Starting a small business can be challenging and exciting, but obtaining funding to scale up operations is often a significant hurdle. Fortunately, numerous banks and financial institutions offer small business loans to help entrepreneurs achieve their dreams. This article will review the Best banks for small business loans and provide valuable insights into what they offer.
Table of Contents
Small businesses are an integral part of the US economy, accounting for more than 99% of all businesses. Despite their importance, they often need help with funding their operations. This is where banks offer small business loans to help them grow and expand. However, not all banks are created equal, and finding the best one suits your needs.
Best Banks for Small Business Loans
Here are the ten best banks for small business loans:
|Lender||Best for||Loan Amounts||Interest Rates||Loan Terms|
|Bank of America||Startup loans||$10,000-$5 million or more||As low as 5.25%||Up to 15 years|
|Wells Fargo||SBA Loans||$5,000 to $1 million||As low as prime plus 1.75%||Up to 25 years|
|Chase Bank||Small loans||$5,000-$5 million||Undisclosed||Up to 25 years|
|Capital One||Business loans||up to $5 million||11.49%||up to 20 years|
|U.S. Bank||Easy application||Up to $10 million||As low as 5.99%||Up to 25 years|
|PNC||Fast approval||$100,000-$3 million||5.99%||6 to 60 months|
|Citibank||Term Loans||$5,000 to $5 million||10.75% +||1 to 5 years|
|Live Oak||SBA loans||$150,000-$15 million||As low as 5.50%||up to 15 years|
|First Internet||Best digital-only bank||$100,000 to $25 million||As low as 4.75%||Up to 25 years|
Bank of America
Bank of America is one of the most well-known financial institutions in the United States. It offers a range of lending products designed explicitly for small businesses. These include business loans, lines of credit, and equipment financing. Bank of America has a solid online presence and offers an easy application process for small business owners.
Wells Fargo is another leading financial institution that offers a variety of small business loans. Their loans are available for various purposes, including expansion, inventory purchase, and equipment financing. Wells Fargo’s user-friendly website allows small business owners to apply online and provides access to other valuable resources, such as financial planning tools.
Chase is a top-rated bank for small business loans known for its competitive interest rates and flexible loan terms. Small business owners can access various loan products, including lines of credit, term loans, and SBA loans. Chase also offers a mobile app that allows users to manage their accounts and track their finances.
Capital One is a top-rated bank for small business loans and offers a variety of lending products to help small business owners achieve their goals. These include lines of credit, term loans, and SBA loans. Capital One has a user-friendly website that allows small business owners to apply online and provides access to other valuable resources such as financial planning tools and business credit cards.
US Bank is a well-respected financial institution that offers a range of small business loans, including term loans, lines of credit, and SBA loans. They offer competitive rates and terms, and their online application process is straightforward. US Bank also provides a wealth of educational resources for small business owners, including business planning tools and financial calculators.
Citibank may be better known among entrepreneurs for its small-business credit cards. But the bank also offers business loans — though it has fewer products than other lenders. Citibank’s term loan ranges from $5,000 to $5 million. Interest rates are fixed, terms last up to seven years, and loans require a personal guarantee. Citi doesn’t offer an equipment loan, but term loans can be used.
Business lines of credit are another option for Citibank borrowers, with two lines of credit available, ranging from $10,000 to $5 million. Both lines come with variable interest rates and revolving terms and require a personal guarantee. Citibank may be a good fit for small business owners who want a simple loan process and fewer product options.
PNC’s business loans are best for more mature businesses. You generally have been in business for at least three years to qualify, which is longer than other banks may require. PNC offers $20,000 to $100,000 for unsecured term loans and $100,001 to $3 million for loans secured by collateral. Unsecured loans come with a fixed interest rate and terms of up to five years, whereas rates on secured loans can be fixed or variable, and times can last up to seven years.
Business lines of credit are also available at PNC, with unsecured options ranging from $20,000 to $100,000 and secured options from $100,001 to $3 million. Both have variable interest rates and revolving terms. The unsecured line has an annual fee of $175, while the secured line charges 0.25% of the committed line amount.
Live Oak is a unique bank that specializes in small business lending. They offer term loans, lines of credit, and equipment financing, focusing on businesses in specific industries, such as agriculture and healthcare. Live Oak is known for its fast funding and exceptional customer service.
First Internet is an online bank that offers various loan options for small businesses, including term loans, lines of credit, and SBA loans. They also provide online tools and resources to help small business owners manage their finances more effectively. First Internet is known for its competitive interest rates and streamlined application process.
The first internet for small business loans offers several benefits. First, it provides an efficient way for small businesses to obtain loans. Small businesses can apply for loans online and receive a decision quickly. This eliminates the need for small businesses to undergo lengthy and complex procedures to obtain loans.
Importance of Small Business Loans
Small business loans can help businesses, from covering startup costs to expanding operations. They can be used for everything from purchasing equipment to hiring employees. Access to funding is necessary for many small businesses to get off the ground or grow to their full potential.
Criteria for Selecting the Best Bank for Small Business Loans
When selecting a bank for small business loans, several factors must be considered. These include:
- Interest rates: You want to find a competitive bank that won’t strain your finances.
- Loan terms: The loan terms should be flexible and tailored to your needs.
- Loan Amount: The loan amount should be sufficient to meet your business needs without overburdening you with excessive debt.
- Repayment options: You should have multiple options for repaying the loan, including automatic payments and online bill pay.
- Credit Score: Your credit score significantly determines the loan amount, interest rate, and loan terms you qualify for. It would be best to strive to maintain a good credit score to secure the best possible loan.
- Customer service: Good customer service is crucial, as you want to contact the bank quickly and easily if you have any questions or concerns.
- Eligibility Requirements: Each bank has its eligibility requirements, and you should ensure that you meet these requirements before applying for a loan.
- Reputation: Look for a bank with a good reputation for working with small businesses.
How to Get a Small Business Loan from a Bank
As a small business owner, you may find yourself in need of financing to grow your business. Several options are available, such as crowdfunding and alternative lenders, applying for a small business loan from a bank can be a smart choice for several reasons. Banks offer competitive interest rates and favorable repayment terms, making it easier for businesses to manage their cash flow.
Determine Your Loan Needs
The first step in securing a small business loan from a bank is to determine your loan needs. Consider how much money you need to borrow, what the funds will be used for, and how long you will need the funds. It’s important to be realistic about your loan needs and not to borrow more than you can afford to repay. This can lead to cash flow issues and harm your credit score.
Evaluate Different Loan Products
Banks offer several business loans, including term loans, lines of credit, SBA loans, and commercial real estate loans. Each loan product has its benefits and drawbacks. For example, a term loan is best for one-time investments, while a line of credit can help manage cash flow. Take the time to evaluate each loan product and determine which one best meets your business needs.
Research Potential Lenders
Once you’ve determined your loan needs and evaluated different loan products, it’s time to research potential lenders. Start with your current bank or credit union, as they may be more willing to lend to you based on your established relationship: research at least three banks and their business loan options. Ask about loan amounts, terms, interest rates, and fees to determine which lender is ideal for your company’s funding needs.
Determine Your Eligibility
Most lenders have a minimum credit score, time in business, and annual revenue requirements for their loans. You’ll also need to operate in a stable industry and demonstrate a track record of success for at least two years to qualify for a small business loan from a bank. And if you’re seeking a secured loan, you’ll also need some form of collateral to get funding. Lending criteria vary, and these requirements may not be made public on the bank’s website. Speak to a bank employee to help determine if you qualify for funding.
Prepare Your Loan Application
Once you’ve determined which lender you want to work with, it’s time to prepare your loan application. Gather any information and documents the lender will need to avoid hiccups or delays during the application process. This can include business and personal tax returns, company bank statements, financial statements, and commercial lease agreements. Contact the lender before applying to determine if you’ll need to provide anything that needs to be listed here.
Submit Your Loan Application
Complete the loan application and review it for accuracy to avoid being denied. The lender will typically compare your documents to the information you entered in the application to confirm no discrepancies. If there are discrepancies, your application may be denied. Be honest and accurate when completing your loan application.
Read the Fine Print
If approved for funding, review the loan documents and ask any questions before signing on the dotted line. Once the agreement is signed and the final approval is issued, the loan will close, and the lender will disburse funds to you.
Alternatives to Bank Business Loans: Exploring Other Funding Options
Bank loans come with strict eligibility requirements, lengthy application processes, and high-interest rates. In addition, you may not qualify for a bank loan due to your credit score, business age, or lack of collateral. Fortunately, there are alternatives to bank loans that can help you obtain the funding you need.
Crowdfunding is an increasingly popular way for businesses to obtain funding. It involves raising small amounts of money from many people via online platforms such as Kickstarter or Indiegogo. In exchange for their contribution, backers receive a reward or equity in the company.
Angel investors are wealthy individuals who fund startups and small businesses in exchange for equity in the company. They often provide more funding than crowdfunding campaigns and can offer valuable guidance and connections.
Venture capitalists are similar to angel investors but typically invest larger money. They look for high-growth startups that have the potential to become profitable in a short amount of time. They receive a percentage of the company’s equity in exchange for their investment.
Peer-to-peer lending involves borrowing money directly from individuals through online platforms such as LendingClub or Prosper. The loans are typically unsecured and have fixed interest rates. This can be a good option for businesses not qualifying for bank loans.
Factoring involves selling your accounts receivable to a third-party company at a discount. The factoring company then collects the money owed and pays you the remaining balance, minus their fee. This can be a good option if your business needs cash quickly.
Grants are non-repayable funds that the government or private organizations provide. They can be used for various purposes, such as research and development or job creation. However, they are highly competitive and often have strict eligibility requirements.
Microloans are small loans that are typically less than $50,000. They are often provided by community organizations or nonprofits and can be a good option for startups or businesses in underserved communities.
Equipment financing involves obtaining a loan to purchase equipment for your business. The equipment serves as collateral for the loan, so it may be easier to qualify for than other types of loans.
Invoice financing is similar to factoring but instead of selling your accounts receivable, you borrow money against them. This can be a good option if you have outstanding invoices and need cash quickly.
Business Credit Cards
Business credit cards can be a good option for small purchases or short-term financing needs. They often come with rewards programs and may offer a 0% introductory interest rate.
If you have good credit, you may be able to obtain a personal loan to fund your business. This can be a good option if you need a small amount of funding and don’t want to go through a lengthy application process.
Friends and Family
If your friends or family memqbers are willing to invest in your business this can be a good option. However, setting clear expectations and having a written agreement is important to avoid misunderstandings or disagreements.
Small Business Administration (SBA) Loans
The Small Business Administration offers a variety of loan programs for small businesses, including microloans, 7(a) loans, and disaster loans. These loans often have lower interest rates and more flexible eligibility requirements than traditional bank loans.
Many online lenders offer business loans with fast application processes and flexible repayment terms. However, these loans often have higher interest rates and fees than traditional bank loans.
In conclusion, at walknow.org, we understand the importance of securing financing for small businesses. These top picks for the best banks offering small business loans have a proven track record of providing the funding and support small businesses need to grow and succeed. We hope this article has been helpful in your search for financing, and we wish you the best of luck in pursuing your goals.
Don’t miss out on the best banks for small business loans! Our expertly researched list reveals the top lenders with unbeatable rates and easy approval. Find your perfect match today!