Discover Your Options: Small Business Loans
When you start your business, cash flow and funding options might be scarce. All the same, a company’s infancy isn’t the only time it may require a little cash infusion to stay afloat.
Regardless, it’s entirely typical for small businesses to need some help with financing options. Whether it’s through merchant cash advances, business lines of credit, business credit cards, or an SBA loan, there’s plenty to choose from.
There are multiple reasons to apply for a small business loan. Commonly, it’s to hire more employees, scale-up, open new locations, or to refinance. Before filling out an application and settling on something, small business owners must figure out what’s available to them, depending on their given situation.
Get the Best Rates for a Small Business Loan
The Small Business Administration (SBA) should be the first option businesses explore when procuring funding.
This organization is an independent agency of the federal government, meant to protect small businesses’ interests throughout the US.
Here are the interest rates for the available loans with the SBA:
- SBA 7(a) loans: 5.50% – 9.75%
- SBA CDC/504 loans: 2.28% – 2.83%
- SBA Coronavirus disaster loans: 3.5% (for-profit businesses)
- Maximum rates for other SBA disaster loans: 4.00%
You can also receive a line of credit, equipment loan, or term loans with a traditional banking institution—at rates similar to the SBA.
Alternatively, online personal loans can range anywhere from 7–100%. Whereas a merchant cash advance can have an APR of 20% to 250%.
Benefits of a Small Business Loan
When working with the SBA, here are your distinct advantages when taking out a small business loan:
- Affordable annual percentage rates (APR)
- Readily available capital
- Favorable repayment terms
- Can be used flexibly
- You’ll have access to SBA resources
Generally, even if you go outside the SBA to receive business loans, the terms and conditions are relatively favorable.
More specifically, bank term loans are incredibly affordable. This is primarily due to how hard it is for new businesses to get approved. Since they’re brand new, these companies lack any existing credit.
Small Business Loans FAQ
Below, you’ll see some insightful responses we’ve given to questions we’re frequently asked.
What is a Small Business Loan?
A small business loan is explicitly meant to provide funds allocated toward various company facets (eg, equipment, capital, salaries).
In the US, these are offered by the SBA. The loans are specifically focused on developing small businesses across the nation.
Provided your personal finances are in good shape, and your credit is excellent, you’ll likely qualify with the SBA. Their terms are between 10 and 25 years, giving your business plenty of time to square up.
You can also procure these loans through the bank and online lenders. The lower your credit and the poorer your credit history, the less favorable will be your terms.
How do I Get A Small Business Loan?
You’ll get a small business loan from the bank or SBA with a high business credit score and good personal credit. If both those scores are in line, it’s a matter of visiting a website and following their prompts and filling out an application.
Other than your credit score, you’d likely need to provide your potential lender with the following:
- Business age
- Annual revenue
- Personal debt-to-credit ratio
- Net operating income
- You’ll maybe need collateral
- A plan for how you’ll use the money
You can also visit online lenders to procure the money, but be ready for drastically higher APRs—especially if your credit is poor.
Can you get a Small Business Loan with bad credit?
If your FICO score is low—or your business’s credit history has a hiccup—both banks and the SBA won’t lend to you.
However, you can go online and look for less traditional institutions—where you’ll be charged a sizable rate.
Consider, provided your business has a low credit score, whether there’s an asset you have as collateral to procure a secured loan. This way, some lenders will look past your bad credit enough to let you borrow at an affordable rate.
How much is a Small Business Loan?
The SBA offers loans starting at $500, going all the way to $5.5 million. But you’ll notice that the administration places restrictions on how you allocate the funds. Alternatively, many banks tend to veer into the mid-six figures, even exceeding half a million dollars. Provided you’re going through online lenders, you can also procure a small business loan for $500,000.
