Best Small Business Loans of 2018

Learn about all of your options

  • Term Loans
  • Business Line of Credit
  • Invoice Financing
  • Small Business Startup Loans
  • Equipment Financing
  • Short Term Loans
  • Merchant Cash Advance
  • SBA Loans
  • Personal Loans for Business

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How To Find The Right Small Business Loan in 2018

Have you been struggling to find the money that you need to take your business to the next level? Why? There are so many options for small business loans these days if you know where to look and what you are looking for.

The information out there may be a little confusing. The truth is that there is a small business loan product for just about every type of business need you can imagine. Whether you are looking for money to make renovations, buy supplies and inventory or get some new equipment, there is an option available for you. We have broken down all of these options for you in plain english so you can easily figure out the best way to get the money that you need as quick and cheap as possible.

The key factors to look at under each small business loan funding method are:

  • How much money can you get?
  • How fast can you get that money?
  • What documentation is required to get the funding?
  • What should your personal and business profiles look like to qualify?
  • How much is the type of funding going to cost you?
  • How are you going to have to payback the loans?

Once you have figured out the answers to these questions, the rest is easy. You will know exactly what you have to do next in order to get the funding you have been seeking for your business.

Top 9 Options for Small Business Loans

1. Term Loans

All You Need to Know About Term Loans

Term loans sound a lot more intimidating than they really are. Actually, term business loans are the classic business loans that get taken out all the time. They’re flexible, so you can use them for almost anything including working capital, buying equipment, servicing debt, or adding machinery to your workshop.

Thanks to the fact that the world is realizing how important startups are, how beneficial it is to support businesses, and how you can actually make money by lending it out, there are now thousands of lenders that are willing to give out business term loans from traditional banks to online lenders.

That means you have plenty of choices – good for variety and competition, but bad for making a choice as to which one is the best fit for you. If you’re wondering which lender to go with, how term loans actually work, and what to do next, this guide will really help you out. We’ve gathered all of the information about term business loans you’ll ever need so that you can get an education and make the best choice in lenders for your business needs.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get with a Term Loan?

In today’s warm lending climate, you can get a business loan for as little as $100 and for upwards of a few million. Realistically, most lenders do cap their minimums at $500-$1,000 for a business loan, and you’ll generally find that the maximum you can borrow is around $25,000 to $500,000. Don’t be discouraged if you need more though because there are plenty of lenders that will finance a loan of up to $2 million.

Like any loan, the amount that you can borrow with a term loan depends on your business profile and the lender's terms. Businesses with a high credit rating, good borrowing history, strong annual revenue, and clear business plan will be able to borrow more than Joe Shmoe’s Shoe Store that’s only been around for a year and isn’t pulling in much revenue.

How Long Does a Term Loan Take?

Good news, one of the best things about term loans is that you can qualify pretty fast. Online business lenders have online applications, so you can apply in less than five minutes. In fact, some lenders even have the technology to respond to your application instantly. If you’re approved of for the loan, funds can be in your account within as little as 24 hours. In loan terms, that’s lightning fast.

If you apply for a term loan through your bank, it’ll take longer to get your money. That’s because you’ll usually have to apply in person or over the phone. Just this step can literally take hours, discussing your business needs, going through paperwork, etc. Banks also take longer to consider your application and complete the underwriting process. That said, you can still get a bank-funded business loan within a couple of days.

What Documentation Do You Need to Qualify for Term Loans?

Term loan approval is a lot like other types of loans. You'll start by completing the lender's application form. Each lender will have different requirements, but most ask for your business credit score, proof of your time in business, and basic business finance documentation. If you're applying for a secured business loan, like an auto loan or one secured against your equipment, you'll also need to send documentation about the collateral you’re putting down.

You’ll also need to provide these documents:

  • Profit and loss statement

  • Business bank account statements

  • Your credit score

  • Business and personal tax returns

  • Your driver’s license

  • A voided business check

Who Can Get a Term Loan?

Every lender has a different set of qualifications, but generally, you can get a term loan if you have:

  • 3+ years in business

  • A credit score of 680 or more

  • Average annual revenue of $300,000 or more

If you don't meet those requirements, you still might have a chance. Plenty of lenders have more lenient requirements, and some are specifically geared towards businesses with bad credit or startups with fewer than 2 years in business. Other lenders specialize in industries like gambling or medical marijuana, businesses that might have trouble getting traditional bank loans.

If you're a member of a minority group, a woman, or a veteran, you might be able to get a special business term loan too that is easier to qualify for, comes with lower rates, or offers longer terms.

How Much Does a Term Loan Cost?

The interest rate you pay accounts for the lion’s share of your costs. You’ll get a lower interest rate if your credit and cash flow are both strong and you have at least 3 years in business. You’ll also get a better rate if you put up some kind of collateral to get a secured business loan.

Business term loans can have fixed or variable rates. The advantage of fixed-rate loans is that you know exactly how much you’re paying every month. There are no surprises, and you won’t need to worry about having to pay more if the prime rates change.

Variable rates can change every quarter or even every month. Even with a variable rate, you'll probably have a fixed margin rate that is added to the benchmark rate. Let's make this clearer. The benchmark rate is usually the Wall Street Prime rate or the LIBOR rate. This rate goes up and down frequently, so you’ll be charged a different interest rate each time the rate changes (within your payment structure). The fixed margin rate doesn’t change. It stays fixed and gets added to the benchmark rate. So, if for example, your business loan has a margin rate of 2.75%, and the benchmark rate is 5%, you’ll pay a total interest rate of 7.75

The final cost of your loan is also determined by the fees and penalties the lender charges. It's important to make sure to read the fine print before taking out a business loan because you could end up paying a boatload more just in fees by going with one lender over another.

Here are some of the most commonly seen fees and charges to look out for:

  • Origination fee. Typically, 3%-5%, an origination fee is very common. It covers the actual cost of processing your loan and includes running a full credit check and confirming your financial information. The origination fee could be added to the overall cost of your loan or taken out of the original loan amount.

  • Check processing fee. Typically, $10 per check. If you repay your loan amounts by check, you might have to pay a fee for every payment. Something to consider.

  • Late payment, returned payment, NSF payment. Typically, $10-$35, or 3%-5% of the failed payment. You'll be charged a penalty any time that your payment is late, returned, or doesn't go through as a result of insufficient funds in your account.

  • Prepayment penalties. Varies. Some lenders will charge you a penalty if you repay your entire loan before the end of the term or overpay at any point. It's super important to check if there are any prepayment penalties, especially if you hope to pay your loan off early.

  • Legal or closing fees. $2500 – $5000. If you’re taking a secured business loan, or your term loan is particularly complex, you might have to pay closing costs or legal fees to cover the cost of writing your loan agreement or other legal costs.

What Are the Payback Terms Like for a Term Loan?

One nice thing about business term loans is that they come with a range of repayment terms. For example:

  • Short-term business loans can have a term as short as a few weeks or up to 1-2 years

  • Most term business loans need to be repaid in between 1 and 7 years

  • Long-term business loans can have a term anywhere between 3 years and 25 years

Usually, lenders will want you to make payments every month, but that can vary depending on the arrangement you make with your lender. Some lenders let you choose between monthly, four-weekly, or two-weekly payments. If you take a short-term loan with a term that’s under a year, you could be making payments every week or even every day. There are also lenders who’ll permit you to skip a payment once a year, or to put off a payment once every six months.

Term Loans Explained & Understood

Now that you know everything you’ve ever wanted to know about term loans (and more) you can apply for a business loan with confidence. Sometimes, this is the little edge that a company needs to really get out of a tough spot or take off. So, apply today, and watch your business soar.

2. Business Line of Credit

All You Need to Know about Business Line of Credit

Imagine having a super healthy cousin who’s also very giving. Whenever you want, you can walk over to them and say “Hey Buddy, can I borrow $5,000?”, and they’ll say yes. Of course, you’re going to pay back whatever you borrow, but you can ask anytime you want, and the answer will always be yes.

A business line of credit is your philanthropic cousin. It gives you access to a pre-approved source of funds that you can draw on whenever you want. You’ll only repay the amount that you’ve borrowed, and the rest of it waits, ready to be borrowed when you need it. Let’s use a concrete example. You’re approved for a business line of credit of up to $100,000. That means you have $100,000 that you can use whenever you want. Now, let’s say you withdraw $60,000 for some hardware upgrades in your office. Unlike a business loan where you'd have to pay back the full $100,000 that you took out regardless of whether or not you used it plus interest on that total amount, with a line of credit, you'll only need to pay interest on the $60,000 you used. Nice!

Business Line of Credit – Break it Down

Business lines of credit can be secured against some type of collateral or unsecured. You can get something called a revolving line of credit or a non-revolving line of credit. Revolving lines of credit let you borrow off of the line as soon as you pay it back. So, once you pay back the $60,000 from our last example, you can take out $60,000, $80,000, or even the entire $100,000 if you need it. This is extremely helpful because it ensures that you always have a source of funding available when you need as long as you pay it back responsibly.

Just be careful because some lenders will cap the number of times you can make a withdrawal even for revolving lines of credit. Some lenders restrict the number of draws that you can take – for example, you might only be able to take 2, 3, or 4 draws on your business line of credit. Others offer unlimited draws.

As the startup generation evolves, so do the ways and methods for obtaining the necessary funding to keep a business running. A business line of credit still remains one of the most flexible and variable loan options of all though. There are usually no restrictions, you can use it for payroll gaps, expanding your inventory, or even getting a Nintendo Wii for the office. Because business lines of credit are so easygoing, businesses generally use them for short-term business costs, making up the occasional lull in cash flow, or sudden unexpected expenses.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Line of Credit Can You Get?

Each lender sets its own minimums and maximums when it comes to lines of credit, but most have a minimum of $1-$2,000 for businesses, and you can get up to $1 million. Once again, revolving and non-revolving come into play in terms of how much credit you can get. Let’s use the above example again for simplicity’s sake. You took out $60,000 from your $100,000 line of credit, paid it back, and so to speak, recharged your line back to $100,000. Now you want to take out the full $100,000 for an all-expenses-paid corporate retreat. Since it’s a revolving line of credit, that’s not a problem. Essentially, what this means is you have taken out $160,000 worth of credit since the line keeps recharging every time you pay it back. Clearly, having a revolving line of credit makes a huge difference. With a non-revolving line of credit, you'll have to reapply before you can make another withdrawal. However, reapplication should be smoother and faster than your first application.

How Long Does It Take to Get Approved for a Line of Credit?

Approval for a business line of credit is fast in loan terms, definitely faster than getting a standard business term loan. Online lenders make use of online resources, so you can get a reply in less than 10 minutes and funds in your account on the same business day. Some banks and even online lenders take longer (up to 2 weeks sometimes) to process your application. Generally speaking, the more you want to borrow and the longer the repayment term, the longer it will take to get an answer.

What You Need to Apply for a Line of Credit

Traditional banks usually ask for the same documentation as they would for a term loan. Online lenders might have a more streamlined approach. You’ll probably need to complete an online application, proof of credit score, business standings, and any borrowing history you have. Some online lenders automatically connect with your bank accounts and online accounting or payment services for faster processing. They’ll just scan your accounts to get a feel for your business performance.

You’ll almost always need to give them the following:

  • Proof of age and/or citizenship, like your driver’s license

  • Bank statements, profit and loss statements, balance sheet

  • Your credit history

  • Business and personal tax returns

If you apply for a secured business line of credit, you’ll also need to provide details about the collateral you’re using, business equipment, real estate, or stocks and shares for example.

Who Can Apply for a Line of Credit?

Anyone can apply for a business line of credit, but businesses are more likely to get approved if they have:

  • Been in business for over 1 year

  • An average annual revenue of over $180,000

  • A credit score of 630 or above

But these are not make it or break it requirements. It’s a lot easier to qualify for a business line of credit than for other types of business funding. Startups with as little as 6 months of business history can get a line of credit, and poor credit won’t deter lenders in this situation. If you’re worried about approval because of a weak profile, you might want to apply for a secured business line of credit. It’ll increase the odds of approval and bring your rates down.

How Much Does a Line of Credit Cost?

How much a business line of credit will cost you depends on a few things like how much you withdraw, whether you have a positive borrower history with that lender, and which lender you use. Here are costs to look out for when you apply for a business line of credit:

  • Maintenance fee: $10-$20 per month. Many lenders charge a monthly maintenance fee for your business line of credit. There are plenty of lenders that don't charge this fee or waive the fee if you've made payments on time for 6 consecutive months.

  • Origination or application fee. 1%-5% of the total amount. You could be charged an origination or application fee to cover the cost of processing your business line of credit application.

  • Withdrawal fees: $1-$4 per withdrawal. Some lenders charge you each time you make a withdrawal from your business line of credit. Fortunately, there are plenty that don’t.

  • Late payment fees, returned payment fees, NSF fees: $10-$35 each time. If your monthly or weekly payment doesn’t come through for any reason, most lenders will charge you a penalty. So, pay on time!

  • Renewal fee: If you have a non-revolving line of credit, you could have to pay a fee every time you renew your credit allowance.

By far, the biggest cost of your business line of credit though is the interest that you pay when you repay the money you withdrew. This could be anything from 2.9% up to 40%, with interest calculated at a fixed rate, or variable rate. Some lenders don’t charge any interest at all – you only pay a fixed maintenance fee, plus a certain percentage of your total borrowed amount each month.

What Are the Payback Terms Like on a Business Line of Credit?

While some lenders allow you up to 5 years to repay the full amount, most will expect you to pony up within 6 or 12 months. Business line of credit repayments are usually made weekly or monthly.

If you have a revolving line of credit, then once you’ve repaid the amount you borrowed, you can withdraw more money and reset your repayment term again. Something to look out for is if you’ve made multiple withdrawals at different points. If this happens, each withdrawal has its own repayment term, so you could have multiple repayment dates to juggle.

Is a Business Line of Credit Right for You?

A business line of credit is incredibly useful for making large purchases or covering unexpected expenses. If you can get approved for one, these can literally be your lifeline when you’re in need. Sign up with a reliable lender, and get yourself the security your business deserves.

3. Invoice Financing

What Does Invoice Financing Mean & Is It Right for Your Business?

Starting and maintaining a business can be pretty rough, especially when customers don’t pay you on time. While there are great options for business financing like Behalf and personal business loans, there’s actually one option that’ll let you turn those IOU’s into an advantage more than a disability. It’s called invoice financing, and today, we’re going to teach you all about what it means, how it helps, and what you can do to get in on this gravy train.

Invoice Financing: What is It?

The world of business primarily runs off of credit. Home Depot isn’t walking into its supplier’s office with a wad of cash for a shipment of lumber. Instead, Home Depot places an order, the supplier ships the order, and then sends out an invoice with a due date. Then Home Depot pays the supplier through whatever payment arrangement it has set up with its suppliers.

So, the supplier doesn’t receive payment for the goods delivered immediately, and this kind of transaction can take a pretty long time to complete. In the meantime, the supplier still needs capital to buy more supplies to keep its customers supplied and happy. Where does the supplier get the money to keep buying goods, pay its employees, grow its operations, and invest in its own company? This is where invoice financing can help.

Invoice financing (aka accounts receivable financing or receivables financing) is best described as short-term borrowing, a way for businesses to get the needed funds using the money owed from customers as a form of collateral. This is very helpful because you can use the money to pay salaries, buy more inventory, pay off suppliers, and more. The beauty of invoice financing is that you are using money that hasn't come in yet, so you're able to take advantage of dividends (customer invoices) that haven't actually paid out yet.

Businesses will, of course, need to pay a small percentage of the actual invoice amount as a profit to the lender, but it's worth it to them because they get the funds right away rather than having to wait out the full length of the invoice. Lenders, on the other hand, love these types of “loans” because it’s pretty much a sure deal, much more so than a typical line of credit or business loan because the customer/invoice is sort of like an insurance plan on the loan.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get from Invoice Financing?

There are three basic types of invoice financing, and we'll take a brief look at each of them to give you a better feel for the process.

Invoice factoring
  • This is the most common form of invoice financing. A lender will pay you 70%-85% of the original invoice total. If and when the customer pays the entire invoice, your company will get the other 15%-30%, minus any fees or interest payments due to the lender for the service it has provided you with. The reason a business might not like this option is because the lender is the one collecting the money from the invoiced client, so your clients know you’ve turned to a lender to take care of these matters.

Invoice discounting
  • Invoice discounting is a little more agreeable for businesses because the customer doesn’t know you’ve turned to a lender for the upfront cash. Instead, the lender forwards you up to 95% of the total invoice amount, and you collect the invoice, so it’s business as usual. Then when the customer pays you, you repay the lender its dues.

Asset-based loans

  • An asset-based loan is really just another form of invoice financing. This financing option lets you put up some of your assets like machinery, supplies, or in this case, invoices, as the financing tool. It's kind of the happy medium between invoice factoring and a proper bank line of credit. Unlike other types of invoice financing though, asset-based loans require a much larger monthly accounts receivables tab (we're talking a million bucks plus). You must have a good financial background, solid financial statements, and assets that aren't going anywhere. So, if you’re a small-time or startup business, you can pretty much ignore this option.

Depending on the type of financing you apply for, you can get anywhere between 70%-95% of the total invoice.

How Long Does It Take to Get Invoice Financing?

There are two stages of invoicing factoring. In the first stage, the lender will transfer around 80% of the invoice total to your account. That'll usually happen within one business day. The second stage, the deposit of the other 20% of the invoice minus whatever fees you have arranged with the lender, only happens after the customer pays the invoice.

The only time-consuming step in this process is the verification stage. This is when the lender verifies the invoice before sending you the cash. Lenders want to make sure there’s nothing fishy going on with the invoice, no chargebacks, disputes, payments received, etc. This can take a little while, but generally, if everything is on the up and up, it won’t take long at all.

What Documentation Do You Need to Qualify for Invoice Financing?

Another nice thing about invoice financing is that you don’t need all of the usual documentation that’s required for other types of loans like many years in business, a thorough business plan, or a detailed list of how you’re going to spend the money. For invoice financing, lenders will generally ask you for proof of the invoice for their verification process we just spoke about. As long as you can prove the invoice is in good standing, you don’t need much else to qualify.

Who Can Apply for Invoice Financing?

Technically, anyone with open accounts receivable can apply for invoice financing. Of course, the more reliable your company is and, more importantly, the more reliable your clients are, the easier this will be to get approved for. What’s more, the better and more often you sell to solid, credit-positive customers, the more likely a lender will be to pick up your invoices.

Another benefit to this type of business financing is that it is open to more businesses than the average business loan. Since the client invoice acts as collateral, lenders are more willing to take a chance on even small businesses with little experience and startups. Businesses most likely to get approved for invoice financing include those with invoices that:

  • Are free from any legal issues

  • Aren’t weighed down by tax problems

  • Won’t be tied down by liens

  • Are from reliable customers that pay back invoices within 90 days

Invoice Financing: How Much Will It Cost You?

Ok, so we’ve already explained the structure of invoice financing and how it works. Now, for the most important question that any shrewd business owner will ask: how much is this going to cost me? That really depends on the lender you’re dealing with, the size of the invoice you’re selling, and the creditworthiness of the client holding the invoice. The average rates can vary from 1.15%-3.5% per month. But the better the creditworthiness of the invoice, the lower the rate you’ll get.

What Payback Terms Can You Get for Invoice Financing?

We already covered this information earlier on in the article, but we'll spell it out for you again just in case you missed something. In most cases, how long you have to pay back the lender will depend on how long your clients take to pay off their invoices. Some types of invoice financing will allow you to collect the invoice yourself, and only ask you to pay the service fee once you've collected the money from your clients. Others will ask you to collect the money and pay them back when the customer pays in full.

Invoice Financing: The Easiest Option There Is

Invoice financing is an easy way for businesses large and small to get the upfront capital they need during slow seasons and drawn out invoice payouts. And frankly, it’s a great option for most businesses. After all, invoice financing gets you the money fast, offers a more fluid cash flow, and even allows you to offer a faster service and longer payment options to your clients.

If you've got clients that like to take their time paying off their balances (but always do eventually), you are a prime candidate for this type of business financing. Fill in your financial gaps using this smart and easy-approval option for your business today.

4. Small Business Startup Loans

The Small Business Startup Loan Primer

More adaptable, tech-savvy, and internet-equipped with the information and tools we need to soar, and a helluva lot cockier than any generation previous, we are the startup generation. And as the wise words of everyone’s favorite webbed-fingered superhero comic strip will attest, with great power comes great responsibility.

And, that’s no joke. Having a startup isn’t a big challenge. Keeping a startup, on the other hand, well, now that's a goal worth striving for. One thing that separates the winners from the ones who didn't make it is their ability to grab an opportunity when they see it. A small business startup loan is that opportunity everyone waits for. Will you grab it or just let it pass you by?

Here’s everything you need to know about small business startup loans.

What is a Small Business Startup Loan?

There are different types of loans that will help small businesses, and even startups, succeed. SBA loans, invoice financing, and even business lines of credit are all available, albeit not at the same proximity for every type of business and in every field. A small business startup loan is any of these types of financial assistance specifically geared towards new businesses and startups that are just trying to get themselves off the ground and could use that extra bit of help to kickstart their endeavors. Since most financial assistance requires a minimum of three years in business to apply, a small business startup loan intentionally caters to businesses with little or no business history to show for themselves. Here’s a short list of the possibilities open to startups today:

  • SBA startup loans (SBA 7 (a), CDC/504, and SBA Microloan)

  • Community advantage loans

  • Equipment financing

  • Invoice financing

  • Business lines of credit

  • Business credit cards

  • Crowdfunding

There are alternative options, but these are the most viable, reliable, and feasible financial options for most startups. If you want to fund your budding business, research each of these types of funds, and find the one that best fits your bill, literally.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get from a Small Business Startup Loan?

How much you can get from a small business startup loan will really depend on what type of funding you are looking at. From SBA microloans to small business grants and even crowdfunding, each option opens up new possibilities and opportunities. You can get anything from $500 all the way up to $250,000 depending on the type of loan, the business you are starting, your business plan, and many other factors. Obviously, there are other factors that determine how much you can get from a small business startup loan too. Things like your own personal credit history, what type of business you’re opening, and any financial discrepancies on your record will factor into the overall figure you can expect.

The best idea is to calculate all of your startup costs based on a well-rounded business plan. This should include all of the essentials and beginners' basics like legal fees, office space rentals, inventory purchasing, equipment purchasing, building and maintaining a website, advertising and marketing, salaries, and more. Once you have an approximation of how much you'll need realistically (and it's always a good idea to round up on this total figure), start applying to see what options are really available to you. Sometimes, the best way to catch a big fish is to throw your line in and see what’s biting.

How Long Does It Take to Get a Small Business Startup Loan?

Okay, here's where things can get a little glum. Since we're dealing with newbies to the world of business and financing, small business startup loans can take a while to complete. From start to finish, the process could take 30-45 days. That sounds like a lot of time if you need the money right now, but if you look at some other financing options, it's really not all that bad. Besides, if the lender is willing to work with someone who doesn't have any business plan or credit history to show for themselves, a little patience is certainly understood.

If you need capital in a hurry, online lenders are always faster. They can often be more economical as well, but not always. If timing is your main concern though, online lenders are your best option. The application process is all online, so there is no time wasted waiting in lines, sitting in offices, and listening to sales pitches. Apply online in about two minutes, and you could receive an answer on the spot with some lenders. Others will take a bit longer, but most will respond within a day or so.

Once you’ve been approved for a loan, again, depending on the lender, you could have the funds in your account within one or two business days. All of this varies with each lender and situation, but it doesn't have to be a month-long process every time. That being said, if you have the time to invest, it's worth it to wait out the other options if you can find a small business startup loan with better terms.

What Documentation Do You Need to Qualify for a Small Business Startup Loan?

While each one will differ depending on their own self-governed rules, most lenders will require the typical documentation including:

  • Income tax returns, both business and personal

  • Balance sheets for your business

  • Bank statements, again business and personal

  • Driver's license or other valid photo ID

  • Whatever business license you hold

  • Some sort of business plans for future projections

Not all lenders will be so pedantic about these requirements, especially when you’re dealing with online lenders, but it’s always a good idea to have as much readily available before applying in case it’s asked for. For some financial assistance like a business credit card, you’ll only need a basic tax ID number and social security number.

Who Can Apply for a Small Business Startup Loan?

Every lender will have their own requirements and rules about who can apply for their loans, so it's a very good idea to shop around to see what the market has to offer. What we can say is this: the younger your business is, the better. We're talking six months or less even. By the time your business reaches its first birthday, other lines of financial assistance open up, so make sure you benefit from this while you have the chance.

Want to give your small business startup loan application its best shot? Check off these boxes before you apply:

  • Build up your credit score, personal and business. The better your personal credit score is, the better are your chances.

  • Know what the requirements are before applying. Different lenders have different qualifications, so do your homework. For example, to apply for a small business loan, you’ll usually have to make less than a certain amount of net revenue per year to qualify, you have to be a for-profit business, and you really shouldn’t have bankruptcies on your record.

  • It's also a very good idea to make sure you have some form of collateral, an asset you can use as an insurance plan against the loan. It builds lender confidence and makes getting approval a lot easier.

Having a diverse business plan, wide customer audience, and a winning business model will just open you up to more options and greater possibilities.

Small Business Startup Loans: How Much Will It Cost You?

There is no telling how much a small business startup loan will cost you until you’ve applied. What we can say for certain is:

  • The smaller your loan, the higher the interest will usually be

  • The better your credit score is, the lower your interest rates will be

  • The longer your repayment terms, the higher your interest rates will be

You could find rates ranging anywhere from 2.25% and up to even 5.32% for SBA loan options.

What Payback Terms Can You Get for Your Small Business Startup Loan?

Lenders will set their own repayment terms, and this can vary from bi-weekly payments up to 25 years for larger business loans. A great thing about small business startup loans is that you can get exceptional terms. Sometimes, you’ll find amazing offers like interest-free payments for the first year-15 months. Other times, the lender will waive the prepayment penalty as an act of good faith. Every lender has different rules, but on the whole, you’ll find lenders willing to be a lot more flexible and even generous when dealing with startups. Discuss your repayment options with each lender you are considering and use a useful online tool to help compare your offers.

Small Business Startup Loan: The Only Way to Fly

Startups are the future of our world, and we are the ones fanning the flames of progress. Check out what your options are for financial assistance, and see how with a little backing, your new business can build a new tomorrow.

5. Equipment Financing

How Equipment Financing Works & How to Make it Work for You

Equipment financing is one of the many ways a business can get funding for its business operations, and it covers a pretty wide array of financing. Basically, anything that provides a company with the capital it needs to purchase equipment is considered equipment financing. This can include leasing the equipment, government loans like SBA loans, or other funding options.

The upside to equipment financing is that it is quick and easy access to a flow of cash, doesn't require loads of paperwork to apply, and uses the equipment itself as collateral. The downside is that your equipment might be outdated before you've even paid back the loan, so you're essentially paying for a piece of machinery that is an older model or may even be obsolete. This is particularly true when dealing with high tech. Even still, the pros generally outweigh the cons. Just keep this in mind when considering one model over another (and maybe opt for the newer model to ensure you get your money's worth out of it).

Need a new piece of equipment for your office, warehouse, or factory but don’t have the upfront cash to make the purchase? Check out how equipment financing works, who is eligible to apply, and what you can do to improve your chances of approval today.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get for Equipment Financing?

The beauty of equipment financing is that the equipment you buy acts as your collateral. That means that if you can’t repay the loan, the lender can always come and take the equipment instead of repayment. While it might make you a little antsy to think about, this stipulation makes lenders more willing to offer equipment financing loans, even to smaller businesses with less history to show for themselves.

With such good odds in their favor, lenders are willing to give you a lot more than they would with a standard loan. In fact, some lenders will enthusiastically extend the full amount for the cost of new or used equipment purchases. You won’t always find such agreeable terms, but it happens more often than not. It is common to get as much as $500,000 from an equipment financing loan, and you can almost always get at least 80% without any issues.

It is worth noting that at times the lender will still ask for some other form of collateral, a blanket lien (a legal statement that gives the lender claims to your business assets if you foreclose on the loan), or a personal guarantee in case your business isn’t able to pay back the loan.

How Long Does It Take to Get Equipment Financing?

Because lenders understand that when a business needs a piece of equipment, they need it now, equipment financing is a pretty fast process. You can get the requested funds wired to your business account in as little as two business days. Considering some business loans can take a month upwards, two days is a real relief to most business owners. Of course, having your papers ready and any information the lender needs on hand will make the process go faster. If you're not prepared, you could be looking at a few weeks of paperwork holding up your loan.

Another thing that’ll help move things along faster is working with an online lender. Traditional banks have their red tape and regulations to deal with, so the whole process just takes longer. Online lenders, on the other hand, have fewer regulations to deal with, and besides, sending an email is a lot faster than having to walk the application form down the hall for approval.

What Documentation Do You Need to Qualify for Equipment Financing?

Because these are big-ticket items, lenders are very thorough when it comes to handing out equipment financing loans. You'll need to prove good creditworthiness, so be ready to hand over documents like:

  • Bank statements

  • Business balance sheets

  • Income tax returns

Lenders, particularly banks, will want to see both personal and business statements, so don't be surprised when they ask for this. Personal documentation is asked for because, at the end of the day, the name behind the business might be responsible for paying back the loan (if the business folds and can't afford to pay it back).

Who Can Apply for Equipment Financing?

Anyone in business can apply for equipment financing, but not everyone will get approved. The majority of businesses that get approved for equipment financing loans have more than $130k in annual revenue, credit scores that are 630+ (or at the very least 600), and have been in business for at least two years. So, you stand a better chance of getting the big thumbs up if you have:

  • Good personal and business credit history/scores

  • Solid annual revenues

  • Been in business for a couple years (or at least one year)

How much you’re asking for and what type of repayment terms you’re asking for will also factor into the overall decision. One other factor that you might not expect weighs in here: the type of equipment you’re trying to buy. You see, since equipment financing uses the equipment being purchased as a form of collateral, the lender is essentially investing in that equipment. For that reason, if you are investing in high-end, high-quality, or value-retaining equipment, a lender is more likely to approve your loan request and even work with you for more flexible terms. The adverse is also true if you are trying to purchase an outdated model, niche machinery, or more random, less useful piece of equipment.

Equipment Financing: How Much Will It Cost You?

Interest on equipment financing loans can be considerably more than for other types of loans. You can expect to pay anywhere from 8%-30% depending on the lender, type (or cost) of equipment, and your own creditworthiness. How much interest you pay will also depend on whether you have taken a fixed or variable rate loan. Some lenders will also ask for a 20% down payment for the loan. This is actually a good thing if you can afford it because it means you’re taking out a smaller amount, so you pay less interest at the end of the day.

If you can’t afford the equipment financing terms, leasing equipment can be a more affordable option since you don’t have to put down any form of guarantee or collateral. Just be careful to do the math beforehand because leasing can also work out more expensive if you plan to lease the equipment for a long time. Generally, if this is a piece of equipment you’re going to want to have for the long haul, it’s worth purchasing it for yourself. This way, you aren’t left without any equipment even after paying out each month. Leasing is also easier to get approved for if you have a short or spotty credit history.

What Payback Terms Can You Get for Equipment Financing?

Equipment financing loans aren't like most other business loans. Rather than setting a fixed repayment date and breaking up your overall debt into equal monthly payments like you normally would with a business term loan or SBA loan, equipment financing calculates the expected lifespan of the equipment you are buying and uses this as a baseline for your loan repayment time frame. In general, you can expect a three to seven-year term for most types of equipment out there today, though 10+ years is not unheard of either.

Equipment Financing for Everything, Even the Kitchen Sink

So, whether you need new computers for your office, a job-specific piece of machinery, or a professional-grade vehicle to get the job done, equipment financing can help you make those buys that you couldn’t afford otherwise. The perfect solution for new businesses or companies looking to grow, find out how equipment financing can open new doors for your business now.

6. Short Term Loans

Small Businesses: Short Term Loans Explained in Plain English

Everything about short-term loans makes them the ideal solution for most small businesses and startups. They're easier to get than typical loans, they come in faster so that you have the money right away when you need it, and short-term loans are extremely flexible. Plus, this funding option is paid back quickly, so you don’t have debt hanging over your head for years to come.

That’s short-term loans in a nutshell. Now, here is everything else you need to know about this smart business financing option.

Short Term Business Loans: How Do They Work?

Since new businesses and smaller businesses usually need upfront capital right now for immediate use like paying salaries, buying equipment, or purchasing supplies to get started, short-term loans are the perfect financing option. Here’s a good scenario that’ll help you see how this type of business financing works.

You’re a small business owner, and it’s the beginning of the month. You need to buy supplies to service your customers with, but you don’t have the money to make those kinds of purchases since you haven’t made any sales yet. You know the money will come in once business is up and running, so you only need to borrow the initial cash flow for a small window of time. What do you do? Turn to a short-term loan, that’s what.

In fact, this is exactly what short-term loans are meant for. Take a look:

  • You get the working capital you need to get the ball rolling

  • Once sales revenue starts to build, you pay back the loan

  • You don’t want that kind of arrangement stretching out for years, forcing you to pay loads of unnecessary interest payments. Instead, you want it taken care of quickly and easily.

You see? Short term loans are fast, easy, and don’t come with all of the complications that other loans do.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get from a Short-Term Loan?

If you are looking for a huge sum, short-term loans might not be your best option. That's because in general, short-term loans work with much smaller amounts than your typical business loans. There are even some lenders that will offer minimum loan amounts of $50!

Of course, you can get higher amounts from plenty of lenders too. It’s not unusual to even get a short-term loan for as much as $250,000 from lenders like Kabbage, BlueVine, or Credibility Capital. While either of these two extremes isn’t the norm, the average short-term loan is usually in the range of $100-$2,000.

How Long Does It Take to Get a Short-Term Loan?

Short term loans are some of the fastest financing options for businesses. Obviously, if you’re taking out a short-term loan for an emergency or so you can get the supplies you need to get your business started, you want the money NOW. Assuming all your paperwork checks out and you are approved for the loan, a short-term loan can be in your account within 24-48 hours (2 business days).

What Documentation Do You Need to Qualify for a Short-Term Loan?

Every lender, from traditional banks to credit unions and online lenders, will ask for certain documentation when you apply for a short-term loan. Specifics might vary from one agency to the next, but the general requirements include:

  • Bank statements and other business cash flow documentation

  • Previous loan repayment history documentation

  • Income tax statements (personal and business)

Who Can Apply for a Short-Term Loan?

If you own a business, you can apply for a short-term business loan, but these loans are most helpful for new businesses, cyclical businesses, companies going through a bit of a rough patch, or services that are seasonal. For example, a holiday season boutique needs the upfront capital to buy supplies and get the business up and running before the holiday shoppers come calling. With a short-term loan, this business owner can purchase everything they need to get started, and then pay back the loan quickly once the customers arrive.

The beauty of short-term loans is that they are fast and easy. Most lenders are even willing to work with startups or businesses with little history because the risk is lower. The loan repayment is coming in a relatively short amount of time, so they are more willing to hand out these types of loans.

In terms of qualifications, most short-term lenders will be pretty flexible. Some places will lend money to businesses that have been running for just three months though most of the lenders out there will require a year in business. Credit scores as low as 500 can apply, but naturally, the higher your score, the more likely it is that you will get approved for the loan you’re asking for.

Short Term Loans: How Much Will It Cost You?

The overall cost of a short-term loan will be the total of any fees the lender charges plus the interest rate you are given. In most cases, interest rates will be higher for short-term loans than for long-term loans (unless you're currently in a recessionary economy, but that brings in a whole mess of other troubles and considerations). Generally, interest rates are calculated by taking the base prime interest rate and adding a premium to that (the premium is calculated by the amount you are asking for times the risk factor the lender is taking by giving you a loan).

A few things that you can do to save yourself money on a short-term loan are:

Improve your credit score
  • Better credit scores will automatically receive better interest rates from any lender, so the hotter your report is, the less you’ll pay in the long run.

Take a shorter repayment plan
  • The longer you have to pay back your loan, the more interest you will end up paying (because you pay interest each month). Paying off your loan faster means fewer payments. A word of caution here, though. Make sure your interval payments are doable. That means, don’t set up your repayment terms so that you are being forced to pay more than you can afford. For example, if you take out a loan of $2,000 and split it up into four weekly payments, you’ll be finished paying off your loan in one month. Just make sure you have $500 per week to make the payments.

Shop around
  • There are loads of online, traditional, and crowdfunding options for borrowing money. So, don’t just settle on the first offer you receive. Check out several services, see what they have to offer, compare terms, and go for the one that is the most appealing.

What Payback Terms Can You Get with Your Short-Term Loan?

Short term loans are usually no longer than a year, and often less, so the whole business is done within a short amount of time. But while most short-term loans are paid back within a year of being borrowed, you can find repayment terms for as long as three years. On the other end of the spectrum, some loans can be paid back within three months or even two weeks. It is not uncommon to find short-term loan repayment terms that are paid back on a daily basis.

Short Term Loan: Your Lifeline When You Need It

If you need a big sum of money that you want to pay back slowly over several years, short-term loans might not be the best option for your business needs. If, on the other hand, you need fast cash, don't have a ton of business history, and want to be done with the whole business of borrowing quickly, short-term loans are the best solution for you.

Whether you’re dealing with an unexpected crisis at work, need the upfront cash to buy stock for your seasonal business, or are waiting for customers who work on credit to come through, short-term loans can be the godsend your business needs to keep going during this lull in revenue flow.

7. Merchant Cash Advance

Merchant Cash Advance: How to Know if It’s Right for Your Business

When your business is really stuck, where can you turn? While there are several business financing options, a merchant cash advance might be your best shot if you’ve been rejected for a loan or aren’t able to cash in on other forms of help. Not as straightforward as a typical bank loan, merchant cash advances can have your head spinning if you don’t know much about the topic. Here’s a step-by-step guide to this confusing subject, so you can understand exactly what a merchant cash advance is, how it works, when it can help (or hurt), and what you can do to get one fast.

Merchant Cash Advance: How Does it Work?

Not familiar with the idea of merchant cash advances? The concept itself is pretty simple; it’s the implementation that throws most people for a loop. To begin with, the lender gives you money upfront, and in exchange, you agree to give them a percentage of your future sales, like this:

  • You and the lender sign a contract

  • You receive the cash advance into your business bank account

  • Each day (or agreed upon time period), a given percentage of your daily revenues will be taken from your business bank account and deposited in the lender’s account. This is the repayment method for your merchant cash advance.

  • This holdback payment continues until you’ve paid back the entire amount you borrowed, plus whatever fees or interest the lender charges you.

Pretty straightforward, right? There’s more to it than that, but before we go any further, let’s just clarify one important point. A merchant cash advance is not a loan. A loan gives you money, and you pay back the loan plus fees and interest according to a certain arrangement you make with the lender. With a merchant cash advance, you also get the money upfront and have to pay it back at specified intervals, but the same rules don’t apply. We’ll get into the differences below, but just realize you’re playing a totally different ballgame here.

Though this type of borrowing is available for loads of different industries, a merchant cash advance really works best for businesses that work primarily with credit or debit card payments. This can include restaurants, retail stores, etc. Not in the retail or food industries? That’s ok, you can still get a merchant cash advance for your biz. Check out the second option in the repayment terms section below to learn more.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get from a Merchant Cash Advance?

How much you can get from a merchant cash advance totally depends on your business. The lender will look at your average credit card sales, and based on these figures, tell you how much they’re willing to advance you. They’ll usually look at 3-6 months worth of receipts to make this decision. Fortunately for some businesses, lenders are willing to give anywhere from 50%-250% of your average credit card revenues. What’s more, the upper limit on an MCA is as high as $1,000,000 from some lenders, so you can really make a killing here if you have good sales.

How Long Does It Take to Get a Merchant Cash Advance?

The other good thing about a merchant cash advance is that you can get an answer within a few hours. You’ll see the money within a day or three at most once approval has been given. So, if you need the money fast, this is an obvious solution for some businesses.

What Documentation Do You Need to Qualify for a Merchant Cash Advance?

You don’t need much to apply for an MCA. All you'll need are your books and credit card receipts for the last few months. Lenders rarely look at much else for these types of "loans."

Who Can Apply for a Merchant Cash Advance?

Merchant cash advances are worlds easier to work with than the traditional business loans. That’s because they’re not subject to the same regulations, there’s no need for a personal guarantee, and bad credit is welcome.

In fact, more than business history, a structured business plan, and sterling credit record, a merchant cash advance lender will look most closely at your daily credit card transactions to see if you are worth the risk of lending to. Since you’re essentially selling off a piece of your future business, sales records are what’s important here. The good news is that even if your business was rejected for a loan, you can still apply and get approved for a merchant cash advance if you have a steady flow of credit card transactions.

Merchant Cash Advances: How Much Will They Cost You?

How much you’ll pay at the end of the day is calculated by multiplying the loan amount by the risk factor your business poses to the lender. It’s usually on a scale of 1.2-1.5 (with 1.5 being the riskiest type of business). So, if you multiply a cash advance of $50,000 by a risk factor of 1.4, you’ll get to a $70,000 repayment total (that’s the total amount you’ll have to pay back by the end of your repayment plan including the fees incurred).

Because there’s no guarantee on merchant cash advances, this form of financing tends to come with higher costs than others. That being said, merchant cash advance fees vary from month to month because of the way the payments are structured. Here’s how this works:

Your business takes out a merchant cash advance. Each month, you pay a percentage of the sales you made that month. On slower months, you pay less because your revenue was less. On better months, you pay more because your revenue was more.

So, the amount that you pay fluctuates based on your sales record. Note that the percentage never changes, that’s a fixed rate, but the amount you pay will change as your monthly sales revenue changes. Let’s take a concrete example:

Your merchant cash advance holdback percentage (aka retrieval rate) is 10%.

  • In January, you make $10,000 in sales. You’ll pay $1,000 towards your merchant cash advance.

  • In February, sales dip to a low $6,000. So, in February, you will only pay $600.

You can expect to pay somewhere between 20%-40% of the cash advance as a repayment fee. This is not the same percentage as the holdback percentage which can be anywhere from 5%-20% usually. Let’s clarify.

A lender gives you $10,000, arranges a 10% holdback, and takes 20% as a repayment fee. Each day, you’ll give the merchant 10% of your credit card earnings (regardless of what that is each day). The overall repayment that you’ll need to make is $10,000+20% or $2,000 for a total of $12,000. So, you have to pay back $12,000, and that is spread out over the amount of time it takes you by making daily payments of 10% of your credit card receipt revenue.

The nice thing about this system is twofold:

  1. If you have a slow month, your repayments won’t cripple you because they are always just the percentage of the sales you made (so you aren’t paying $1,000 every month, even when you made less than that)

  2. When business is better, you can pay off your debt faster

What Payback Terms Can You Get for Your Merchant Cash Advance?

Merchant advance repayments really depend on how much business you do each day because the payments are usually based on your credit card charges (though this is not always the case as we’ll explain in a sec). In general, MCAs have a wide range of repayment terms, spanning from 90 days to as long as 18 months depending on how much you take out and your lender’s terms.

You can structure your repayments in two ways:

Percentage-based payments
  • With this type of repayment plan, you will hand over a slice of your earnings pie from every credit or debit card sale you make.

Fixed rate payments
  • Alternatively, you can agree upon a fixed amount that you pay via a direct withdrawal system that uses the ACH (Automated Clearing House). This option is directly connected to your bank account, and payments are usually structured to be made daily or weekly. This is more like a traditional loan you are used to.

The second option is popular with businesses that don’t work frequently with credit cards. The downside to the fixed payments is that they have to be made so often and regardless of your revenue. If you’re having a dry spell, coughing up weekly or even daily payments could really set you back (and even send you into debt). For this reason, many business advisors suggest looking into other forms of business financing like short-term loans or lines of credit before exploring a merchant cash advance.

Merchant Cash Advance: Is it the Right Choice for You?

Merchant cash advances are a tricky subject for sure. On the one hand, it’s easy to let payments swallow you up if you aren’t careful. On the other hand, they’re more flexible in terms of repayments. Plus, there’s no collateral necessary since the lender is attached to your bank account. So, it’s easier to get approved of for this type of financial aid. Weigh your options, know your current business finances, and make an informed decision now that you have all the cards on the table.

8. SBA Loans

All You Need to Know About SBA Loans

SBA (an acronym for the Small Business Administration) loans are the perfect way for new businesses to get much-needed startup funding. That’s because SBA loans are backed by the government, so you actually have UncleSam covering your loss if you default on your loan. It’s a lot more reliable and gives new businesses the assurance and financial capital they need to focus on launching a great new venture.

SBA loans aren’t as easy as walking into a bank and just submitting an application though. You have to qualify for these handouts. Luckily, these types of loans are actually easier to get approved for than others, and here’s why. When banks or other lenders are deciding whether or not to offer you a loan, they look atseveral factors to see how likely it is that you’ll be able to repay the loan in full. This makes sense since the lender needs to cover their risks so that they don’t end up losing massive amounts of money on bad loans.

With an SBA loan, it’s a totally different ball game. Since the government promises to repay up to 85% of the loan amount if you can’t pay it back, banks and other lenders feel a lot safer handing out these loans, making them easier for the average startup to get approval.

If you're considering an SBA loan for your new business, here's everything you need to know about how this type of loan works.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

SBA Loan Terms: How Much Can You Get?

There are different types of SBA loans, and each one will allow you to take out a different amount of money. The three options you’re looking at are:

SBA 7(a) loans
  • These loans are the most popular type of SBA loan. You can use an SBA 7(a) loan for a lot of different purposes like paying offexisting debt, working capital, leasing equipment, or renovating your office space. You can borrow anywhere from $500 all the way up to $5 million through an SBA 7(a) loan, so it really covers just about anyone in any line of business out there. There’s also an Express 7(a) SBA loan, but this gets capped at $350,000.

SBA 504 loans
  • Next up are SBA 504 loans. These can be used only for buying major fixed assets –like real estate or fixed equipment. The maximum you can get through an SBA 504 loan is $5.5 million. Still not too shabby.

SBA microloans
  • Not surprisingly, based on the name, SBA microloans are very smallbusiness loans only up to $50,000. They can be used for working capital, buying inventory or supplies, or investing in furniture, fixtures, machinery, or equipmentfor your business.

Know your business needs, financial parameters, and industry requirements to get a better understanding of which SBA loan is right for you.

How Long Does SBA Loan Approval Take?

The one downside to SBA loans isthat it can take a long time to qualify for and get funding through this option. It is not uncommon for the full process to take anywhere from 45 days to 3 months. Of course, it doesn't have to be that long a wait. Some applications are processed and accepted in just 3 weeks. More often than not though, even if you're applying for an SBA microloan, you should still expect it to take more than a month. SBA Express loans take less time (hence the name), but it can still be a few weeks for these to go through.

The reason for this long timeframe is that your loan is basically doing double the work. Both the lender and the SBA have to review your application, business documents, and financial statements. Once you’ve been approved for an SBA loan, it can still take another few weeks before the funds clear into your account. Bottom line, SBA loans take time, but the super-low rates and reassurance of government backing make it worth the wait.

What Documentation Do You Need to Qualify for an SBA Loan?

Another thing you have to realize is that applying for an SBA loan is a lot of work. You’ll need to prepare a truckload of documentation including information about your current financial situation, your business history, and your plans for the future. No matter which lender you go through, you'll have to complete a loan application that asks about your average revenue, what collateral you’ll be using, and why you need this loan in the first place. You’ll need to prove that you can repay the loan and that you intend to use it according to the SBA loan guidelines too.

Here are the documents that you’re going to be asked for:

  • A detailed business plan that shows how you’ll use the loan money

  • A business debt schedule to show how you’re going to pay off the debt

  • Your personal and business tax returns

  • Business documents, including your balance sheet and profit and loss statements

  • Recent business bank account statements

  • A copy of your driver’s license

  • A voided business check

If you’re applying for an SBA 504 loan, or most types of SBA 7(a) loans, you’ll also need to put down a down payment. For an SBA 504 loan, that’ll be 10% of the total loan amount. For an SBA 7(a) loan, it could be anywhere between 10% and 20% of the loan amount.

Who Can Get an SBA Loan?

This is one particular area where appearances really do matter. Lenders look for businesses with a strong credit score, realistic business plan, and a proven ability to repay the loan. If you want to qualify for an SBA loan, make sure your business can check off these boxes:

  • Has a credit score of 680 or more

  • Registers $180k+ in annual revenue

  • Has been around for 4+ years

What’s more, just to apply for an SBA loan, you need to:

  • Be defined as a small business that means fewer than 500 employees, an average net income of less than $5 million, net worth of less than $15 million, and an average yearly revenue of less than $7.5 million

  • Operate primarily and have a physical location in the US

  • Have no bankruptcies, defaults, or government debts

  • Run a for-profit business

  • Have invested personal funds into your business

  • Not have previously received an SBA loan

  • Have been running your business for at least 3 years

  • Be able to prove that you need the loan

Exactly How Much Does an SBA Loan Cost?

That’s a sliding scale answer. The cost of your SBA loan will depend on which type of loan you get and how much money you ask for.

For example, if you get an SBA 7(a) loan, you can generally expect to pay between 0% and 3.5% of the total dollar amount, depending on the amount you borrow and the loan’s maturity. This fee is charged by the SBA, and some banks pass it on to the borrower. For an SBA 504 loan, you’ll usually pay around 3% of the total amount, but this fee could be absorbed into the total cost of your loan. SBA Microloans don’t come with any fees.

But the main cost of your SBA loan depends on your interest rate. Interest rates for SBA 7(a) loans can be fixed or variable, but either way, they are limited by the SBA. The SBA has a cap on the interest rates for SBA 7(a) loans by allowing a maximum of 2.25% above the base interest rate, or a maximum of 2.75% if your loan term is over 7 years. This makes average interest rates for SBA 7(a) loans at 6%-13%.

It’s harder to understand how the interest rates on SBA 504 loans are calculated, but you can expect to pay between 5% and 6% interest. With microloans, the lender is the one who sets the interest rates, without any regulations from the SBA. That’s why these are usually higher than the other types, typically between 8% and 13%.

One thing to look out for is an origination fee that some banks charge. Check out bank policies and compare fees from different lenders before you sign.

What Are the Payback Terms Like for SBA Loans?

The repayment term for your SBA loan also depends on which type of loan you have.

SBA 7(a) loans have a monthly repayment terms ranging from:

  • 7 years for working capital loans

  • 10 years for equipment loans

  • 25 years for commercial real estate loans

SBA 504 loans have terms of 10 or 20 years. SBA microloans vary, up to 6 years.

SBA loans are giving startups the financial backbone they need to launch new ideas and great projects and services. Apply for an SBA loan, and let your business change the world today.

9. Personal Loans For Business

When & When Not to Use Personal Loans for Business Purposes

A personal loan for business purposes? Sounds a bit backwards and maybe even a little sketchy, doesn’t it? Believe it or not, it’s totally on the up and up, and it’s actually one of the best ways to fund a budding business of your own.

In fact, if you own a business or have considered opening one recently, the idea might have come across your desk. Using personal loans for business expenses definitely has its advantages...and drawbacks too. When is it the right idea to use a personal loan for business versus a straight-up business loan? How are the two different? What do you need in order to apply and get approved for a personal loan? There are so many questions, it’s enough to make your head spin. If you’re as confused as most business owners are about this topic, then follow us. We will show you all of the pros and cons of using personal loans for business purposes and how to make it happen when you want to.

Personal Loans vs. Business Loans: What's the Difference?

Personal and business loans are actually pretty similar at their core, so is one better than the other? To answer that and loads of other questions, let’s understand the difference between these two financing options.

Business Loans

Pros:

  • Limited uses: For one thing, business loans are tagged specifically for business purposes ONLY. That means if you have some extra cash left over, you can’t use it to go on vacation to Tahiti. That being said, the parameters for business expenses is pretty wide. Lunch with your buddy Adam, a “potential client”? Business expense. That 43” flat screen you wanted to watch the game on, so you bought it and installed it in the conference room? Business expense. Get the picture? So, while you’re limited to business expenses, that category is pretty exhaustive. It can also include things like salaries, equipment, supplies, business investments, or anything else you need to grow your business.

  • Bigger payouts: Business loans also come in much bigger amounts since businesses usually require bigger expenses and capital to cover those expenses.

Cons:

  • Harder application and approval processes: The downside to business loans is that they’re a lot harder to get. Since you’re dealing with bigger numbers, lenders are more particular about who they lend to. Also, there’s a boatload more paperwork involved in these applications. Lenders want to see your business plan, your income tax returns, your books, your bank statements, your driver’s license, your favorite Netflix original, and well, you get the point. There's a mountain of paperwork that you need to find, organize, share, and have processed before a yes is forthcoming.

  • Time in business requirements: One of the primary issues lots of people have with business loans is the required time in business needed for approval. Many lenders won’t hand out these loans unless you have been in business for at least a year (sometimes 3 or 5). That rules out a lot of startups and small businesses who are the prime candidates for business loans.

Personal Loans

Pros:

  • Super flexible: Personal loans, though, are more flexible in how you use them and who can get them. For example, you will have the flexibility to use the money as you please. No questions asked. So, you can spend it on your business and on anything else you want.

  • Sometimes lower APRs: Sometimes, personal loans can come with lower APRs but not always. Look at the terms you can get, and compare them with business loans you are eligible for.

  • Easier qualifications: This is without a doubt one of the biggest perks. Did you know only about 25% of businesses are approved for a business loan from the banks? You may have a hard time obtaining a business loan if:

    • You haven’t started your business yet

    • You want a small amount, less than $25,000, without astronomical interest rates

    • You don’t have any collateral to use

Personal loans, however, are much more amenable with their requirements. You don’t need to have any business history (since it’s not a business loan), can have lower credit scores, and can ask for a smaller amount without getting hit with huge rates. Most of all though, you don’t need collateral to make these loans happen.

Cons:

  • Fees and taxes may apply: On the other hand, you might have to pay a prepayment penalty if you finish paying off your loan earlier than the repayment date (but not always). What’s more, often you won’t get a tax credit for your interest payments like you would with a proper business loan.

  • Personal loans make you the guarantor: Worst of all though, personal loans put your own personal assets in danger because if you're unable to pay back the loan, your assets will be seized as payment.

All that said, using personal loans for business purposes can be a big help and work out really well for most business owners. Now that you’ve decided you want to look into personal loans for business purposes, here’s everything you need to know.

  • How Much?

  • Speed of Funding

  • Required Docs

  • Profile Required

  • Cost of Funding

  • Payback Terms

How Much Can You Get from a Personal Loan?

Personal loans are usually smaller amounts, generally from around $1,000 up to $50,000. There are some lenders like SoFi that offer up to $100,000 (but you’ll need to have some impressive stats to get approved), but the norm is up to $50K.

How Long Does It Take to Get a Personal Loan?

Especially when working with online lenders, the process of getting a personal loan is really fast. It can take up to a week for the entire process to go through, but sometimes you can receive the funds in as little as one day. This will depend on the papers you provide, the lender you are working with, and your creditworthiness.

What Documentation Do You Need to Qualify for a Personal Loan?

Personal loans are worlds easier to deal with than business loans. Unlike the alternatives which require shopping lists of documentation to apply, you’ll only need a few things to apply for a personal loan. As always, the requirements will vary depending on the lender, but you can expect them to ask for a few of these items:

  • Proof of ID: This can be a driver’s license, passport, voters ID, etc.

  • Proof of residence

  • A few bank statements

  • Pay stubs

That’s it. Like we said, a lot simpler than a business loan.

Who Can Apply for a Personal Loan?

That's just it, a personal loan is geared towards the average Joe. That means that anyone, and we mean anyone, can apply for this type of loan. Of course, you’ll stand a much better chance of getting approved for the loan if you have good credit and a clear and long credit history, but there are plenty of lenders who will work with poor credit or no credit folks.

To get the best rates, you’ll want a credit score of 680 or better, but really, anyone can apply.

How Much Will It Cost You?

Personal loan APRs can be anywhere from 4.08% to 36% depending on your creditworthiness, the amount you borrow, and the lender you are working with. In general, though, if you have good credit, your APR will average in the 10% range. The longer you stretch out your repayment plan, the more you’ll end up paying in interest over time. So, if you can afford to, make your monthly payments larger to avoid long repayment terms.

What Payback Terms Can You Get?

Personal loans offer some of the most flexible repayment terms around. The average small personal loan will require repayment in 1-5 years, but there’s a lot more flexibility built into these financing options. You can get a personal loan repayment plan that spans ten years sometimes. Just remember what we said about paying more interest as time marches on.

Personal Loans for Businesses of Every Shape & Size

Ready to launch your business but need some capital? Getting a personal loan for business expenses might be the best idea you ever had. Check out your options, deal with reliable online lenders, and watch your startup take off today.