The question is not “Could my business utilize credit cards?” but rather “Which type of business credit card is right for my business?”
Find the right funding solution for your business with our top picks of of small business loans offerings.
It’s not unusual to need a business loan to cover expenses you can’t handle with your current budget. Seasons and circumstances change, impacting daily cash flow and your ability to support continued growth. Before approaching a lender, educate yourself on the types of loans available, the terms you can expect, and what documentation will be required to determine eligibility.
When seeking financing for growth or to cover gaps in cash flow, small businesses have a surprisingly easy pathway to funding thanks to the tailored loan solutions available. Unlike traditional loans extended to enterprise level companies, small business loans are easier to access, quicker to apply for, and have friendlier terms for repayment.
Finding the right loan is not a problem thanks to the rise of financial services providers and new companies that offer quick funding and straightforward approval processes. Additionally, the requirements many companies set for approval, such as lendio, tend to be much accommodating for small businesses.
Unlike enterprise-level loans, which are usually extended by large banks, small businesses have different options when seeking financing which can be much more beneficial. Aside from banks, small companies can take advantage of federal loans such as Small Business Administration loans, work with credit unions, or even consider online alternative lenders.
For these online lenders, working with smaller companies is more useful considering they can be growth partners and create lasting working relationships. Additionally, these lenders often provide different forms of financing outside of traditional loans, which are better suited for some businesses. Services such as invoice factoring, lines of credit, and equipment loans can help small businesses more as they provide a targeted influx of capital. These financing types offer flexibility and let smaller companies take loans without putting themselves at a disadvantage.
Generally, lenders are looking for small businesses that meet the following requirements:
Companies whose owners have good to excellent credit
A proven flow of income that can be used to repay the loan, or financing extended
More than one year in operation, although this may vary from lender to lender
In some cases, proof of collateral that can be used to secure the loan
A plan for investing the capital being extended
Requirements will vary between the different alternative online lenders, but small business loans are a great way for expanding companies to find the funds they need to sustain growth and help them reach performance targets.
Acquiring a business loan can be more difficult than obtaining funding for other purposes. Business loans represent a big risk to lenders because of the volatility of the consumer market. Although marketing analytics are making it easier to predict customer behavior, many unknown variables still affect business cash flow and profits. This is another reason why banks want to know exactly what you plan to do with the loan should your application be approved.
When applying for a loan, you’ll discuss terms, interest rates, and other details with the lender. It can be a long process requiring a lot of detailed financial information from both personal and company accounts, and you’ll likely need to speak with more than one lender to find the right fit.
Remember, a loan is a binding agreement for a given period of time, and once you sign the documentation, you’re committed to paying the money back according to the agreed-upon terms. Make sure you know exactly what you’re getting into before the loan is finalized.
Because of the time and expense involved, consider whether you actually need a business loan and if it will benefit your company before applying. If you determine that a loan is necessary, prepare a list of questions to bring along when you compare loans from different lenders. Your list should help you narrow down your choices to banks and other lending institutions offering options closely aligned with your business needs. You may want to ask:
If the lender has experience lending to your type of business
How much the lender typically loans to businesses of similar size
Who is in charge of application review and approval
What documentation is required to apply for a loan
How long a typical application-and-approval process lasts
Whether interest rates are fixed or variable
If there’s a penalty for paying the balance off early
|Business loan type||Best for||APR range|
|Secured loans||Companies with property to put up as collateral||6% - 8%|
|Unsecured Loans||Good credit scores||4% - 36%|
|Line of credit||Ongoing working capital expenses||9% - 108%|
|Merchant Cash Advance||Good credit, low risk||2% - 60%|
|Accounts receivable||Outstanding invoices, short term debts||3% - 8%|
|Equipment loans||Necessary equipment to grow business||6% - 99%|
|Construction loans||Expansion or new facility||2% - 7%|
|Invoice factoring||Filing cash flow gap||11% - 64%|
Lenders offer a variety of loans for businesses depending on what the money is going to be used for and how companies are able to guarantee payment.
Secured loans require collateral to back up the amount of the loan, meaning you could lose what you put up if you fail to pay in full.
Unsecured loans are granted to companies with solid credit ratings and may offer lower interest rates than secured loans.
Lines of credit work like a credit card, allowing you to borrow against a set amount as needed and only requiring interest payments on the money you use.
Merchant cash advances are based on your volume of monthly credit card sales and are paid back using a percentage of each future sale.
Accounts receivable loans use outstanding invoices as collateral to help pay off short-term debts.
Equipment loans are granted specifically for the purchase of new equipment, using what you purchase as collateral.
Construction loans provide funding to expand your existing location or build a new facility, and the building is considered collateral.
Invoice factoring lets businesses with rigid cashflow constraints operate more flexibly by providing them with access to the funds they require until invoices are paid in full.
Each loan type has a specific payment structure, term length, and interest rate. Some are more difficult to qualify for than others, and most require you to present detailed paperwork when applying.
Lendio is ideal for businesses with less than stellar credit who want to fill out one loan application and get offers from multiple lenders on a number of different loan types.
Lendio is a network for lenders that offer loans from $1,000 to $2 million for a variety of business needs.
To qualify for a loan from Lendio, you must be in business for at least 6 months and have $8,000 in monthly revenues. There is no minimum credit score requirement, although individual lenders may have their own credit requirements.
Lendio works with lenders who offer APRs from 0% to 30% with 1 to 5 year loan terms on traditional business loans.
Lendio's online application process is quick and easy, particularly because only one application must be filled out for multiple lenders. Once you’ve been approved, funding can be obtained in as little as a few days, depending on the individual lender.
Lendio is an entire marketplace of lenders competing for your business. By filling out a single application you can see what type of loans you’re eligible for and which lenders are competing for your business. You’ll have a selection to choose from, allowing you to shop around for the best APR and most favorable repayment conditions.
Our full-length review of Lendio provides more details about this great lender.
Kabbage is ideal for small businesses that need immediate access to capital, and borrowers with less than perfect credit that have been in business for at least one year.
Kabbage offers lines of credit from $2,000-$150,000 for covering any type of expense.
To qualify for a Kabbage line of credit you must be in business for at least a year and have $4,200 in monthly revenues. There is no minimum credit score requirement.
Kabbage customers must payback their loans within either 6 or 12 months, depending on their qualifications. Each month they pay back one sixth or one twelfth of the loan plus a monthly fee. Monthly fees range from 1% to 10% for the first 2 months, and settle on 1% for each month thereafter.
Filling out a Kabbage application takes minutes and money can be accessed in as little as a few hours. The company's automated system reviews applicant data, calculating the funding and payback term that the potential borrower qualifies for. If approved, funds can be deposited into the account of your choice in a short time. For those who do not initially qualify, Kabbage keeps their information on file and informs them if funding has become available.
Kabbage is a good option for businesses who need working capital, in the form of a line of credit, to cover certain expenses when cash flow is low. The application process is simple, and funds are delivered quickly. There are no upfront fees and the payment structure is straightforward and transparent.
Read our in-depth review of Kabbage to find out more about this lender.
Fundbox is ideal for small businesses and freelancers that need to cover short term gaps in income and cash flow.
Fundbox offers lines of credit up to $100,000 to be used at the discretion of the business owner.
To qualify for funding from Fundbox, you must be in business for at least 6 months and show $5,000 in monthly revenue. Fundbox hooks up directly to your accounting software or bank account to assess your financial health, applying their own credit rating to your business.
Fundbox offers either 12-week or 24-week terms. Fees for the 12-week term start at 4.66%, with APRs ranging from 16.40% to 67.70%. While the rates may seem high, the short repayment terms mean that customers will not necessarily have to pay an unreasonable amount in interest. Fees for 24-week repayment start at 8.99%, with APRs between 18.50% and 76.50%. Businesses can avoid any outstanding fees if they repay their funding before the term expires.
Fundbox's application process is quick and easy. Prospective borrowers connect to Fundbox through their accounting software or bank account. The lender then analyzes the company's financial health, assigning them their own credit score. If approved, funding can be made available as soon as the next day.
Fundbox has created an innovative funding platform for small businesses that takes into account their financial state and outstanding invoices when making approval decisions. It's a good solution for businesses that struggle to secure funding because of personal creditworthiness.
Read more about this lender in Fundbox’s in-depth review.
Once you decide what type of loan you need, your lender will request certain documents and financial records to determine if your business qualifies. These documents may include:
A business plan showing your intentions for the loan
Tax returns for your business
Three to five years of company revenue figures
Personal and business credit information
Personal and business bank statements
Cash flow history and future projections
Business licenses and certificates
Current profit and loss statements
Detailed resumes of key executive staff members
Franchise, partnership, and other legal agreements
The lender will review this information along with your application. However, before taking the time to gather such an extensive amount of paperwork, review the specifics of the loan one more time. Ask questions about anything you still don’t understand, and be ready to move on to another lender if something doesn’t sound right. If the cost of the loan is more than the benefit you’ll get from it, you’re better off seeking alternative options.
A business loan can give your company the boost it needs to make it through a difficult time or fund growth to catapult you to future success. Talk to a variety of lenders before making your final decision to find the terms and conditions compatible with your financial situation. Structure your budget so that you stay on top of loan payments to ensure your business winds up stronger and more profitable once the balance is paid off.
On this page, you’ll find a list of some of the highest-rated lenders in the industry. Check out their reviews, compare their features, and find the lender that’s best suited to meet the needs of your business.