If you currently own your own small business, you are probably acutely aware of how much money you need to stay afloat.
Even businesses that boast huge profit margins may need to access a loan for additional cash flow from time to time.
It’s also a common occurrence for businesses to need additional funds for capital improvements or an expansion.
Fortunately, it’s not that difficult to get a business loan if you have good credit and a solid business plan.
You can even qualify for a business loan if you need capital to start a business that doesn’t even exist yet, although you may wind up with with a higher interest rate and less favorable terms.
Types of Business Loans
Before you apply for a loan, it’s important to understand the types of small business loans available. The most popular loan types you’ll want to consider include:
Peer-to-peer Business Loans
This type of loan is offered through a peer-to-peer lender that uses individual investors for funding instead of a traditional bank.
Peer-to-peer lenders, the largest of which is LendingClub, often offer lower rates to consumers who qualify and high returns to the investors who provide the loans.
Peer-to-peer loan transactions take place online, streamlining the loan application and repayment process, and both borrowers and lenders are verified by the platforms.
Online Business Loans
Business loans offered online are provided through peer-to-peer lenders and online lending companies.
Some online lenders can offer lower rates and fees since they don’t operate out of brick-and-mortar buildings and have lower overhead as a result.
You can also access lines of credit from online lending services, which could be ideal if you need some flexibility for a short-term, smaller loan.
Banks and Credit Unions
Also remember that you can take out a business loan from a traditional bank or credit union. These loans may be more difficult to qualify for as banks can only offer so many business loans and tend to have more strenuous qualification requirements.
But one of the benefits of a traditional loan from a bank or a credit union is the relationship aspect. You might not have a problem getting approved if you have an existing relationship with a bank already.
Best Small Business Loans
For the purpose of this guide, we profiled an array of direct lenders and peer-to-peer lenders that offer small business loans online.
We looked for business loans that offer low interest rates and fees, as well as ones with reasonable criteria to qualify.
Our top business lenders include:
LendingClub: Best All Around
LendingClub allows consumers to borrow up to $30,000 to fund their small business, and you can get your money in as little as five business days. Repayment terms are available between 1 and 5 years, and these loans come with fixed monthly payments and no prepayment penalties.
While your interest rate will depend on your creditworthiness and other factors, LendingClub business loans come with APRs as low as 5.99%. You can easily apply online and get multiple quotes in a matter of minutes.
- Borrow up to $30,000 and repay for up to five years
- Your APR may be as low as 5.99% depending on your creditworthiness
- Apply online and from the comfort of your home
- The best APRs and loan terms only go to those with good or excellent credit
- While $30,000 is a lot of money, it may not be enough for everyone
- These loans come with an origination fee that varies from borrower to borrower
- You need to be in business for at least ten years and have at least $50,000 in annual sales to qualify
- You also need to own at least 20% of your business and have good credit
Prosper: Best for Businesses with Excellent Credit
Prosper is yet another peer-to-peer lender you can consider for your business loan. The big difference is that, when you borrow from Prosper to fund your business, you are taking out the loan as an individual borrower.
Prosper offers interest rates and loan terms that depend on your creditworthiness and other factors.
Loan amounts are offered between $2,000 and $40,000, and you can repay your loan for 3 or 5 years. Typical APRs range from 6.95% to 35.99%, so your rate could be fairly low or radically high depending on your financial qualifications.
To qualify for a business loan from Prosper, you typically need a credit score of 640 or higher. However, the best rates and terms go to those with scores over 710.
- Rates can be very low for people with excellent credit
- You can borrow up to $40,000 and repay it for up to five years
- Apply online and get an answer in minutes
- These loans come with an origination fee of up to 5% of the loan amount
- You may not qualify for an affordable rate if your credit isn’t very good
- Loan amounts aren’t as high as you get with some other lenders
OnDeck: Best Variety of Lending Options
OnDeck is a direct lender that offers business loans for a variety of purposes. The company may not be that well known, but they do boast an A+ rating with the Better Business Bureau. They have also funded over $10 billion in business loans so far, so they know what they’re doing.
OnDeck lets you borrow up to $500 for your business with rates as low as 9.99% APR. You can also apply for a line of credit for up to $100,000 with APRs as low as 13.99%.
OnDeck business loans are also easy to research and apply for online, although your loan amount, APR, and repayment timeline will vary depending on your qualifications.
- Borrow up to $500,000 to fund your business goals
- This company also offers a line of credit, which can be a better option if you’re unsure how much funding you need
- Rates can be as low as 9.99%
- Some business lenders offer significantly lower interest rates to consumers with great credit
- You need a minimum credit score of 500 and $100,000 in annual sales to qualify
- You’ll have to pay an origination fee of 2.5%
Kabbage: Best for Big Loans
Kabbage is another direct lender that offers business loans to qualified entrepreneurs and business owners. This lender allows you to borrow up to $250,000 and repay it over 6 or 12 months.
They also feature an easy online application process that can yield an affirmative answer in less than ten minutes.
To apply for a business loan from Kabbage, you’ll need to access their online application page and enter information ranging from annual revenue to your business details.
From there, Kabbage will analyze your business performance and decide if you are eligible for a loan.
Generally speaking, you need a credit score of 560 or higher to qualify. You also need to have been in business for at least one year and have at least $50,000 in annual revenue.
- You can borrow up to $250,000, which is a lot more than some lenders offer
- Apply online from the comfort of your home
- Easier credit requirements than some lenders
- Interest rates run between 24.99% APR to 99% APR, which makes Kabbage less competitive than many other lenders
- With such high interest rates, borrowing from Kabbage is going to be expensive
- You have to pay your loan off quickly, usually in 6 to 12 months
- Origination fees can be up to 10% of your loan amount
FundingCircle: Best for Early Repayment
FundingCircle is a peer-to-peer lender that has chosen to offer loans in the small business space. Not only can you borrow up to $500,000, but rates are as low as 4.99% for borrowers with great credit and ample business income.
You can repay your loan with terms that span from 6 months to 5 years, and you can apply online and get an answer in a matter of minutes.
FundingCircle loans do charge an origination fee between 3.49% and 7.99%, so that’s important to keep in mind. Their highest interest rate is also 27.79%, which is strikingly expensive but not as high as some other options on this list.
If you want to apply for a loan from Funding Circle, you can easily do it on their website. All you have to do is enter your personal information, business information, and your income to get started.
- No prepayment penalties
- Interest rates as low as 4.99% for those who qualify
- Apply online and get an answer the same day
- Their origination fees can work out to up to 7.99% of your loan amount
- Interest rates can be as high as 27.99%
- Minimum loan amount is $25,000, which might be too much for some business owners
The Bottom Line
If you’re in the market for a business loan, it’s crucial to compare your options to find the best deal.
You may find that some lenders work better than others for your needs, but you’ll never know unless you check.
Start searching for business loans today, and don’t give up until you find the ideal business loan to achieve your goals.