This post was reviewed and updated on July 7, 2020
Getting financing for your small business isn’t a matter of “if”; it’s usually a matter of “when.” That’s why, even if you’re not looking to take out a loan right now, it’s smart to look ahead to stay on top of what’s available. There are a lot of small business financing options available to a business owner looking for a small business loan, do you know the differences between loan types? Are you aware of all the lenders offering them? Can you tell if an online lender or brick-and-mortar bank is better for your situation?
So many questions go into finding a business lending solution. A good place to start may be identifying those traditonal lenders that might be the best banks for small business loans. Research each to see if they have the bank loans best-suited for your unique growth plans. You may even see a few on this list that are new to you!
Best Banks for Small Business Loans
- Live Oak Bank
- Wells Fargo
- Capital One
- Bank of America
It shouldn’t surprise you to see Chase leading the pack. It has one of the more robust credit offerings for businesses of all sizes, including those who need working capital, equipment financing, or commercial real estate loans. If big borrowing is your goal, they have plenty of SBA-backed options to help, including SBA 504 loans, which can connect you with a million or more for that new storefront or manufacturing plant.
Not ready to go big yet? That’s OK, too. Their line of credit program is a great way to access capital as needed, which you can borrow against as you need it to grow your business.
Live Oak Bank
Never heard of them? You’re not alone. This SBA-preferred lender is completely online, with no physical branches to visit. What they do focus on, however, they do very well. Choose from SBA 7(a) loans, 504 loans, or the 504 “green loans.”
You won’t find a lot of extra business lending programs here, but with SBA preferred status, they can get you approved and on your way quicker than most. They also handle other government small-business lending programs, such as agricultural loans through the USDA. Don’t ignore what an online bank can do for you!
One of the big names in business banking, Wells Fargo has been handling consumer and business financial loans for a long time. With a full range of options, including equipment financing, short and medium-term loans, working capital loans, lines of credit, and business credit cards, they are perfect for someone who knows they need business financing but aren’t sure where to start.
They also work with the SBA small business loans program! Extra perks can be found for existing customers; if you already use Wells Fargo for your personal checking account, business checking account, or savings account, they’re worth checking out.
Capital One is a familiar name when thinking of business credit cards. That’s because they have some start-up business options that allow even those with less-than-excellent credit get access to rewards cards with low or no annual fee. If you’re looking for a more traditional loan option, however, they can help there, too. They partner with the SBA, offering loans for various amounts in almost every industry. Other lending options, including equipment financing and lines of credit, can be just what you need to get to the next level of business. (One other solid perk of Capital One is that they do so much online! It’s ideal for someone who travels and wants a bank that will be everywhere they go.)
Bank of America
Bank of America has been more aggressively financing small businesses in recent years. With SBA loans and traditional business loans, lines of credit and credit cards, it’s been giving a variety of solutions to small businesses poised for growth. They value their relationships with customers and are more likely to offer great rates if you have other bank account services with them. From commercial real estate of that new healthcare tech purchase, they can find the right term loan to get you there.
How to Qualify for Banks Loans for Business
Traditional banks vs online lenders
When it comes to getting cash for your business, it may seem that online lenders, or other alternative lender, and their simplified loan applications and shorter approval times are too good to be true. In fact, they can be a suitable option for funding, especially if you need a decision in days – or minutes!
What’s the catch? Unlike traditional bank loans, online lenders use a different paradigm to evaluate credit worthiness, meaning that if you don’t qualify for a loan at the local bank, an online loan could be an option for you. They are making access to capital easier and faster, but that access will likely come with higher fees and APR—although that isn’t always the case for borrowers with an excellent credit profile.
In stead of taking weeks or months to get a traditional bank loan, an online loan often takes only a day or two, making this faster access to capital worth any additional cost. Be sure you understand the repayment terms of a loan before you sign on the dotted line, no matter where you apply.
Types of small business loans banks offer
Many of the top banks got on our “best of” list because of the variety of funding options they offer. It’s a benefit to businesses to be able to walk into a bank branch, sit down, and spell out your needs in person—and have confidence they will likely offer just the right lending product. Looking at the long list of loans, lines of credit, and financing options can be overwhelming, however. We advise getting to know a bit about all the different financing banks are likely to offer; it will make the search process much less stressful.
A business term loan is probably the most straightforward loan option. Term loans have a preset amount and a specific timeframe to make repayment, with a monthly or weekly payment scheduled that’s consistent throughout the term of the loan. Within this category, in addition to “long-term loans” like mortgages, are what banks call “medium-term loans” and “short-term loans.” As the names suggest, each will give you a different timeframe to repay the loan.
With shorter-term loans you need to make sure you understand the true dollar cost of the loan, which is not well-represented by APR for loans with a term under 12 months. A good rule of thumb to remember is that the shorter the term the higher the periodic payment will likely be, but the less accrued interest you’ll likely pay.
Business lines of credit
A business line of credit is traditionally a preferred financing option for many small businesses. You can access the credit line as you need it, repay what you’ve borrowed, and access it again. What’s more, you only pay interest on the part of your credit line you use. A business line of credit may be a good way to augment occasionally cash flow challenges. It has the flexibility of a credit card that you can borrow against whenever you need it. Just stay below your established credit limit, make on-time periodic payments, and watch your credit score soar! You’ll pay anywhere from 7 to 36% for this type of financing. Just like credit cards, it will depend on our business credit profile, personal credit score, and how big the credit line.
The SBA isn’t really a lender, but works with SBA lender banks. These loans are given to qualified small businesses who have been matched to lenders through the Small Business Administration, SBA loans vary in their length, amount, rate, and intended purpose. The most common SBA loans include the following:
- SBA 7(a) Loan. Consider this for working capital (this is the most flexible SBA loan program). This general-purpose business loan comes in amounts up to $5 million with low rates and origination fees.
- SBA 504 Loan. This is a good option for purchasing real estate or buying other fixed assets, consider this loan with an upper limit of $20 million. Like other SBA-guaranteed loans, you’ll need collateral and a personal guarantee for this, as well as excellent credit. If approved, however, your rates are considerably low. (There is also a “green” version of this loan for businesses that are in sustainable industry.)
- SBA Microloans. Not every business needs to borrow millions. That’s where these smaller microloans come in. With a loan amount cap of $50,000, these loans are for startups or those just launching and have yet to demonstrate much annual revenue. Not all banks offer these, even if they do participate in other SBA programs. Call ahead to be sure. For a young business that can leverage a relatively small amount of borrowed capital into a big result, these loans could be a good fit.
- SBA Express Loans. Like the 7(a) program but need your money fast? You may qualify for an express loan, which gives you a quicker response. Find out if you’re approved in just days – instead of months.
With the exception of the Express Loans, which are often approved within a few days, most SBA loans have a lengthy application and approval process that require financial reports, a detailed business plan, cash flow statements, tax forms, and more. They aren’t ideal for anyone needing money in a few days—or even weeks. Expect to spend up to a month or more demonstrating your ability to repay and going through the loan application process, but the interest rate you pay will likely be one of the lowest.
If you want to get started with an SBA loan, however, you can reach out through the SBA LenderMatch program, or contact any of the above banks directly. Most are partners in the SBA programs!
Also known as “equipment financing,” these loans are self-explanatory. Get help paying for new machinery, manufacturing tools, or even commercial restaurant stoves and fridges. The rates on these loans are going to depend on your credit profile, ranging from 8 to 30%, but offer longer repayment terms than some short-term loans. These loans are considered secure since the equipment being financed is also the collateral ensuring you repay the loan.
Business credit cards
Small business credit cards work a lot like personal credit cards. The perk of business cards over personal cards, however, is that your good repayment history will help you build your business credit profile. Additionally, you can often get free cards for your employees, and their spending can help accumulate points and cashback rewards that you can later redeem for items your business.
Expect to pay the same kind of higher rates that personal cards charge, anywhere from 10 – 28%. The better the rewards, the higher the annual fee tends to be, as well. Shop around to get the best business credit card from your bank, and consider upgrading as your annual revenue grows.
Long-term real estate loans
If you’ve got a mortgage for your home, you already know how these work. Business real estate loans are considered long-term financing because they typically include longer terms associated with the higher costs of purchasing real estate. Expect to get lower rates for property, but prepare to have plenty of cash on hand for a down payment. Banks like to see a willingness to invest upfront in the form of 10-20% down payment; like buying a home, the more you can provide, the better rates you are likely to receive.
If you find yourself unable to get a more traditional long-term real estate loan that many banks offer, going through the SBA’s 504 Loan program may be a good option. They are often willing to work with businesses that haven’t been able to get funding elsewhere but demonstrate a strong annual revenue and have a very good or excellent credit score.
What is the easiest bank to get a small business loan?
There’s no easy answer to this question, as it will depend entirely on what you are looking for and your qualifications. Online lenders are usually more open to those who might not qualify at the bank, although you’ll pay more for your loan. If a bank advertises its loans with a guarantee they will get back to you with an approval within 2-3 days (or even less), that could be a sign that they use less stringent methods to determine approval. You could find yourself with a loan faster and easier than traditional banks that ask for pages and pages of physical documentation.
Other avenues for financing include peer-to-peer lending companies (also known as “P2P”) such as Lending Club or the use of personal loans for your business. Don’t discount what credit unions or your local community bank offers, either.
The easiest bank to get a loan isn’t always the best one for you in the long run, however. Take your time to see that the loan contract is something that benefits you. If you don’t find the terms agreeable, it might be worth working on your credit score so you can get a more favorable loan from a bank that has tougher approval requirements. Your business is worth this investment!