Small Business Loans
Find the Best Options
Let’s Get Started
Financing Options For Your Business’s Needs
Table of Contents
Compare Your Business Loan Options
Whether you’re looking to expand, upgrade equipment, or bridge seasonal cash flow gaps, you need enough capital to run your business. Small business loans offer you the financial resources needed to grow your business. You can apply for financing from banks and alternative lenders, but both follow different eligibility criteria.
If you’re a small business owner looking for more information on the different small business loans, you’re in the right place. We’ve compiled everything you need to know about your small business loan options.
Compare Business Financing Options
Type of Small Business Loan |
Maximum Loan Amount |
Term |
Interest Rates |
Speed |
|---|---|---|---|---|
| Business Line of Credit | $10,000 -$5,000,000 | Revolving | Starting at 7.99% | 24 – 48 Hours |
| SBA Loan | $100,000 – $10,000,000 | 10 – 25 years | Starting at 6.25% | as little as 30 days |
| Equipment Financing | $25,000 – $5,000,000 | up to 10 years | Starting at 5.99% | 24 – 48 hours |
| Asset Based Loans | $250,000 – $10,000,000 | Revolving | Starting at 5.25% | 10 to 14 days |
| Bridge Loan | $25,000 – $5,000,000 | 6 to 36 Months | Starting at 12% | 24 – 48 Hours |
| Inventory Financing | $25,000 – $10,000,000+ | Revolving | Starting at 7.25% | 24 – 48 Hours |
| Invoice Financing | $25,000 – $10,000,000+ | 6 – 24 Months | Starting at 12% | As little as 24 hours |
| Purchase Order Financing | $25,000 – $10,000,000+ | Revolving | Starting at 15% | 24 – 48 Hours |
| Business Term Loans | $25,000 – $5,000,000 | 2 – 25 years | Starting at 6.99% | 5 to 7 days |
Business Term Loans
Best for: Addressing short-term needs or investing in long-term business opportunities
Term loans are a straightforward business financing option. Small business owners receive a lump sum upfront, which they can pay back in fixed weekly or monthly installments over an agreed-upon timeframe or term.
These business loans have loan terms ranging from a few months (short-term loans) to ten years (long-term loans). Depending on your business’ credentials (i.e., credit score, revenue, and time in business), you can qualify for anywhere between $25,000 to $5 million. Most lenders will require collateral to secure the loan.
Once approved, you can use business term loans to fund business initiatives like bridging cash flow gaps, equipment purchases, inventory reordering, expansion, renovations, business acquisitions, and more.
Business Term Loan Pros
- Companies can qualify for high loan amounts
- Low repayments
- Affordable rates
- Offers spending flexibility
Business Term Loan Cons
- Collateral and personal guarantee may be required
- Potential prepayment penalties
- Businesses with poor credit scores may not qualify
How to Qualify for Business Term Loans
To apply for business term loans, you need to meet the following eligibility criteria:
- A business credit score of 680 or higher
- Annual revenue of at least $500,000
- At least 6 months of business history
Ready to apply for Business Line of Credit?
Secured vs. Unsecured Business Line of Credit
There are two types. of business lines of credit: secured and unsecured business lines of credit which could be also known as small business lines of credit. Both options qualify a borrower for a set amount of credit, businesses must understand what each option entails.
As the name implies, secured business lines of credit are financing that requires collateral or an asset that will serve as security for the small business loan. It could be real estate, equipment, or other valuable assets the company holds. Regardless of the purchase, the collateral adds a layer of protection for the credit line.
With collateral, lenders will have something to repay if the borrower defaults on the loan. This gives them enough confidence to offer excellent terms and high credit limits to borrowers.
Unsecured business lines of credit do not have the collateral requirement. That being said, the lenders have nothing to tie up the loan to. Nothing to seize in case the business cannot fulfill the monthly payments. This adds significant risk to the lender’s side. Lenders are more likely to charge a higher interest rate for the financing and may require the borrowers to sign a personal guarantee agreement to mitigate the risks.
Terms |
Secured Business Line of Credit |
Unsecured Business Line of Credit |
|---|---|---|
| Collateral requirement | Yes | No |
| Credit limit | Lower | Higher |
| Interest rate | Lower | Higher |
| Risk (for lenders) | Low Risk | High risk |
Business Line of Credit vs. Business Credit Card
Another distinction that borrowers must know is the difference between business lines of credit and business credit cards. Both options work similarly in a way that it provides businesses with access to a set amount of credit line. But there are certain things that you cannot pay for using your credit card, but a line of credit can cover.
A business credit card can come in handy in many instances. For instance, you can use the card for expenses like company food purchases, travel expenses, purchasing inventory, or paying the utility. Business credit cards also have a higher credit limit than personal credit cards. Plus, many credit card providers don’t report business activities to personal credit, making it an ideal solution for businesses who want to separate business and personal expenses and those who want to protect their personal credit.
But it’s worth noting that you can only use credit cards for vendors that accept credit card payments. If the vendor doesn’t accept credit cards, you may have to resort to cash payments. This is where a business line of credit can come in handy. You can use the cash from your business for expenses like working capital, rent, payroll, and other invoices. Plus, business lines of credit can also have higher credit limits than credit cards.
So, how do you know which financial resource to get for your business?
Having both financial resources can be helpful for your business. In general, use a business credit card under the following circumstances:
- You don’t need a significant amount of cash for a specific business expense
- You want to take advantage of detailed expense tracking
- Paying for travel expenses like plane tickets, meals, accommodation, etc.
- You want to earn rewards like points or cashback
Choose a business line of credit if:
- Your business needs to fund a short to mid-term investment like expensive equipment
- You want more flexibility
- You need a financing resource with higher credit limits
Pros and Cons of Business Line of Credit
Business lines of credit are a great financial resource because it gives your company a chance to cover certain expenses without draining your cash flow. However, like other investments, it comes with certain disadvantages and risks.
Below, we’ll outline the pros and cons of business lines of credit:
PROS
One feature that makes business lines of credit excellent financing of choice is that it offers fast access to additional working capital. This can come in handy in situations where businesses find themselves facing an unforeseen expense. It could be broken equipment that they need to fix or replace or a business opportunity that only comes once in a while.
Further, businesses won’t have to worry about reapplying for financing as business lines of credit are revolving credit. In some cases, the lender allows companies to log into their account online and request money from their credit line. Online lenders, specifically, can process the amount and transfer into the business bank account within 24 hours. Small business owners won’t have to worry about going through the lengthy application process again.
With a business line of credit, you can use the proceeds for almost anything – as long as it’s for your small business. You can use the capital to buy equipment, cover rent and utilities, payroll, marketing, renovations, and others.
As mentioned, business lines of credit are unique in a way that it only lets you take only the amount you need. That also means that you only have to pay the interest on the borrowed amount.
To put it into perspective, let’s take an example. Suppose the online lender approved your business line of credit for $10,000, and you used $2,000. You only have to make the daily or monthly payment for the $2,000 you used and the interest on that amount. If you didn’t draw money from your credit line, you wouldn’t have to pay for the principal and interest. However, know that you’ll still be charged for the maintenance fees for your account.
Most business owners often have a hard time qualifying for comprehensive business loans because of the lack of credit history. If you’re looking to improve or build credit, a business line of credit can help. Many lenders may work with businesses with credit scores as low as 580.
As long as you make timely payments and you don’t go over the credit limit, you can improve your credit score and boost your chances of qualifying for comprehensive small business loans in the future.
Like other types of loans, applying for a business line of credit puts you in contact with a manager that oversees your application. You’ll most likely be in touch with this person throughout the duration of your credit contract.
The regular correspondence between you and your loan manager will help build a business relationship that you might be able to leverage in the future. Anytime you need additional capital to cover business initiatives in the future – be it equipment, renovations, or raising the limit on your credit line – you can trust that your loan manager can help and make the process smoother.
CONS
As mentioned, business lines of credit come with flexibility. With that, business owners often get tempted to use the credit line for just about anything. While a business line of credit can be a valuable resource, irresponsible spending could easily backfire. For one, your debt-to-income ratio could increase, along with your credit utilization ratio. Both could mean bad news for your credit score.
With lines of credit, you can expect the rates and fees to be higher than typical small business loans, especially if you’re working with an online lender. It could even be higher if your credit score is lower than 680 or your business does not have a solid financial track record.
While rates may vary from one lender to the next, the average interest rates for business credit lines could go up to 20%. If you’re applying from alternative lenders, the number could go higher. Some may even charge as much as 90%. On top of the interest rates, lenders may also charge other fees like account maintenance fees, late payment fees, prepayment penalties, and others, which can bring the charges to an even higher sum.
Especially if you’re applying for an unsecured line of credit, lines of credit come with a lower borrowing amount than typical business loans. This is because the lenders face a much higher risk by lending to high-risk borrowers, such as small businesses.
That is not to say that you won’t be able to find a lender that offers business lines of credit with a higher credit limit. Online lenders may still offer it, but the business would need to present stellar credit and financial history to qualify. They can also expect higher interest rates and fees for the financing.
If you’re not applying from online lenders, chances are, you’ll have to go through a longer application process, submit a long list of paperwork and documents, and present collateral. All of which can be a deal-breaker for some businesses.
How to Get a Business Line of Credit
When apply for revolving line of credit, you’ll need to fill out our online application form (it’s free and won’t affect your credit score) and submit your bank statements. We’ll review your application and reach out to you to discuss the loan options suitable for your business.
Ready to apply for Business Line of Credit?