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Choosing the best small-business loan

Funding options for qualified business owners include bank loans, SBA loans, term loans, business lines of credit and equipment financing. You typically need a year or more of business history and revenue to qualify for financing. Startups operating for less than a year can consider other financing options.

The best loan for your small business will depend on a variety of factors, such as:

Why you need funding.
How fast you need access to capital.
How much capital you need.
Total cost of debt.

Learn more about some of the most popular types of small-business loans below.

Types of small-business loans

Loan terms, interest rates and qualifications vary by lender, but here are the features you can generally expect to find with the different types of small-business loans.

Bank loan

Banks can offer a variety of types of small-business financing, including term loans, SBA loans and lines of credit. To qualify for a bank loan, you’ll typically need a strong personal credit score (starting in the 700s), several years in business and a solid track record of business finances, such as strong cash flow. In some cases, banks will require collateral.

Loan amounts: $10,000 to $1 million.
Approximate APR range: 3.19% to 6.78%.
Best for: Working capital, expanding your business.

SBA loan

The government-guaranteed SBA loan program works with banks to offer low interest rates and long-term repayment. But the process is time-consuming, and the requirements are strict. Only those with good personal credit (690 or higher, although some SBA lenders may have lower score requirements), strong business finances and the flexibility to wait for funding should apply.

Loan amounts: $30,000 to $5 million.
Approximate APR range: 7.75% to 10.25%.
Best for: Large one-time and longer-term investments, purchasing real estate or equipment, buying existing businesses and refinancing debt.

Business term loan

Online lenders offer term loans of up to $500,000. For a short-term loan, the repayment period typically ranges from three to 18 months, while a repayment can extend up to 10 years or longer in some cases. Business owners can also find financing that can be used for specific items, like long-term loan, equipment, or inventory.

Loan amounts: Up to $500,000.
Approximate APR range: 9% to 99%.
Best for: Large one-time investments.

Business line of credit

A business line of credit provides access to flexible cash. Similar to a credit card, lenders give you access to a specific amount of credit (say, $100,000), but you don’t make payments or get charged interest until you tap into the funds.

Credit line range: $1,000 to $250,000.
Approximate APR range: 9% to 99%.
Best for: Managing cash flow, handling unexpected expenses and financing short-term business needs.

Equipment financing

Equipment financing is a form of asset-based financing where the equipment itself serves as collateral for the loan. You can get an equipment loan equal to up to 100% of the value of the equipment you’re looking to purchase — depending on the lender and your business’s qualifications — which you then pay back over time, with interest.

Some lenders may also pay for soft costs, such as installation, delivery, warranties, assembly and other similar expenses associated with getting your equipment up and running. Although certain lenders will finance these costs on top of the full value of your equipment, others may fund only a percentage of the cost of the equipment — 80%, for example — and devote the remainder of the loan (20%) to your soft costs.

Credit line range: Up to 100% of the value of the equipment, plus soft costs
Approximate APR range: 4% to 30%.
Best for: Purchasing machinery and equipment.

Compare financing and apply

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

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Frequently asked questions

Fundera by NerdWallet works with more than 25 lending partners that offer a variety of products, so the time to fund can vary. Our application can be completed in just a few minutes. Some lenders may be able to approve and fund applications within one business day — however, others may have longer funding times.

With most small-business loans, you borrow capital from a lender and repay it, plus interest, over a predetermined period. Maximum loan amounts, interest rates and repayment terms will vary based on the type of business loan, the lender you’re working with and your business’s qualifications.

If you haven’t gotten a business loan before, you will need strong personal credit, solid business financials, at least a year in business and in some cases collateral to qualify for a small-business loan at a bank. Online lenders require less stringent requirements. If you’re just starting out, consider alternatives such as business credit cards. See our list of startup funding options.

Some online and nonprofit lenders offer business loans for bad credit (personal credit scores of below 630). These loans typically have higher interest rates than other business lending options, however.

Startups less than a year old typically won’t qualify for traditional small-business loans. The SBA does have two loan programs that cater to startups: the SBA microloan and SBA Community Advantage loan programs. Consider alternative financing like business credit cards, personal loans or grants if you can’t secure a small-business loan for your startup.