Getting funding 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 now, it’s smart to look ahead to what’s available. 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?
So many questions go into finding a business lending solution. Perhaps the first step is identifying those 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!
It shouldn’t surprise you to see Chase leading the rest. 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 the 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 can give you just a little to start, which you can borrow against as you need it to grow your business and personal credit scores and get access to those more substantial loans down the road.
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. 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 work 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 taking more of the lead in financing small businesses these past few 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, too. From commercial real estate of that new healthcare tech purchase, they can find the right term loan to get you there.
Traditional banks vs online lenders
When it comes to getting cash for your business, it may seem that online lenders 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 aren’t doing quite the same grueling underwriting process with piles of paperwork. They are taking a bit more risk, hence the often-higher fees and APR. If you don’t mind paying more for your money and need a decision right away, online lenders have their place. Be sure to read up on the repayment terms of a loan before you sign, 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 – then know that they probably 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 financing banks are likely to offer; it will make the search process much less stressful.
Term loans are those have a preset amount to time to pay back, with a monthly payment that’s decided from the start. Within this category 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. They will also charge interest based on this. Expect to pay more interest and fees for the short-term loan option, overall. These loans are popular for online lenders to offer.
Business lines of credit
Not sure how much you want to borrow at the moment? Like the idea of borrowing again and again throughout the life of your business? If increased cash flow is you aim, a business line of credit may right for you. 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 monthly 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 score, personal credit score, and how much you hope to borrow.
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 loans that the SBA helps to guarantee include the following:
- SBA 7(a) Loan. Consider this for working capital (such as payroll or buying raw materials). This general-purpose business loan comes in amounts of up to $5 million with low rates and origination fees.
- SBA 504 Loan. If you have big expenses coming up, such as real estate or buying other fixed assets, consider this loan with an upper limit of $20 million. You’ll need collateral as 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 specialize in sustainable industry.)
- SBA Microloans. Not everyone is looking to borrow millions. That’s where these smaller microloans come in. With a loan cap of $50,000, these 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.
- SBA Express Loans. Like the 7(a) program but need your money fast? You may qualify for the express loans, which give you a quicker response. Find out if you’re approved in just days – instead of months.
With the exception of the Express Loans, which work to get you approved within a few days, most SBA loans have a lengthy application and approval process and require financial reports, 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 motions of the loan cycle. If you want to get started with an SBA loan, however, you can reach out through the SBA LenderMatch program, or contact many 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 rate on these loans is going to depend on your credit score, ranging from 8 to 30% and more time to repay than some short-term cash loans. These loans are considered secure, since the equipment being financed is also the collateral ensuring you repay the loan.
Business credit cards
Business credit cards work a lot like personal credit cards. In fact, many of them are almost identical in how they work and the benefits you can receive. The perk of business cards over personal cards, however, is that you can often get free cards for your employees, and their spending can help accumulate points and cash back rewards that you can later redeem for items your business needs most.
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 gotten a mortgage for your home, you already know how these work. Business real estate loans are considered long-term financing, because property can take a long time to pay off. 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 up front 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 the more traditional long-term real estate loans that many banks offer, going through the SBA’s 504 Loan program may be a better 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 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 with lower credit scores, although you’ll pay more for your loan. If a bank advertises its loans with a guarantee that 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 funding 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 offer, 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!