. It only takes five or so minutes of your time. Get matched with a potential lender. You’ll get an email with contact information for lenders who are interested in doing business with you, typically within two business days. Connect with the lender. During the initial call or meeting, the lender will review the terms and conditions of the loan. Apply for funding. You’ll submit a formal application and any required documentation directly to the lender. Who it’s best for: SBA loans are most suitable for small business owners who operate in the U.S. or its territories, have exhausted all other options and can’t secure a loan elsewhere. However, if you have access to other small business financing opportunities, an SBA loan may not be a good fit. Online opportunities
The internet is also a treasure trove when it comes to finding the best small-business loans, and it’s common for online lenders to offer better rates and terms than you can find elsewhere. Websites like can help you shop around and compare multiple business loans in one place, and you might even be able to get prequalified online before you apply. Generally, you’ll need to fill out a brief questionnaire to get matched with lenders in its network that can get you funding for your business. Some online business lenders offer unique borrowing opportunities other than traditional small-business loans. For example, you can find small-business lenders that offer loans that cater to credit-challenged borrowers or let you borrow against unpaid invoices using a process called invoice factoring. How to calculate your business loan payment
To calculate your small-business loan payment, you can use a . To figure out how much you may need to pay each month, you’ll need to know how much you plan to borrow, the length of your loan repayment terms and the interest rate you can qualify for. A loan calculator can also be helpful if you’re trying to compare business loan options from different lenders. When you use a calculator to compare loans, you may find that one option is significantly less expensive than another due to a lower interest rate or a shorter repayment timeline. Less traditional ways to get money for a small business
If you’re having trouble qualifying for a small business loan, there are viable alternatives. Personal loans
Personal loans can be easier to access than business loans. The downside is the rates are usually higher, particularly if you have bad credit. It’s also highly likely that you’ll get approved for a small amount that’s payable in a short span of time, which means the monthly loan payments could stretch your budget too thin. Another significant drawback is recordkeeping as these loans make it difficult to keep business and personal financial affairs separate. Home equity loans
should only be used as a last resort to fund your small business. These loans let you convert a percentage of the equity you’ve built up in your home, or the property’s value minus the outstanding balance on the mortgage, to cash. Depending on how much equity you have, you could get a sizable amount of cash. Plus, the interest rate is fixed and you’ll typically get an extended period to repay what you borrow in equal monthly installments. But here’s the catch: your home is used as collateral to secure the loan. So, if you fall behind on payments, the lender could foreclose on your home. The bottom line
The best way to get a small-business loan is to compare all of your options to find one that suits your needs. Your business could qualify for a loan with a brick-and-mortar bank in your area, but it’s possible that an online lender could offer a lower interest rate or more flexible repayment terms. Try to only borrow what you need, and go with the loan product that offers the lowest rate and lending fees you can find. Learn more
SHARE: Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles