Best Business Loans for 2020

Best Business Loans for 2020

Best Business Loans for 2020

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Getting the right type of funding for your business isn’t always easy. While there are plenty of commercial lenders and business loans on the market, the best one for you can depend on a variety of factors.

How long you’ve been in business, your annual revenue, your personal credit score, and your required funding time are all things to consider before you apply. It’s also important to consider lenders who can provide the type of loan you need.

To save you time, we’ve put together a list of what we think are the best small business loans for business owners. Check out the list below and sign up for a free Nav account and use our MatchFactor algorithm to get matched to the best lending options based on your credit profile.

Best Small Business Loans for 2020

Best For Established Businesses With Great Credit

Best Without Origination Fee

Best For Startups

Best For Fast Cash

Best For Bad Credit

Best For Established Businesses With Great Credit

SmartBiz SBA Loans

SBA Loan by SmartBiz

SmartBiz combines the benefits of a traditional SBA loan without the long and tedious application Learn More

SmartBiz is an SBA loan provider that allows you to complete the entire application process on its website, making it a much more flexible process for business owners than many other SBA loan providers. They offer SBA 7(a)  loans worth up to $5 million that you can use to

  • Fund startup costs or working capital
  • Buy equipment
  • Purchase land
  • Purchase a new business
  • Expand an existing business
  • Refinance existing debt
  • Increase inventory

Loan options include SBA working capital and debt refinancing loans ranging from $30,000 to $350,000 and commercial real estate loans between $500,000 and $5 million. The lender also offers term loans from $30,000 to $200,000.

Once you’re approved for a SmartBiz loan, you can receive the funds in as little as seven days. However, it can take weeks, depending on the situation. The repayment term for your loan can range from 10 to 25 years, and the estimated APR, including interest and fees, can range from 6.87% to 10.08%.

Requirements to qualify:

  • FICO SBSS score of 160 or above (you can check your FICO SBSS score with a Nav Premium account).
  • Must have 2+ years of tax returns filed for the business
  • Have a personal credit score of at least 650
  • Own a U.S.-based business
  • Be at least 21 years old
  • Have no outstanding tax liens
  • Have no bankruptcies or foreclosures in the last three years
  • Have no recent charge-offs or settlements
  • Be current on all government-related loans

Best Without Origination Fee

American Express Business Loan

One of the drawbacks of many small business loans is that they charge an origination fee just to process your application and disburse your funds. Depending on the lender, either you’ll need to pay the fee upfront, or they’ll deduct it from your loan proceeds.

American Express is better known for its business and consumer credit card products. If you already have a business credit card with the bank, you may also qualify for one of its business loans.

Loan amounts range from $3,500 to $50,000, and you can pay back what you owe over 12, 24, or 36 months. The lender offers fixed interest rates from 6.98% to 19.97% APR. There’s no collateral requirement, and you don’t have to worry about an origination fee.

The only drawback is that you need to be pre-approved to be able to apply. You can find out if you’re pre-approved by logging into your American Express account. With a pre-approval, you’ll be able to see how much you can borrow and the maximum rate you’ll pay based on your creditworthiness.

Applying won’t impact your credit score, and if you’re approved and you accept the terms, you’ll receive the funds within three to five business days.

If you don’t qualify for the loan based on the pre-approval requirement, you can also apply for a working capital loan, which can range from $1,000 to $750,000, and has repayment terms of 30, 60, or 90 days. You can also request merchant financing for $5,000 to $2 million, which you can pay back over six, 12, or 24 months.

While the working capital loan also requires you to be an American Express business credit card holder, you don’t need to be pre-approved to apply. Merchant financing doesn’t require that you have a business credit card with the lender, but your business does need to accept credit cards as a form of payment.

Best For Startups

Kiva Microloan

Microloan by Kiva

Kiva is a non-profit that provides entrepreneurs with 0% interest loans up to $10,000. Kiva loans are Learn More

When you’re just starting out, it can be virtually impossible to find a good business loan. Without any track record, commercial lenders view you as too much of a risk.

Microloans, however, are specifically designed to help new small business owners get their companies off the ground. With Kiva, you can borrow up to $10,000 with no interest, making it affordable even if things to turn out the way you want them to. Repayment terms can range up to 36 months. A big plus is that Kiva does not check business credit, making it a great tool to build business credit

There are a few things to consider before opting for a Kiva microloan, however. For starters, it can take up to 45 days to get the funds, which is a long time if you need the cash now.

Also, Kiva doesn’t directly lend you the money. Instead, it relies on individual lenders in its network to provide the funds. To prove your creditworthiness, you’ll have 15 days to invite people within your community — such as family members and friends — to lend to you. Kiva calls this step social underwriting.

If you meet a certain minimum, Kiva will then post your loan publicly, allowing its network of more than 1.6 million individual lenders to join in over the next 30 days.

In addition to this process, Kiva also has the following minimum requirements for its microloans:

  • You and your business must be based in the U.S.
  • You must be at least 18 years old
  • You must use the loan for business purposes
  • Your business can’t be engaged in multi-level marketing, direct sales, illegal activities, or financial investing
  • You can’t be currently in foreclosure or bankruptcy or be under any liens

Best For Fast Cash

Kabbage Line of Credit

Some business situations require an immediate influx of cash. If you’re experiencing an emergency, though, most commercial lenders can’t help you. Kabbage, however, can.

Kabbage is an online lender that offers a line of credit ranging from $2,000 to $250,000. If you’re borrowing $150,000 or less and Kabbage can get your business data and verify your bank account automatically, you can get approved in 10 minutes or less. You may even get the funds the same day.

If you’re borrowing more than $150,000, Kabbage will do a manual review of your application and business information.

Depending on the terms of your loan, you’ll have six or 12 months to repay the line of credit. There’s no origination fee, but you each monthly payment will include a monthly fee, which can range from 1.5% to 10%.

Because of these high fees, the APR on a Kabbage line of credit can be as high as 90%, making it one of the more expensive business financing options on the market. But if you’re desperate for cash, it could be worth the cost.

To be eligible for a line of credit with Kabbage, you’ll need to be in business for at least one year. The lender also has a minimum revenue requirement, which is $50,000 annually or $4,200 per month for the last three months.

In general, you’ll also need a personal credit score of 560 or higher to get approved.

Best For Bad Credit

Fundbox Line of Credit

Whether you’ve been in business for years or you’re just starting out, it can be tough to get approved for a business loan if you have terrible personal credit.

Fundbox doesn’t have a minimum credit score requirement, making it possible to get approved if you’re brand new to credit or you’ve made some credit mistakes. The lender offers two types of loans: a line of credit and invoice financing.

With the lender’s line of credit, you can borrow between $1,000 and $100,000 with a repayment schedule of up to 12 weeks. After you apply, you can get a decision in under three minutes and receive the funds as soon as the next business.

Depending on your creditworthiness the terms of the loan, your APR, which includes interest and fees, can range from 10.1% to 68.7%. That can be a high price, but it’s not competitive for bad-credit borrowers.

To qualify, you’ll need to be in business for at least three months with $25,000 or more in annual revenue.

With Fundbox’s invoice financing, you can get a short-term loan for 100% of the invoices you’re waiting to get paid on, between $1,000 and $100,000. Note that this is different from invoice factoring, which involves selling your invoices at a discount.

You’ll have up to 12 or 24  weeks to repay the debt — you’ll typically want to do it once you receive the money from the invoice — and you can receive the loan funds as soon as the next business day. The APR can range from 13.44% to 67.70% APR.

To qualify for Fundbox’s invoice financing, you’ll need to have at least three months worth of accounting software data. You also can’t have a bankruptcy or liens on your credit report.

How to pick the right business loan for your company

While these business loans are our top choices for their given category, they’re not a one-size-fits-all solution for every business owner. It’s important, therefore, to know what your business needs and how loan features can affect you. Here are some things to consider when you’re comparing loan options.

Know your credit score

Most business lenders require a personal guarantee, so they’ll want to run a personal credit check to make sure you’re good for the money if your business fails.

If you have excellent credit, you’ll have a lot more options from which to choose. But if your credit needs some work, you may be limited to a handful of lenders.

Understand your needs

Different business loans are designed for different functions. Do you need short-term financing or long-term capital? Are you looking to make a large purchase or bridge a short-term cash shortfall?

As you think about your company’s needs, you’ll have a better idea of what type of loan is best suited for the job.

Consider the loan terms

Getting cash fast is nice, but if you only have a few months to pay it back, it could increase the financial pressure you’re already feeling. The same goes if the loan has steep fees or a high interest rate.

Also, keep in mind that lenders typically have a minimum loan amount, so if you need $1,000 and a lender’s minimum is $2,000, it’s better to look elsewhere than to borrow more than you need. Using a calculator to figure your payment for a business loan or invoice financing can also give you a better idea of what to look for for your business. 

Take your time

You may feel like you’re working against time itself, but the last thing you want is to jump into something prematurely and end up regretting it.

Take your time in researching these and other business loan options out there. Also, research some non-traditional business financing options that may be a better fit for what you’re trying to accomplish.

As you do your due diligence, you’ll be in a much better position to determine whether you can afford to take on capital through financing, and which loan provides the best way to do it.  

Pull back the curtain on your business credit

Pull back the curtain on your business credit

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This article was originally written on December 27, 2018 and updated on May 12, 2020.

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Ben Luthi

Ben Luthi

Ben Luthi is a personal finance and travel writer who loves helping consumers and business owners make better financial decisions. His work has appeared in several publications and websites, including U.S. News & World Report, USA Today, Marketwatch, Yahoo! Finance, and more.

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2 responses to “Best Business Loans for 2020

  1. Thanks the information you provided was very helpful, they were very informative. I hope to hear more down the road, it’s highly important that we’re not applying for loans and different credits, that don’t need pertain to you or your organization but in a way that it will benefit you in the long run. Thanks again!

  2. Hello, Gerri very valuable information you have shared. Small business loans are the necessary requirement for small business owners. There are different types of term loans today – short term loans, long term loans and medium-term loans, which the entrepreneur can avail upon his requirement and financial status. Financial needs and other industrial expenses that is crucial to keeping your business running. 3 years ago, my I faced the financial problem.