Ratings Methodology for Small-Business Loans

NerdWallet’s overall star ratings for small-business loans are weighted averages of ratings across six major categories:

• Cost.

• Transparency.

• Underwriting and loan flexibility.

• Credit.

• Application experience.

• Customer service.

We analyze and rate small-business loans based on six categories and 18 subcategories. Here’s how we weigh each category.

Cost (33%)

Small-business lenders that don’t charge an origination fee or prepayment penalty rank higher in this category.

Transparency (19%)

We review lenders’ websites and practices to determine if it’s possible for borrowers to reasonably assess whether the business loan is the right option for them, and how easy it would be to do so. This includes whether information like the loan’s rate, fees and terms are easily accessible. It also includes transparency in terms of qualification requirements, such as minimum personal credit score, time in business and annual revenue.

Underwriting and loan flexibility (15%)

We assess the rigor of lenders’ underwriting practices, including whether they require physical collateral and whether they take out a Uniform Commercial Code (UCC) lien on funded borrowers. We also consider whether the lender offers multiple payment options (e.g. daily, weekly, monthly) and prepayment discounts.

Credit (11%)

Small-business lenders earn high marks in this category if they report timely payments to the commercial credit bureaus. This reporting allows borrowers to establish business credit, which can help them qualify for better rates and terms on future loans.

Application experience (11%)

We consider the overall experience of the small-business owner trying to get a loan, including the ways in which they can apply (e.g. online, over the phone, in person) and the funding speed.

Customer service (11%)

We reward lenders that offer multiple customer support methods (phone, email and live chat), as well as those that provide access to an online dashboard for loan management.

Discretionary (not weighted)

A lender’s rating may be lowered if it has faced governmental regulatory action in the past five years or been accused of predatory business lending practices by a reputable source. A lender that offers a unique, small-business-friendly feature (outside of the scored categories above) that few others offer may earn a higher score.

Data collection and review process

NerdWallet’s review process evaluates and rates small-business loans from reputable banks, reputable online lenders and more. We analyze over 800 data points across lenders using a combination of company websites, public documents, company representatives and by going through lenders’ initial application process ourselves.

Information is gathered on a regular basis and reviewed by our editorial team for consistency and accuracy. Final star ratings are presented on a scale of one to five stars, where a one-star score represents “poor” and a five-star score represents “excellent.”

The review team

The writers and editors behind our business loan reviews are small-business specialists who have had their work featured by The Associated Press, The Washington Post, Entrepreneur, MarketWatch and many other publications. Each writer and editor follows NerdWallet’s strict guidelines for editorial integrity.