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Small business loans help businesses in need of a cash infusion to help drive growth – whether it be in the form of purchasing equipment, expanding facilities, facilitating new hires, or investing in marketing.
A small business loan can also prove timely when a business finds itself in a tight spot following a downturn and requires extra cash in order to meet payroll and other operating expenses.
While traditional bank loans typically come with more favorable terms, it can be difficult for a small business (particularly a start-up) to secure a bank loan. Therefore, a number of online and alternative lenders have emerged in recent years to help provide loans to small businesses who would otherwise encounter difficulty securing a bank loan.
Let’s take a closer look at some of the best small business loan lenders active in the market today.
What to Look for in a Small Business Loan
Small business lenders examine the amount of time a business has been operating and its associated financials – gross annual revenue, net profits, type of collateral available to back the loan, and often the personal credit score of the business owner.
Small business owners, meantime, must evaluate interest rates and effective annual APRs while considering the size and terms of the loan, along with any origination fees and prepayment penalties.
Many lenders make it easy for small business owners to secure financing – even those with weaker qualifications – but since it is vitally important for small business owners to understand the underlying effective APR and associated costs attached to any small business loan, it makes sense for small business owners to gain an understanding of several of the best lenders.
Three Excellent Online Small Business Lenders
OnDeck offers term loans of up to $500,000 with flexible repayment terms ranging from three to thirty-six months. Though lesser qualified borrowers may face high APRs, qualified borrowers may receive a loan with an APR as low as 9.99% with an origination fee of 2.5%.
APRs on lines of credit start at 13.99% and approvals are frequently granted within 24 hours. OnDeck is accredited with the Better Business Bureau, carries a grade of A+, and can be found online at. Loanbuilder, a Paypal service represents an excellent financing option for small businesses requiring rapid access to funding, which is often provided within 24 hours.
Its reasonable qualification requirements specify that a business have a minimum nine months of operations and at least 42k in annual income to qualify for loans ranging from $5,000 to $500,000. Terms are on the short side, however, ranging from 13 to 52 weeks, and come with a fixed fee representing total interest expense on the loan.
Loanbuilder boasts an A+ rating with the Better Business Bureau. Meantime, Kabbage offers revolving lines of credit of up to $250,000 and a quick online application process.
A Kabbage line of credit is best suited for a small business that has been operating for at least one year with annual revenue of $50,000 or more and that requires quick access to working capital with a repayment term of six to twelve months.
Effective APRs are higher, starting at 20% and ranging as high as 80% – so it is important for the small business to have visibility on repayment to alleviate interest expense on the line of credit. Kabbage also carries an A+ rating with the Better Business Bureau.
Online Lending Marketplaces
LendingTree is an online lending marketplace that connects small business owners with multiple lenders, allowing for the comparison of many different types of small business loans.
The LendingTree platform provides competing quotes on equipment financing, invoice financing, business lines of credit and SBA loans, offering the most flexible range of rates and terms available to the small business owner. Funding can take longer here – from a few days to as long as a month – as the process is dependent upon the chosen lender.
Meantime, Torro is an online lending marketplace that connects small business owners with a network of lenders, independent brokerages and private investors. Their primary products are lines of credit ranging up to $250,000 and merchant cash advances as high as $750,000.
Term lengths, APRs and fees will vary according to the chosen lender, but a quick application process often results in funding within two days. Torro has a strong reputation with the Better Business Bureau, showing an A+ rating.
Small Business Loans for Startups
It can often be difficult for a startup or fledgling business to secure funding when it lacks a track record of operations that show a steady level of revenue or income.
However, in addition to the online lending marketplaces discussed above, another viable resource for startups is Seek Business Capital, a consulting firm that helps early stage businesses procure funding through banks and credit unions. Seek analyzes the startup and its business owner before providing a custom funding estimate that includes the size, term, rates and fees associated with the small business loan.
Seek does not charge any upfront fees and arranges for disbursement of funding within one to three weeks of a small business owner approving the funding plan. Seek arranges for funding but is not the ultimate provider of the funding, therefore, terms, APRS and fees depend upon the actual eventual lender.