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Best 7 Small Business Loans Compared 2020

Looking for a small loan for your business? See our comparison of the best 7 small business loans in 2020.
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Author: Edith Muthoni

Last Updated: May 11, 2020
Debt consolidation loans | Leanbonds
Debt consolidation loans | Leanbonds

The loans offered onLoans are an integral part of business growth for most small and medium enterprises. But how do you grow and expand your small business operations with a loan when no bank is willing to advance you credit facilities because of a poor credit score?

short term loans for small businesses | Learnbonds

In most cases, these small and medium enterprise administrators often turn to the short term loans offered by the payday lenders. The biggest problem with these, however, is their insanely high interest rates and numerous hidden fees and penalties that push up the price.

To address this issue, a new breed of short term loans lenders that advance cost friendly loans to SMEs without paying too much attention to their credit reports have cropped up. Most of these are online based and will only pull your credit report for verification purposes.

These seek to offer a balance between banks and the payday lenders whereby unlike banks, they will still advance you loan services while overlooking your bad credit report. And unlike the payday lenders, they offer lower interests and are more straightforward in calculating the cost of the loan with highly flexible terms of payment.

While a credit line or a loan may sound like the best option available, it is worth mentioning that in most cases the easiest borrowing vehicle for any new company would be a Busines Credit Card. keep in mind that if you are starting your business you might want to build the best credit score possible. If you take care of it and make sure all your payments are done on time, this will help you secure other borrowing products later in life.

Note: A bad credit score and limited business cash flow should not force you to settle for highly priced payday credit services with unrealistic payment terms or sell company equity. There is always a third option, the small business loan providers with less complicated terms and even less emphasis on credit score ratings.

On this Page:

    What are the pros and cons of small business loans?

    Pros

    • Relatively more affordable compared to business loans
    • Offers more flexible payment terms compared to payday lenders
    • Most have a near-instant loan processing time
    • Will overlook a ‘bad’ credit score if it is backed by solid cash flows and reasonable collateral
    • Most have highly transparent loan fee structures
    • Helps you accelerate business growth without diluting equity through ale of company shares

    Cons

    • Most will charge higher interests for what they consider ‘low’ credit score
    • Relatively pricier than conventional bank loans
    • The regular loan repayments almost always affect your business cash flow
    • Some don’t report your repayment history to credit bureaus thus don’t help grow your credit score

    Criteria used to rank the best small business loan providers:

    • Maximum lending limit
    • Interest rates on loans
    • Processing time
    • Borrower requirements
    • Repayment period offered
    • Minimum FICO score allowed
    • Types of loans offered
    • Customer service
    • Collateral required

    Best business short term small business loans providers: Summary

    Reviewers Choice
    LoanBuilder
    Rating
    Available Loan Amount
    $1 - Unlimited
    Available Term Length
    Negotiable
    Representative APR
    Negotiable
    Rating
    Visit Now
    Patch of Land
    Rating
    Available Loan Amount
    $1,000 - $20,000,000
    Available Term Length
    12 months
    Representative APR
    10 to 18%
    Rating
    Visit Now
    FundThatFlip
    Rating
    Available Loan Amount
    $100,000 - $3,000,000
    Available Term Length
    6-18 months
    Representative APR
    1.5% and 8.99%
    Rating
    Visit Now

    Best business short term small business loans providers:

     

    1. Lendio - Custom Interest rates

    Lendio is not your typical small business loan lender. Rather, it is a business credit marketplace with one of the most diversified types of loans we have come across so far. Here you can apply for merchant cash advances, different types of credit advances and unspecified short and medium-term loans.

    It connects you to a pool of lenders who vet your business and check on your personal credit score to determine the interest rate at which they should advance you the loan. And most of these are willing to advance your credit even when you have a credit score of 550.

    One of the most interesting features about Lendio is that their services are free and lets you prequalify for different types of loans. It also presents you with multiple offers from different lenders and gives you a chance to choose the terms and interests you are most comfortable with.

    Prequalification requirements here include:

    • A credit score of above 550
    • Must have been in business for more than six months
    • Have cashflows of above $10,000 per month

    Our Rating

    • You can borrow between $1k and $5 million
    • Free loan review and prequalification process
    • Accepts relatively low credit scores
    • The $10,000 ash flow and 6 months of business requirement locks out startups

    2. LendingClub - 4.99% to 29.99% Interest

    LendingClub is a peer to peer lending site that specializes in advancing loans to small and medium enterprises. Here you can borrow between $5,000 and $500,000 and pay back within one or five years.

    The loans offered on this peer-to-peer lending site are fixed rate with rates ranging from 4.99% to 29.99% depending on a host of factors like your credit score, business revenues, and repayment duration.

    Some of the most unique features about the P2P service provider include the fact that you don’t need collateral for loans less than $100,000. They will also match you with client advisor to help you navigate through the site and work around the necessary loan requirements that speed up the loan review process. Ideally, funding here may take between one and five days.

    Loan qualification requirement:

    • Must have been in business for at least 12 months
    • Loan applicant must own at least 20% of the business
    • Minimum annual revenue of $50,000
    • A personal credit score of 600+

    Our Rating

    • Stellar client support – rated ‘A’ on Better Business Bureau
    • No prepayment penalties on early payments
    • Funds a wide variety of loans from inventory purchase to emergency repairs
    • Not available in all states
    • Not start-up friendly

    3. OnDeck - 9.99% to 13.99% Interest

    The most interesting thing about OnDeck is the fact that loan processing here may take less than a day. You are also exposed to different types of both short and long term business loans of between $5,000 and $500,000. Either of these loans is advanced at a fixed annual interest rate that starts from 9.99% or at an annual percentage rate that starts from 13.99%. The loan term ranges from 3 to 36 months.

    OnDeck makes it possible to automate loan repayments into “micropayments” that are paid in daily or weekly in a bid to minimize defaulting cases. Their loan application process is also rather straightforward as you can apply online or over the phone and have the answer to whether you qualify for the loan or not in minutes.

    What do you need to qualify for an OnDeck small business loan?

    • The business owner must have a credit score of 500+
    • Have been in business for more than 12 months
    • Post n annual minimum revenue of $100,000

    Our Rating

    • Excellent customer service with an A* BBB rating and 9.8 Trust Pilot score
    • Highly transparent loan pricing
    • Relatively fast loan processing time
    • One may consider the interest rates relatively high for a stable business

    4. Loan Builder - Custom Interest rates

    If you are looking for flexibility, you will like the PayPal-owned Loan Builder, an online based small business loan lender. Unlike most other small business loan lenders on this list that have fixed minimum and maximum loan limits and fixed rates, loan builder lets you customize both the loans amounts and interests.

    As the name suggests Loan Builder is an online platform where you can ‘build’ your loan to a predetermined limit by constantly tweaking the amounts required and examining how it affects both the interest rates and repayment terms.

    Loan Builder’s borrower requirements:

    • A business owner must have a credit score of 550+
    • Your business must be located in the United States
    • Biased towards PayPal Businesses that have been in operation for more than 9 months
    • Reported a business revenue of $42,000

    Our Rating

    • Highly customizable
    • Friendly borrower terms and conditions like low credit score acceptance
    • Has the backing of one of the largest multi-national payment processor
    • Only accessible to businesses with PayPal business accounts

    5. Funding Circle - 4.99% to 27.99% Interest

    Broad qualification requirements, competitive loan repayment terms, and attractive interest rates are some of the most unique factors about Funding Circle’s small business loans. Here, a small business owner can access loans of between $25,000 and $500,000 and pay back within 6 months and 5 years. Interest rates on loans here start from 4.99% but can reach the highs of 27.99% per annum. You should also note that the peer to peer lender doesn’t penalize early payments but imposes a 5% charge on late payments.

    Like most other peer-to-peer lenders, Funding Circle is an online based loans marketplace where you get to submit a loan request that is then funded by a pool of accredited lenders. It may, therefore, take less than 24 hours or a few days to fully fund your request depending on such factors as your credit score and business turnover.

    What are funding Circle’s borrower requirements?

    • You need a credit score of 620+
    • Your business must have been in operation for more than two years
    • No criminal history or record of bankruptcy

    Our Rating

    • Available in both North America and Europe
    • Offers the services of a loan specialist to help you get your documents in order
    • Straightforward application process and charges
    • Relatively high credit score requirement
    • One might also consider the maximum loan of $500,000 quite limiting

    6. Kabbage- 1.5% to 10% Interest

    First off, Kabbage does not review your credit score when making the decision on whether to advance you a loan or in determining the interest rate. It, therefore, doesn’t maintain a minimum credit score on its list of borrower requirements and is thus best suited for business owners with incredibly low scores.

    Here you can apply up to $250,000 and choose a 6-, 12-, and 18-month repayment plan. Interests range from 1.5% to 10% of the principal amount and are dependent on such factors as the amount of loan and the preferred repayment period.

    What are Kabbage’s borrower requirements?

    • Business must have been in operation for the past 12 months
    • Post annual revenues of $50,000 or $4,200 per month for the past three months

    Our Rating

    • No minimum credit score required to access loan services
    • Relatively fast loan application reviews and processing time
    • Doesn’t penalize early payments
    • One may consider their interest rates and late payment charges high

    7. FundBox - 4.66% to 8.99%

    FundBox remains one of the most recent entrants into the world of small business financing and caters for the low volume businesses. Like Kabbage, FundBox doesn’t review your credit score when you apply for a loan. They, therefore, don’t have a minimum credit score that you must fulfill before accessing loan facilities and neither do they use it as a base to determine interest rates. Here you can borrow between $1,000 and $100,000 and pay back in 12 or 24 weeks.

    The interests charged on Kabbage’s platform range from 4.66% to 8.99% on each weekly payment. More of its rather unique factors include what their website refers to as lightning speed loan application process with the promise of getting a response about your loan application request in less than three minutes and full funding in less than 24 hours.

    FundBox borrower requirements

    • Business must have posted minimum annual revenue of $25,000
    • Must have been in operation for the past six months

    Our Rating

    • Grants you access to a wide range of small business loans
    • No emphasis on credit scores in determining your creditworthiness or interest rates
    • Biased towards new and low-volume businesses
    • One might consider their interests high and repayment period steep

    When do you need the services of a small business loan provider?

    • When you have a bad credit report:

    If you approach a bank looking for a short term loan for your small business, the first step to analyzing your creditworthiness is checking your credit score. This means that even with good business cash flow and assets to back the loan, most conventional banks will either turn you away or demand unrealistic interest rates. Most small business loans providers are however always open to businesses with solid cash flows.

    • When you need cash fast:A roll of cash strapped with a rubber band - representing the need for cash for small businesses

    We all know how bureaucratic loan processing by a bank can get. And all these are hidden in the phrase ‘processing time’ that often drags on for days on end. What do you do when you need cash immediately to enter into a profitable deal, pay for inventory or sort emergencies? You turn to the small business loan providers with faster, near-instant, loan processing speeds.

    • When you have an overdrawn checking account:

    If you run a checking account, your bank may offer you overdraft services to a certain limit, but at a higher interest rate. For instance, if you wrote an overdraft check, most banks will charge you about $35 dollars for the first six days and $5 for every other day the overdraft remains unsettled. When you have maxed out the overdraft or just consider their interest and additional charges exorbitant, you might want to consider the small business loan lenders.

    • When you want to sort small business expenses:

    While some business expenses like electricity bills, rent, car repairs or even machine maintenance may seem small, they just can’t wait until the next check. Most have to be cleared as soon as they fall due. Most small business lenders offer credit packages specially designed to address such emergency bills.

    • When you have maxed out your credit cards:

    The allure of spend now pay later can be quite tempting even for small business administrators. It has in more instances than one seen most run a tad bit wild with the plastic. But with the interest on credit card debt averaging 15%, you don’t want to be stuck with this loan for long. You might, therefore, have to turn for the relatively more affordable small business loan lenders for advance to clear out this loan.

    How do you decide on the best small business loan provider for your business?

    • Evaluate your need for the loan and amounts needed:

    One of the first queries you have to answer when applying for a small business loan with any of these lenders is the type of loan needed. And given that various lenders offer different types of loans, the first step to identifying the best financing for your small business should be matching the type of loan needed with the most appropriate lender.

    • Interest rates:Interest rates | Representation of an animated person unlocking interest rates

    The only reason you are going after a small business loan lender that keeps monitoring your creditworthiness and business revenues and not a payday lender that only needs collateral for the loan is their low interests. It is therefore imperative that your search for a financier starts with evaluating the interest rates for your proffered lenders.

    • Terms of repayment:

    What is the maximum loan repayment period and what happens should you late on payments? What are the lender’s late payment penalties and do they charge interest on early payments? More importantly, at which point of delayed payments does your lender consider you a defaulter and what is their recourse? Examine these factors carefully by going through the lender’s terms and conditions as well as their past and present customer experiences on such review sites as Better Business Bureau and Trust Pilot.

    • Ability to fulfill loan requirements:

    Before you even fill and submit the loan application form, check whether you fulfill the borrower’s requirement criteria for your preferred lender. For instance, what is your credit score, how long have you been in business and what is your current business turnover? These are basic factors that almost every lender puts into consideration when evaluating your creditworthiness and also when determining the rate at which they can advance you the loan.

    Final word

    Accessing loans for your small business doesn’t have to be a choice between giving up equity and settling for punitively expensive credit services. Not even when you have a bad or fair credit score and running a relatively new business. The small business loan providers including peer to peer lending sites and loan marketplace have made it possible for entrepreneurs to access short term and medium term loans at affordable prices. Whether you are looking for cash to pay for inventory, pay for emergency repairs or for business or asset acquisition, you will always find a lender willing to advance you these amounts. And most won’t even pay keen attention to your credit score or borrowing history.

    Glossary of Loan Terms

    A scale showing a high Credit Score
    Credit Score

    A credit score shows your creditworthiness. It's primarily based on how much money you owe to loan or credit card companies, if you have ever missed payments or if you have ever defaulted on a loan.

    A green tick stamp showing Guaranteed Approval
    Guaranteed Approval

    Guaranteed Approval is when, no matter how bad, your credit score its, your loan application will not get declined.

    A stack of coins and notes to show Cash Advance
    Cash Advance

    A Cash Advance is a short-term loan that has steep interest rates and fees.

    A secured padlock and document showing Collateral
    Collateral

    Collateral is when you put up an item against your loan such as your house or car. These can be reposessed if you miss payments.

    A scale with coins showing a high Credit Limit
    Credit Limit

    A Credit Limit is the highest amont of credit a lender will lend to the borrower.

    5 gold stars showing a high Credit Rating
    Credit Rating

    Your Credit Rating is how likely you are to fulfil your loan payments and how risky you are as a borrower.

    A silver cog with a gold star inside
    Default

    If you default on your loan it means you are unable to keep up with your payments and no longer pay back your loan.

    A coin with a green arrow showing Interest Rates
    Interest

    The Interest is a percentage based on the amount of your loan that you pay back to the lender for using their money.

    Piles of coins showing Fixed Interest Rate
    Fixed Interest Rate

    Fixed Interest Rate is when the interest rate of your loan will not change over the period you are paying off you loan.

    A calendar with an exclamation mark showing late payment
    Late Fee

    If you miss a payment the lender will charge you for being late, this is known as a late fee.

    A printed document with a crest showing a Principle
    Principle

    The Principle amount the borrower owes the lender, not including any interest or fees.

    A tag with a dollar symbol highlighting Prime Rate
    Prime Rate

    This is the Interest Rate used by banks for borrowers with good credit scores.

    A and holding a pile of green cash
    Secured Loan

    A Secured Loan is when you put collateral such as your house or car up against the amount you're borrowing.

    A hand holding cash with an unlocked padlock
    Unsecured Personal Loan

    An Unsecured Personal Loan is when you have a loan based soley on your creditworthliness without using collateral.

    Two hands holding an changing interest rate
    Variable Rate

    A Variable Rate is when the interest rate of you loan will change with inflation. Sometimes this will lower your interest rate, but other times it will increase.

    a credit card with gold coins
    AAA Credit

    Having an AAA Credit Rating is the highest rating you can have.

    A small bridge
    Bridge Loan

    A Bridge Loan is a short term loand that can last from 2 weeks up to 3 years dependant on lender.

    A calendar and tools to show an Installment Loan
    Installment Loan

    An Installment Loan is a loan that is paid back bi-weekly or monthly over the period in which the loan is borrowed for.

    A graduation cap and price tag
    Federal Student Loan

    If you obtain a Federal Student Loan to pay your way through College ten you loan is held with the U.S. Department of Education.

    A graph with a magnifying glass
    Financial Aid

    Financial Aid is funding available to post-secondary education students in America.

    A grey bank building with a green dollar symbol inside
    Guarantor

    A Guarantor co-signs on a loan stating the borrower is able to make the payments, but if they miss any or default the Guarantor will have to pay.

    Homes on scales balanced with money
    Home Equity Loans

    Home Equity Loans is where you borrow the equity from your property and pay it back with interest and fees over an agreed time period with the lender.

    London Inter Bank Offered Rate
    LIBOR

    LIBOR is the London Inter-Bank Offered Rate which is the benchmarker for

    Gold coins being fed into a larger doller weight
    Debt Consolidation

    Debt Consolidation is when you take out one loans to pay off all others. This leads to one monthyl payment, usually with a lower interest rate.

    FAQs

    What is a small business loan?

    This refers to the different types of financial credit services advanced to small businesses by a lender. They are characterized by such factors as above average interest rates and shorter repayment periods when compared to bank loans.

    How do I qualify for a small business loan?

    Various loan service providers have different considerations that borrowers must fulfill before qualifying for credit services. The most common include having an operational business for a specific number of months. This business must also have reported a specific amount in revenues for a few months, mostly 6 or 12, and enough business assets to be used as collateral.

    Do I need a good credit score to acquire a loan for my small business?

    No, most small business loan lenders on this list will approve your small business loan for enterprises whose administrators have a personal credit score as low as 500. Some like Kabbage and FundBox won’t even consider checking the credit score rate or use it to determine your creditworthiness.

    Can I get a small business loan to fund my startup?

    Yes, the fact that most lenders don’t have to be impressed by your credit score to advance your loans means that virtually every business owner has access to small business funding. Most of these lenders, however, won’t advance credit to a business that has been in operation for less than six months.

    What if I default on the small business loan?

    While most of these lenders are willing to advance cash of up to $5 million, as in the case of Lendio, they still appreciate the fact that you are a high-risk loanee given the fragility of most small businesses and your poor credit scores. They will therefore almost always demand collateral for the loan in the form both business and founder’s assets. If things are starting to go south and you are anticipating that the default is imminent, I would advise reviewing all your possibilities in terms of Consolidating Debt or simply refinancing it.

    What is the small business loan grace period before I start paying back?

    You pretty much have to start repaying the loan as soon as you have it with minimal to no grace period. If it has a monthly repayment plan, you have to start repaying the loan within the month and if weekly, you start repayments during the same week. Any delays in submitting payments even at this stage will attract late payment penalties.

    How much can I borrow as a small business loan?

    Small business loan providers are free to express their discretion when it comes to determining the minimum and maximum loan limits for the different loans. On our list of the best small business loan providers, Kabbage holds the fort when it comes to lenders with the lowest minimum limit that is currently set at $1,000 while Lendio has the highest upper limit, standing at $5 million.

    How long will the small business application take?

    Most small business loan providers take pride in conducting some of the fastest loan application reviews. And even faster loan approvals. Kabbage, for instance, promises to review your loan application in under three minutes and if approved grant you access to your funds in less than 24 hours. Loans applied through such Peer to peer sites like Funding Circle or loan marketplaces like Lendio may, however, take up to five days as different lenders evaluate the offer and place their bids.

    Types of Loan – A-Z Directory

    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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    Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.

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