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Best Business Loan Companies

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A business loan is financing specifically for entrepreneurs and business owners to aid with business startup costs, expansion fees or cash flow issues. These loans can be used for a wide range of purposes, such as investing in new equipment or inventory, hiring staff or even moving to a larger building.

Getting your business loan from a reputable lender can be the difference between your company’s success and failure. To help, we’ve gathered the top companies, along with loan details for the three most popular on ConsumerAffairs, so you can choose the best business loan company for your needs.

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Compare our top 3 most-popular picks for best business loans

Biz2CreditHeadway CapitalSeek Capital
Primary Biz2Credit Customer Rating
4.3
812 reviews812 reviews		Financial services
Working capital, term loans, commercial real estate loans
Loan amount
$25,000 to $6 million
Terms
12, 18, 24 or 36 months
Time to fund
Primary Headway Capital Customer Rating
4.9
84 reviews84 reviews		Financial services
Business line of credit
Loan amount
Up to $100,000
Terms
12, 18 or 48 months
Time to fund
As soon as one business day
Primary Seek Capital Customer Rating
4.8
310 reviews310 reviews		Financial services
SBA loans, equipment financing, restaurant loans
Loan amount
$5,000 to $500,000
Terms
3 to 25 years
Time to fund
Up to 24 hours
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What is a business loan?

A business loan is money that an entrepreneur, small business or commercial entity borrows from a lender, with an agreement to repay it over a specified period with interest. These loans are typically used to fund major business expenses like starting a new project, expanding operations, purchasing inventory or equipment or managing cash flow.

While similar to a personal loan, business loans are usually for larger amounts, have higher interest rates and require more requirements for approval.

Types of business loans

There are several types of business loans, including the following:

  • SBA loan: Backed by the Small Business Association (SBA), this is a government loan guaranteed to small businesses, including startups, that need additional support and help securing financing.
  • Business line of credit: Gives companies with ongoing financial needs the opportunity to borrow on an as-needed basis.
  • Invoice financing: Allows companies to get immediate cash based on the amounts due from their customers.
  • Equipment leasing: Certain lenders specialize in equipment financing. These lenders may fund leasing or the purchase of business equipment.
  • Merchant cash advance (MCA): A type of financing in which a business receives an upfront sum of cash in exchange for a portion of its future credit and debit card sales.

Business loans can come in either short-term loans that last for a maximum of three years or long-term loans that last between 20 and 30 years.

» MORE: Personal loan for business: what you should know

What are the requirements for a small business loan?

Requirements will vary by lender, the type of loan and how much you will be borrowing. For example, requesting a business line of credit for $50,000 might be easier to obtain than a million-dollar small business loan.

Here are some common factors lenders look at:

  • Personal/business credit score: Lenders typically require a good personal credit score, usually 680 or higher, or an excellent business credit score.
  • Time in business: Many lenders want to see that you have been in business for over a year, but other lenders will require a company to be in business for between two and three years to qualify.
  • Financial documents and revenue: Have your business bank statements and balance sheets ready. You will also need to provide documentation of your business’s annual revenue, profit and any debt you have.
  • Amount and use of funds: Lenders want to know how much you need to borrow and why. Depending on the loan, you may need to specify how you plan to use the funds, such as for working capital, purchasing equipment or buying real estate.

» MORE: How to get a business loan

Pros and cons of business loans

A business loan can give you the funds to take your company to the next level, but it does come with its own unique risks. Consider the following pros and cons of business loans before deciding whether it is right for your business.

Pros

  • Larger borrowing limits: Business loans can come with larger limits than other loan types, allowing for expansion and equipment purchases.
  • Longer terms: Business loans usually offer longer repayment terms, which can make monthly payments more manageable
  • Build business credit: Regularly paying off a business loan can help a business build its credit score, which can be beneficial for future financing.
  • Variety of products: Find financing to meet your unique business needs.

Cons

  • Strict requirements: Business loans often require extensive documentation, and businesses need to meet strict eligibility criteria.
  • Risk of default: If a business fails to repay the loan, it could lead to default and put the company in hot water financially.
  • Not ideal for startups: New businesses or startups may find it challenging to secure a business loan due to a lack of credit history or collateral.
  • Lack of repayment flexibility: Business loans usually have set terms and conditions, and there is little flexibility when it comes to repayment.

How to choose a business loan company

“Securing a loan for your business goes way beyond just locking in an interest rate,” said Joe Camberato, CEO and founder of National Business Capital. “You should make sure that the type of financing you're eyeing fits your business goals like a glove. Don't get swept up in the allure of a business line of credit's flexibility if your plans don't demand that kind of access to capital.”

When considering which business loan company to choose, you must first look at your company’s current financial situation, needs and goals. Any financing you take on should be done to help you grow rather than put you in a sticky situation money-wise.

Weigh the following factors when deciding on a specific business loan or lender.

Fixed or variable interest rate
Whether a loan is for a short time period or for a long one, the interest rate and payment amount remain constant with a fixed-rate loan. In a rising interest rate environment, the borrower risks higher debt payments with a variable-rate loan.
Set maturity date
The maturity date, which is set at the time of the loan, is the date by which the loan must be repaid. Some loans have a set maturity date, while others do not. For example, a line of credit may not have a predetermined maturity date.
Collateral requirement
Many business loans require customers to put up collateral , or property, that is used as security if the borrower defaults on his or her loan payments. If the user defaults on the loan, the bank can seize the property and sell it to recover its loss. For example, an equipment loan usually uses the piece of equipment as collateral.
Repayment schedule
Most business loans are repaid in installments until the loan, interest charges and financing fees are completely paid off. Repayment can vary and require either daily, bimonthly or monthly payments. You should also know what a lender’s policy on refinancing is in case the borrower encounters financial hardships.
Limitations on additional debt
Some lenders require that business borrowers agree not to take out additional loans for greater than a specific amount. This protects the debtor from securing more debt than he or she can realistically pay back.
Flexible terms
Not all business loans are alike. Many lenders offer flexible terms, depending on the debtor’s credit rating, the strength of the business and other factors. Borrowers can choose from several different payment plans with varying interest rates and loan lengths with a flexible term loan.

Business loan alternatives

If you decide that a business loan is not the right step for your company, or if you aren’t in the position to qualify for a business loan, there are other options available.

  • Business credit cards: Business credit cards can be used for everyday expenses and often come with perks like rewards or cash back. With a business credit card, you will be limited to how much you can spend, and some cards require full repayment each month.
  • Peer-to-peer (P2P) lending: In P2P lending, businesses can borrow directly from individual investors, often through online platforms. The number of legitimate P2P lenders is small, but Funding Circle is available for small- and medium-sized businesses that have been around for over two years.
  • Crowdfunding: Businesses can raise money from a large number of people, usually through an online platform. Keep in mind that crowdfunding sites do take a portion of profits and might hold you to specific requirements.
  • Personal loans: If your credit score is very good or excellent, a larger personal loan could be helpful for funding your business expenses.

FAQ

What is the average loan amount for a small business?

The average loan amount depends on the lender you’re working with and how much you qualify for. The 7(a) loan program offers federally guaranteed loan amounts of up to $5 million, depending on what the funds are for and the kind of enterprise you operate. These loans are generally low-interest and have flexible terms.

How do you qualify for a small business loan?

The U.S. Small Business Administration states that the basic criteria to apply for a small business loan includes:

  • Being registered as a for-profit business
  • Physically located in the U.S. or its territories
  • Having invested equity
  • Exhausted all other financing options

Every lender has specific criteria for small business loans, so check their website to find out if you meet their eligibility requirements.

Can you get a small business loan for an online business?

The basic eligibility requirements for a physical business are the same for an online business:

  • Registered as a for-profit business
  • Located in the U.S. or its territories
  • Have invested equity
  • Exhausted all other financing options
What credit score do I need to get a business loan?

Every lender has a different minimum credit score requirement. Having a good credit score (700 or higher) can boost your loan application and get you access to higher loan amounts.

If you have a less than perfect credit score, you might be able to get a business loan, but interest rates and fees tend to be higher for borrowers with poor credit.

Is it a good idea to get a loan to start a business?

Business loans give you the funds you need to get your business up and running. If you need money to cover startup costs and meet the eligibility requirements, a business loan could be the right option.

Which business activities would necessitate short term financing?

Short-term financing usually has a term that lasts less than a year. It’s a viable option for a few different reasons:

  • Seasonality. A loan can help your business make it through the off-season
  • Cover short-term costs. If you’re waiting for customers to pay their bills but need to pay your employees, a business loan is a practical option
  • Even out cash flow, especially if you have a cyclical business

Not sure how to choose?

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    Disclaimer

    Information in this guide is general in nature and is intended for informational purposes only; it is not legal, health, investment or tax advice. ConsumerAffairs.com makes no representation as to the accuracy of the information provided and assumes no liability for any damages or loss arising from its use.

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