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Finding the Best Small Business Loans for You

Statistics reveal that only one out of five small businesses have their loans approved in a big bank. To help you get the financing you need, we will review the top online lenders where you can get the best business loans available.

Here, we will cover the four major business loans that you will find the most useful: term loans, equipment financing, line of credit, and invoice factoring. All these will be discussed in detail, along with the reviews of the different online lenders featured.

There will be instances that a lender will be mentioned more than once. Thus, for the sake of clarity, all online lenders will be assessed in different contexts, depending on what type of loan they are recommended.

Term Loans

A term loan is an umbrella term for loans having a specific repayment schedule, which most of the time is monthly or quarterly. The interest rate can be fixed or variable, and the particular amount depends on a lot of factors such as your employment status and credit history.

For the maturity, the term can be as soon as 3 months or a long as thirty days. Equipment financing and SBA loans fall under term loan. However, for our purposes, we would treat this as separate from its two subcategories. Some lenders find it easier to deal with just one creditor every time a funding need arises.

This part would detail on where is the best place to get a business loan, if you are looking for a jack-of-all-trades of sorts.

Where are the best places to get a term loan?

Lending Club

 

Pros

  1. They have generally lower interest rates than those offered by the bank, allowing you access to the best small business loans out there.
  2. Only requiring a minimum credit score of 600, even those with relatively bad credit history can get approved for a term loan of their choice.
  3. With only little mediation on the part of Lending Club, it works like a laissez-faire market where multiple potential investors present their loan offers, and you get the one most appealing to you.

Cons

  1. In the case that most of the lenders decide to avoid risk, you may not receive any loan offers at all.
  2. In the application process, you will have to reveal sensitive information such as your social security number. Thus, if the website is hacked, the data you have provided may be compromised.
  3. They charge an origination fee ranging from 1% to 5% of the total loan amount.

Verdict

For website that only mediate the transaction, no matter if it is in freelancing or in loans, an origination fee is very normal. Lending Club offers a great opportunity for people, even those with bad credit rating, to take out a loan even at higher interest rates. It serves a matchmaking website of sorts, finding both ends of the transaction the perfect pair for them in terms of risk appetite.

Credibility Capital

 

Pros

  1. Borrowers with strong credit rating who just falls short of traditional bank financing will find Credibility Capital to be a great place to take out a loan.
  2. For an annual percentage rate (APR) of as low as 10%, you can loan as much as $350,000 with a maturity of one to three years, making it perfect for intermediate-term finance solutions.
  3. They do not charge any prepayment fee, allowing you to settle the loan balance with smaller incremental payments.

Cons

  1. While they are relatively lenient with their credit rating requirements, potential borrowers would only qualify if their credit rating is below 650.
  2. The life of the loan does not exceed three years so you will have to explore other lenders if you are looking for a long-term loan.
  3. All business loans obtained from Credibility Capital are secured as they require a UCC-1 filing, putting your business assets at risk. If you own more than 25% company as well, you will have to file a personal guarantee which will expose your estate to possible repossession.

Verdict

Credibility Capital offers one of the best interest rates for business loans. However, it is highly recommended that you only take out a loan from them if you are sure you can repay the loan. Else, you can lose your business and have your assets liquidated. Other than that, their customer representatives are knowledgeable and helpful, guiding you in every step of the way.

Street Shares

 

 

Pros

  1. With excellent credit, you can best the best business line of credit interest rate they offer at only 9% APR.
  2. Businesses with strong cash flow are viewed favorably by Street Shares, with this being their basic determinant in granting loans.
  3. For contract financing, one of their term loan products, you can borrow as much as 90% of the invoice or $500,000, whichever is lower.

Cons

  1. Even with the business line of credit, the amount they are willing to borrow is small, maxing at only $100,000 compared to at least $300,000 that other alternatives offer.
  2. The maximum amount that you can loan is based on your annual income. Particularly, only 20% of your or of your business’ annual income can be borrowed.
  3. As of January 2017, their area of service is limited. Businesses in the following states cannot take out a loan from them: Vermont, Rhode Island, Wyoming, North Dakota, South Dakota, Nevada, and Alaska. Sole proprietorships in New Jersey, New York, Washington, D.C., Delaware, Minnesota, Nebraska, and Wisconsin would not be able to avail of their loan products as well.

Verdict

Despite their limited reach, Street Shares still has the potential to be one of the best of business loans for startups mainly because of how they assess the risk associated with a business. Although the amount you can borrow is limited, the APR they offer remains very attractive to the right borrowers.

On Deck

 

Pros

  1. They have a very easy and fast application process that one has to follow to avail of their loan products.
  2. They do not charge origination fees and draw fees, something considered a common practice with online lenders.
  3. For short-term loans, they charge a factor rate ranging from x1.003 to x1.04 monthly. Converted this can be as low as 0.3% or as high as 4% per month.

Cons

  1. Unless your business plans to withdraw at least $5,000 from the approved term loan within the first five days after approval, you will be charged a maintenance fee.
  2. If your business is operating on your home address, you will not be able to take out a loan with them.
  3. For some of their services, On Deck does not loan to businesses with revenues lower than $100,000 a year.

Verdict

For businesses with good credit rating, they will find quick funding and low interest rates with On Deck. Due to poor credit, they may not be able to give the best small business loans to everyone. However, they do make an effort to remain an attractive option to their customers. Not only do their factor rates do no compound, they do not charge origination fees and draft fees as well.

Equipment Financing

Equipment financing is a business loan used to fund equipment purchases, whether brand new or second hand. Thus, the amount you borrow depends on the price of your purchase.

This is a secured type of loan as the equipment you acquired through the loan serving as the collateral. Therefore, in the event that you fail to pay your creditor or you default on the loan, it will be repossessed.

In a field where the standard technology used in operations changes quickly, equipment financing may not be recommended. The term for this loan usually lasts a few years, so even before its maturity, you may end up paying for something deemed obsolete.

Where is the best place to get equipment financing?

Currency

Pros

  1. As much as 70% of their borrowers receive their loan approval within minutes, and the funding can be accessed as soon as after 24 hours.
  2. The current APR for Currency averages at 8%. However, if you have an excellent credit, it can be as low as 6%.
  3. They practice due diligence by making sure that the equipment you are purchasing is in the condition as advertised. Aside from that, they also take care of the payment terms and of disbursing of the payment to the equipment merchant.

Cons

  1. Currency takes new businesses and bad credit as too risky, so they do not allow entities from these groups to borrow from them.
  2. Partner lenders of currency have different prepayment policies, so it is possible that you will be charged with this.
  3. If there is a collateral put to secure the loan, you may be charged a document fee ranging from $75 to $575.

Verdict

Online lenders seem to compete with each other when it comes to the time of application approval, and Currency rises above all. However, as they are the one to choose a partner lender for a particular borrower, they should have mediated a little more in the transaction. Instead of having different prepayment policies, there should only be one to avoid confusion. Overall, it remains to be the best choice you have for equipment financing because of their low APR and their taking a responsibility to ensure the quality of the equipment purchased.

Line of Credit

A small business line of credit can be considered to be the best business loan, especially if quick and instant access is your primary concern. Although where you can use the funds is not as limited as equipment financing, a creditor may still choose to put some restrictions.

Most of the time, it can be utilized for general business use such as replenishing the inventory as well as for emergencies like cash flow problems.

The beauty of line of credit, aside from the ease of access, is that it is relatively easy to acquire even with low credit rating. However, expect that you will be imposed with a higher interest rate that can easily go up to 40%.

It works basically like a credit card: your business will have set amount of funds it can withdraw (the credit limit), and only the portion that you actually use will accrue interests.

Where are the best places to get a line of credit?

Lending Club

 

Pros

  1. For loan amounts as much as $99,999, you do not risk any of your personal or business assets as they would not require you to put up a collateral.
  2. Unlike your traditional banks, Lending Club does not require most of the industry standard requirements such as appraisals, title insurance, business plan, and revenue projections.
  3. There is no restriction on where you can use the funds, allowing you freedom on purchase options.

Cons

  1. Lending Club caps the maximum amount that you can borrow at $300,000. Thus, if you need more, you will have to look for other creditors that can approve a loan having a higher maximum amount.
  2. For loans starting at $100,000, you will have to put an asset as a collateral. This puts you at a difficult position if the revenues remain sparse.

Verdict

By not requiring documents usually asked for by other lenders, Lending Club does put an emphasis on the ease of process. There is also no restriction where you can use the funds loaned. However, be ready to put up a collateral if you wish to get approved for amounts $100,000 and above.

 

On Deck

 

Pros

  1. For you to qualify for their business line of credit, you only need a credit score of 600, compared to a traditional bank’s 720 or higher.
  2. Only one year of continuous business operation is required to avail of their loan product, including line of credit.
  3. If you are diligent on settling the loan balance, you would be glad to know that On Deck reports your payment activities to different business credit bureaus, allowing you to get a better deal for your next business loan.

Cons

  1. The loan can be expensive. For lines of credit, the APR ranges from 14% to 40% depending on your and your business’ credit rating.
  2. Their automatic daily or weekly repayment schedule does not leave you a lot of room to maneuver when business is slow.
  3. There is absolutely no benefit to paying your loan early because there is a fixed amount that the lender sets for their customers.

Verdict

Although their line of credit can be expensive, it may still be worth pursuing for businesses wanting to build their credit rating. Still, On Deck’s preference to report your payment activities to business credit bureaus can be a double-edged sword. This is the best way to get a business loan with bad credit as it presents a real opportunity for improvement in terms of credit rating.

Blue Vine

 

Pros

  1. Once you get approved for a line of credit, you can get the funds for free through an ACH.
  2. The processing time for line of credit funds is one business day, making it a great option for business expenses that need to be settled immediately.
  3. Even with online lenders, it may be hard to obtain a line of credit with bad credit. In this case, Blue Vine will look the business cash flow instead.

Cons

  1. The range for their line of credit APR is from 16% to 62% which can be hard to pay back especially with restricted cash flow.
  2. Their services are not available in Kentucky, Nevada, New Hampshire, North Dakota, South Dakota, Tennessee, and Vermont.
  3. Their loan terms are pretty short, not the best business loan option for those needing a longer-termed financing.

Verdict

Line of credit is generally hard to land with bad credit. With Blue Vine, it becomes a little easier. However, do not expect that to get a big amount approved. Comparing their interest rates with other online lenders, Blue Vine comes inferior. Still, it should be considered as their risk threshold is greater than normal.

Fund box

Pros

  1. The amount that you can have in your line of credit is relatively low, maxing at $100,000.
  2. Unlike most online lenders, they do not put your personal credit into consideration when deciding on whether or not they will approve your loan.
  3. Their annual revenue requirement is relatively small at only $25,000 or just a little above $2,000 a month.

Cons

  1. The loan can easily get very expensive if you have bad credit with a maximum of 53.7% APR.
  2. To apply, your business should have a checking account with a minimum balance of $500.
  3. Due to short loan maturity, the weekly payments would expectedly be bigger than usual.

Verdict

If your business has a regular and generous cash flow and an excellent credit rating, you can get a great business line of credit here. However, because of short repayment terms, expect that it would take a dent on your revenues.

Kabbage

 

Pros

  1. Kabbage does not require a minimum credit score to qualify. Instead, they would look at your online presence, along with the business revenue and cash flow.
  2. So far, they are the online lender to beat in terms of funding time. With them, you can get the loaned amount the same day it was approved.
  3. Aside from wire transfers and bank accounts, you can also receive money through PayPal.

Cons

  1. The biggest downside is higher APRs, ranging from 20% to 80%.
  2. Businesses who do not use bookkeeping services may find it hard to get approved with Kabbage.
  3. It may not be suitable for your business as they are only offering short-term line of credit.

Verdict

Kabbage is the best business loan option for those making online purchases and have bad or fair credit. Not only can they receive the funds through PayPal, the funding time can also be just a blink of an eye.

Invoice Factoring/Financing

Through invoice factoring, businesses get to sell their outstanding invoices for a large chunk of the total value of the invoice. When the transaction is over, the lender would be responsible for collecting the money from you customers.

 

Where are the best places to get invoice financing?

Blue Vine

 

Pros

  1. Your customer who has yet to pay the invoice does not need to be a U.S. Citizen. For as long as he is located in an English-speaking country or province, that invoice may be sold.
  2. You can choose which of the invoices will receive financing.
  3. Even with a payment due date as far as 13 weeks away, you can get that invoice financed.

Cons

  1. If your customer does not pay the invoice, you will have to return the funds, along with a 3% fee.
  2. Only invoices amounting $500 or above will be accepted by for selling.
  3. For wire transfers, they charge a $15 fee per transaction.

Verdict

If you have a reliable customer base that pays on time, this is a great option for you. Unfortunately, this is not an option for businesses selling low-priced products.

Fund box

 

 

Pros

  1. Aside from using an accounting software for at least three months, they do not have any requirements to avail of this loan product.
  2. They reward loyal customers with lower APRs.
  3. Fund box does not interfere with the transaction, so your customers will never know you advanced on the invoice.

Cons

  1. A lot of customers find their credit limit to be too small to truly augment the income.
  2. Fees are relatively big at 4% a week, which can easily accumulate over time.

Verdict

Fundbox targets very small or very new businesses, and freelancers. Looking at it that way, it makes sense to have a relatively small credit limit. They also encourage repeat business through lower APRs, making this a great option if you want to continue transacting with only one lender.