Funding Circle takes the top spot as the best overall small business loan thanks to a combination of competitive rates and broad qualification requirements. Funding Circle offers loans from $25,000 to $500,000 with 6-month to 5-year terms. Rates start at 4.99% for the best credit borrowers on a 6-month loan and go up to 27.79% for low-credit borrowers on a 5-year loan.
Origination fees range from 0.99% to 6.99% based on your credit history. There is no pre-payment fee. Late payments cost 5% of the payment amount. You’ll need at least a 620 credit score to qualify. Businesses must be at least two years old.
Funding Circle is interesting because it is a peer-to-peer small business loan marketplace. Your loans at Funding Circle are funded by accredited investors who invest in American small businesses. Investors can choose loans individually from the online marketplace or set up automatic investing to fund loans based on specific criteria.
Credibility Capital offers competitive rates but requires a 650 credit score to qualify, which is higher than the average lender reviewed. Loans are available from $10,000 to $400,000 in one-, two-, or three-year terms. Credibility Capital charges a one-time 3% origination fee but charges no prepayment fees.
To qualify, you’ll need to be revenue generating with at least 24 months in business. Interest rates range from 8% to 20%. This lender only works with strong businesses in a healthy position. If that sounds like your business, Credibility Capital may be a good fit for your borrowing needs.
The good news: OnDeck Capital offers loans to borrowers with credit scores as low as 500. The bad news: interest rates can be high. According to the OnDeck website, the “weighted average rate for term loans is 25.3% simple interest and 48.7%” annual interest rate.
Poor credit borrowers have limited options and have to pay high interest rates when borrowing. If you do get offered a high rate, seriously consider whether you need the loan before accepting. While you can quality at a 500 credit score, the average borrower has a score of 660 or higher.
OnDeck offers both fixed-term loans and lines of credit with funding as soon as 24 hours. Term loans (which we are focusing on here) charge a 2.5% to 4% origination fee. Loans are available from $5,000 to $500,000.
If you run a business with seasonal or lumpy revenue, Kabbage offers loans to business with $50,000 annual revenue or $4,200 per month over the last three months. That means businesses with irregular revenue cycles may fare better than with some more restrictive lenders.
Kabbage offers loans as a line of credit. You can take the entire approved amount at once or choose a lower amount, all from your computer or smartphone. Loans are available for up to $250,000. As it is a line of credit, there is no minimum you can borrow.
Loans are available in 6-month and 12-month terms. Interest rates range from 1.5% to 10% of the principal loan amount. Note that this rate is not an annual interest rate. The actual APR can make Kabbage relatively expensive.
StreetShares offers term loans and lines of credit to veterans. Term loans are available from $2,000 to $100,000 with terms of 3 to 36 months. StreetShares offers a best-price guarantee and will give you a $100 gift card if you find a comparative loan with a higher rate. While you technically don’t have to be a veteran to qualify, StreetShares is specifically marketed towards the veteran community.
StreetShares also uses a unique process to fund loans and determine rates: Loans are funded by investors who bid on your loan, and higher bids from investors lead to lower interest rates for borrowers. You’ll still likely end up in the 9% to 40% APR range.
Fundbox has lower requirements for revenue and time in business than most others. Loans are available to businesses at least six months old with at least $25,000 in annual revenue. There is no minimum credit score published. FundBox offers lines of credit and invoice financing. This review is focused on the line of credit offering.
FundBox offers near-instant approval and next day funding. Loan paybacks are in 12-week or 24-week periods in $1,000 to $100,000 amounts. Interest rates range from 4.66 and 8.99 percent charged as a weekly fee with each payment.
Lending Club is one of the oldest and biggest marketplace lending platforms. That size makes getting a loan funded on Lending Club easier than other, smaller platforms. Loans are available for $5,000 to $300,000 in one- to five-year terms. Origination fees range from 1.99% to 8.99% and interest rates range from 9.77% to 35.71% based on your credit. You’ll need a minimum credit score of 600 to qualify.
To qualify, you must have at least $50,000 in annual sales and have been in business for at least 12 months.
SBA loans are a government-backed loan program that helps small businesses get loans at better rates. Because they are backed by the Small Business Administration (SBA), loans come with very low rates. You’ll pay just 6.75% to 9.00% for loans from $30,000 to $5 million. Repayment terms range from 10 to 25 years.
It can take a week to get approved, but this loan might save you so much in interest compared to a loan outside of the SBA program that the wait isn’t a big deal. SBA loans do have strict requirements that vary based on loan size.
SmartBiz also offers non-SBA loans, but you’ll get a much more favorable rate if you do qualify for the SBA loan program.
The 8 Best Small Business Loans to Use in 2018
For when your business needs a boost
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If your business needs a little extra cash to cover the bills, order new inventory, expand to new locations, or a laundry list of other business needs, a small business loan might be right for you. Taking out a new loan is a big deal, so you shouldn’t rush and choose a loan without comparing several options and finding the loan with the best terms for your business needs.
The first thing to look at is the type of loan. Most commonly, you will find businesses borrow through credit cards, lines of credit, and fixed loans. If you need to borrow regularly to supplement working capital, a line of credit might make the most sense. If you are looking to buy a specific piece of equipment or real estate, a fixed-term loan is probably best.
Speaking of terms, the amount of time you borrow impacts rates and total borrowing costs. Longer payback periods lead to lower monthly payments, but the shorter term you borrow, the less you’ll pay in total. It’s also important to consider interest rates on business loans, which vary by lender, term, loan type, and your credit. Your business may have a credit score that a bank will review in addition to your personal credit. Both of those credit scores may have a big influence on your interest rate.
And, as always, it’s important to keep an eye on the fees. There can be application fees, early payoff fees, and other costs associated with a small business loan. You may not be able to avoid all fees, but you should understand which ones may impact you and which you can avoid.
Now that you know what to look for in the best small business loans, read on for our top choices for business loans and see if one of them may be right for your business.