The Best Small Business Loans of 2018
Small business loans are typically used to start a business, purchase inventory or equipment, purchase real estate or expand an existing business. According to the National Small Business Association, 69 percent of small businesses used financing in 2016, including loans, credit cards, venture capital and crowdfunding. The remaining 31 percent were not able to obtain adequate financing.
The NSBA report indicates small business loans are a key component of economic growth for small businesses and their employees. There is a direct correlation between small business financing access and the ability to hire employees.
Alternative lenders are increasingly lending to small businesses. According to data from the U.S. Small Business Administration, small business bank loans totaled nearly $600 billion in 2015. At the same time, lending from alternative sources such as finance companies and peer-to-peer, or P2P, marketplace lenders amounted to $593 billion.
While small business loans can be difficult to obtain, there are options. In this guide, you’ll learn how small business loans work and how you can find the best loan to start or expand your small business.
How Small Business Loans Work
Small business loans are used for business expenses. While some loans are for general business funding, other small business loans are for specific uses, such as working capital, commercial mortgage, or the purchase of new equipment or furniture.
Types of Small Business Loans
Business lines of credit. Business lines of credit are very similar to credit cards and offer a lot of flexibility. With a business line of credit, a lender approves you for a revolving line of credit with a maximum limit you can borrow. Similar to credit cards, you’ll be charged interest for the amount of money you draw, not on the maximum limit.
You can access your line of credit for any of your business needs, whether it’s to purchase inventory or equipment, invest in marketing or manage fluctuations from seasonal sales. As long as you make the minimum payments and don’t go over your limit, you can use your line of credit and repay what you borrowed for as long as you like.
Equipment loans. Equipment loans can be used to purchase and spread out the cost of a large piece of machinery or equipment for your business. The down payment is typically 10 to 20 percent, but can be as low as 5 percent. Sometimes the equipment serves as collateral for the loan. Instead of taking out a loan, you may also have the option to lease equipment.
Invoice financing. If your small business struggles with cash flow issues because you’re waiting on invoices to be paid, you can use invoice financing, also known as factoring. With invoice factoring, you sell your unpaid invoices to a lender at a discount. The lender will provide you with the majority of the amount owed on the invoice upfront and hold a portion of the outstanding amount (usually 20 percent) until the invoice is paid.
Businesses that take on invoice financing may be perceived as struggling. You should carefully weigh the costs when considering invoice financing. There is a fee that is based on a percentage of the invoice, plus interest charged on the cash advance.
Merchant cash advances. If you need cash immediately, a merchant cash advance can provide access to capital. With a merchant cash advance, the lender provides you with a lump sum of cash in exchange for a portion of your future sales. You’re responsible for paying the amount of the loan plus fees.
You repay the advance with either a portion of your future credit and debit card sales, or with fixed daily or weekly transfers from your bank account. Your fee is determined by a risk assessment, with lower fees for lower-risk borrowers. Because of the high interest rates which can be in the triple digits, merchant cash advances are not recommended.
Commercial mortgage loans. The money borrowed from a commercial mortgage loan is used to buy, develop or refinance commercial property such as a warehouse, mixed-use building or retail center.
Commercial mortgage loan rates are typically 0.50 to 1 percent higher than the prime, 30-year residential mortgage rate, C-Loans.com reports. Loans that are guaranteed by the SBA are usually 2 to 2.5 percent higher than the prime residential mortgage rate.
Franchise loans. If you want to purchase or expand a franchise, a franchise loan can help you pay for it. Franchise loans can be used for standard business opening expenses and franchise-specific expenses such as marketing fees or the franchise fee, which is paid upfront to open a franchise.
While you can finance a franchise with a traditional term loan, there are lenders that offer loans specifically for franchises. Some franchisors may offer funding to help you establish your franchise.
SBA Loan Guarantees
The Small Business Administration, a government agency that offers support and resources to small businesses, offers guarantees for loans. These SBA-backed loans were created by the SBA to help small businesses and startups, and are executed by commercial lenders who are approved by the SBA. The SBA guarantees up to 85 percent of loans up to $150,000 and up to 75 percent of loans over that amount up to $500,000, so there is reduced risk to the lender. The SBA doesn’t directly offer the loan, only the guarantee. There are four types of SBA-backed loans:
1. 7(a) loan program: The SBA’s primary lending program, 7(a) loans are the most common, flexible and simple type of SBA loan. They also have lower interest rates.
Loans under the 7(a) program can be used for many different purposes, including toward working capital, construction of new buildings, renovations, establishing new businesses, the expansion of existing businesses and debt refinancing. There are restrictions, such as not using the money to pay back an owner for money they’ve already put into their business.
There are also special types of 7(a) loans to provide financial assistance for businesses with short-term capital needs, for businesses affected by NAFTA and to help with employee stock ownership plans.
There is an Express Loan Program where you will receive a response within 36 hours of submitting an application. The maximum loan amount is $350,000 and the SBA provides a 50 percent guarantee for loans granted through this program.
Loan amounts range from $25,000 to $5 million and are typically repaid in monthly installments. You can apply through a participating lender. The loan maturity depends on how the money is used but typically ranges from five to 25 years.
2. Microloan program: New or expanding small businesses are eligible to receive loans up to $50,000. These loans can be used for working capital or purchasing inventory, equipment, furniture, supplies or machinery. Microloans can’t be used to pay existing debts or purchase real estate.
The SBA makes funds available to designated intermediary lenders, which are nonprofits with demonstrated experience in lending and assisting others in business management. These intermediaries manage the microloan program, which offer loans up to $50,000. The average loan is about $13,000. The maximum repayment term is six years, and the loan repayment terms vary according to several factors, including the loan amount, planned use of funds, the intermediary lender’s requirements and the small business borrower’s needs.
3. Real estate and equipment loans: The CDC/504 loan program provides businesses with long-term, fixed-rate financing for major assets such as real estate and equipment. These loans are provided by a Certified Development Company, which is a nonprofit corporation that helps with the economic development of its community.
Funds from a 504 loan can be used to purchase existing buildings, land or long-term machinery, to construct or renovate facilities, or to refinance debt in connection with an expansion of the business. These loans cannot be used for working capital or inventory. The typical 504 loan includes a loan secured from a private sector, a loan secured by the CDC, which is 100 percent backed by the SBA, and a contribution from the borrower. The maximum amount of a 504 loan is $5.5 million, and these loans are available with 10- or 20-year maturity terms.
4. Disaster loans: These low-interest loans can be used to repair or replace real estate, machinery and equipment, and inventory and business assets that were damaged or destroyed in a declared disaster. The SBA offers disaster loans of up to $2 million to qualified businesses and includes assistance in both economic injury and physical damage.
Types of Small Business Lenders
Banks and credit unions. Banks and credit unions typically serve larger, more well-established businesses, including those that are categorized as small businesses. The APRs, terms and length of loans offered by banks and credit unions may vary, but rates on commercial and industrial bank loans have remained below 5 percent since 2009, according to the U.S. Small Business Administration.
If you’re having trouble getting approved for a small business loan through a big bank, you’re in good company. According to a 2016 NSBA report, 49 percent of small businesses received a loan through a bank.
You’ll have a better chance of getting a loan from a traditional bank with an SBA-backed loan. While SBA loans have more requirements for approval, they reduce the risk for the lender and can make it easier to get approved for a small business loan.
Alternative lenders. “Small businesses should be aware there are multiple channels available for borrowing needed funds,” says S. Michael Sury, lecturer of finance at the University of Texas at Austin. “There is a cottage industry full of private investors, hedge funds and private equity firms that have entered the direct lending business.”
Alternative lenders can be more flexible than commercial banks, as they have less regulation on the types of loans they can make. Alternative lenders have much higher approval rates for applications than big banks and credit unions, at around 60 percent in August 2017, according to Biz2Credit’s Small Business Lending Index.
There are two categories of alternative lenders, direct and peer-to-peer lenders:
1. Direct lenders: Direct lenders are finance companies that fund your loan with capital other than a bank and without a middleman such as a broker, investment bank or private equity firm. Some direct lenders, such as LiftFund, offer SBA loans. Typically, small to midsize businesses borrow from direct lenders.
2. Peer-to-peer lenders: Online peer-to-peer lending directly connects you with investors who usually have a diversified loan portfolio made up of small portions of loans. A loan is often divided among several investors.
Borrowing criteria is usually less stringent than at traditional brick-and-mortar banks. Alternative lenders provide loans to borrowers who otherwise may not have access to financing, such as startups or businesses with a shaky financial history.
Because financing through a P2P marketplace poses a larger risk to lenders, the interest rates are often higher. Interest rates vary, but alternative loan products can have annual rates from 15 percent for a 36-month P2P loan and up to 45 percent for a four-month institutionally backed loan, according to the U.S. SBA. This is compared with an interest rate of less than 5 percent for industrial and commercial bank loans.
Before You Apply for a Small Business Loan
You may be excited about your business, but lenders will need convincing to determine that your business is worth the risk. You’ll need to know how much you need to borrow, and have good credit and a solid business plan.
Take these steps to prepare before you apply, and you can increase your chances to get approved for a loan:
1. Determine how much funding you need. Examine your business expenses and consider how much of a loan payment you can afford. You can find out how large of a loan your business can afford by calculating your Debt Service Coverage Ratio.
The formula is a simple one: net operating income / total annual debt = DSCR.
Lenders are looking for small businesses that have a 1.0 ratio. This means your cash flow is equal to your monthly loan payment. However, it’s ideal to have a bit of a buffer, so lenders prefer a 1.35 DSCR. For example, if your annual net operating income is $135,000 and your total debt is $100,000, your DSCR is 1.35.
You’ll want to consider the impact taking on new capital will have on your small business, says Sury. There are a number of cases where businesses were able to borrow significant sums of capital, believing they were building a great capital reserve cushion, only to find that the ongoing borrowing costs and interest payments had a crushing impact on their bottom line.
“Just because capital can be borrowed, doesn't mean that it should be,” says Sury. “Small businesses should be mindful of exactly what terms are really needed and not try to exceed them simply for the sake of having excess cash in the bank.”
To minimize risk and ensure you net a positive return on your investment, you can perform a small business loan performance analysis before you commit to taking out a loan. A loan performance analysis will forecast how the small business loan will financially impact your business.
2. Check your credit score. Your personal credit score is a crucial part of the small business loan application process, as lenders often consider your personal credit, especially with startup business loans. The higher your credit score, the better terms and lower interest rates you’ll get on a small business loan.
“As a sole proprietor, your personal credit may be considered in the business loan application if you are using personal credit to secure the business debt,” says Rod Griffin, director of public education for Experian, one of the three major consumer credit bureaus. “Doing so is fairly common for a small business owner. Note that if the loan is made using your personal credit, failing to pay it may affect your personal credit history and your ability to qualify for new credit in the future.”
Carefully review your credit report so that it’s free of errors and identify and resolve other problem areas. Inaccuracies on your credit report can hurt your chances of getting a loan approved and may negatively impact your score. It’s important you try to clear these up before beginning the application process.
You can order a free credit report each year from all three credit bureaus on AnnualCreditReport.com. This is different than receiving your credit score. Some services require you to pay a fee to see your score.
If you’re already in business, you should check your business credit score. Whereas your personal credit is linked to your Social Security number, your business credit is tied to your Employer Identification Number or taxpayer ID. There are credit reporting agencies that deal only with business credit, such as Dun & Bradstreet.
Whereas a personal credit score on the FICO scoring system ranges from 300 to 850, the range for a business credit score is from zero to 100. Like personal credit scores, your payment history, credit utilization and credit accounts affect your business credit score. Public records such as judgments, liens and bankruptcies will be reflected on your report. Other variables, such as the size of your business and how long it has been around, may also be considered.
3. Draft a strong business plan. A solid, comprehensive business plan is the foundation of your small business and shows potential lenders how profitable your venture is.
“It’s vitally important for small businesses to have organized, well-thought-out and professionally presented business plans,” says Sury. “If a small business approaches a lender without a compelling business plan in hand, it’s a recipe for disaster.”
A business plan includes:
Summary, which provides an overview of your plan
A description of your business and its main objectives
The primary products and services your business will offer
You and the management team’s skills and backgrounds, and how they relate to the success of your business
Your target customers, market and the competition
Sales and marketing plans
Organization and management, which includes the setup and responsibilities
Financials, such as the estimated cost to start or grow the business, a breakdown of ongoing expenses and what the funds would be used for
Projections, which include projected income and balance sheets for the first few years
Appendix, which provides supporting documents for your business plan
4. Talk to a business mentor. A business mentor can help you tighten up your business plan, connect with resources and more. You can find a business mentor through professional associations, former employers or networking mixers. Another option is the Score Association, which is a nonprofit group with volunteer business counselors throughout the U.S.
5. Explore local resources for small business owners. Some of these include SBA District Offices and Score chapters, Veteran’s Business Outreach Centers and Women’s Business Centers. You may receive free counseling, advice or financial assistance for your new small business. If you’re a veteran with strong credit, you may qualify for a guaranteed loan through a Veteran’s Business Outreach Center.
How to Get a Small Business Loan
Small business loans require significant documentation. You’ll need to fill out an application and provide supporting documents, which you should be ready to submit to the lender. Required documentation often includes:
Personal background: You’ll need to provide personal information on the application or a separate document, such as:
Previous addresses
Names used
Criminal record
Educational background
Resumes: Besides submitting your resume, you’ll need to submit professional resumes of each principal. Some lenders require applicants to have previous management or business experience, particularly for startup business loans.
Business plan: All loan programs require a sound, detailed business plan. The business plan should include a complete set of projected financial statements, including a profit and loss statement, an in-depth, five-year projected financial statement and a cash flow and balance sheet.
Income tax returns: Most lenders require applicants to submit personal and business income tax returns from the previous three years.
Loan application history: You’ll provide records of loans you’ve previously applied for.
Bank statements: Many lenders require one year of personal and business bank statements.
Collateral: Collateral requirements vary greatly. Some loan programs do not require collateral, but loans involving higher risk factors for default require substantial collateral. A strong business plan and financial statement can help you avoid collateral requirements. However, it’s still a good idea to prepare a collateral document that describes the cost and value of personal or business property that can be used to secure a loan.
Use of loan: This document outlines how you plan to use the loan.
Debt schedule: A debt schedule shows all your business’s outstanding loan and credit amounts, monthly payments, interest and payment dates.
Legal documents: Depending on your loan’s specific requirements, your lender may require you to submit one or more legal documents. Make sure you have the following items ready, if applicable:
Business licenses and registrations
Business lease (either a copy of your current business lease or proposed lease from landlord)
Business formation document, such as articles of incorporation or LLC filing
Copies of contracts you have with any third parties, such as subsidiaries and affiliates
Franchise agreements
Choosing a Small Business Loan
You should focus on eligibility requirements, loan options, costs and reputation when choosing a small business loan lender. Focusing on these factors will help you identify a lender that is most likely to approve your loan, offer acceptable terms and costs, and offer good service during approval, closing and repayment.
Eligibility Requirements:
Minimum credit score
Minimum years in business
Minimum annual revenue
Loan Options
Loan types: Find a lender that offers the type of loan you’re looking for. To save time and ensure you get enough capital to start or grow your small business, create a business plan and pinpoint the type of funding you need before you begin your search.
Loan limits: If the lender doesn’t offer loans in the amount you need to start or grow your business, you’ll need to find one who will. Settling for a lower amount could burden you with a loan that falls short of adequately addressing your capital needs.
Loan term: Your loan’s term is the time frame you have to repay the loan. Loans with shorter lengths have higher monthly payments, but you may pay less in total interest on the loan. If you take out a loan with a longer term, your monthly payments may be lower, but you may have to pay more in total interest over the life of the loan.
Costs
Keeping loan costs minimal allows you to invest profits back into your business and not back to the lender. Look for a lender with the lowest costs, including:
APR: Short for “annual percentage rate,” this is the interest charged on your loan every year, plus all loan fees and costs associated with the loan.
Down payment: In some cases, the down payment for your small business loan is covered by collateral. Other small business loans require an equity investment. Down payment requirements vary, but you should expect to invest at least 10 to 30 percent of your own capital when taking out a loan.
Factor rate: A factor rate is typically used for merchant cash advances and short-term loans to determine how much you will owe in interest.
Instead of a percentage, like with APRs, the interest rate for invoice factoring is expressed in decimal form. The average factor rate is 1.1 to 1.4, according to FitSmallBusiness. For example, if a small business takes out a $5,000 loan with a 1.2 factor rate, it will pay a total of $6,000 on the loan.
Your factor rate is determined by the industry your business is in, how long you’ve been in business, the stability of your business and your monthly credit card sales. With factor rates, you generally pay more in interest than with loans that use APRs.
Origination fee: This fee is for processing a new loan. Some lenders include the origination fee in their interest rate or total loan balance, and some do not charge an origination fee.
Underwriting fees: These fees are charged by underwriters to review and verify the provided documentation in your loan application and for preparing the loan.
Closing costs: These fees are any other costs tied to closing the loan, such as a business valuation, commercial real estate appraisal, filing and recording fees or loan-packaging fee.
SBA loan guarantee fee: The lender pays this fee and has the option to pass it along to you at closing.
This fee is not based on the total loan amount, but the maturity and dollar amount guaranteed. If the guaranteed amount of an SBA-backed loan is 85 percent, the fees are based on that 85 percent. For example, for a loan with a maturity of more than one year, the fee is 3 percent of the portion that is guaranteed by the SBA on loans of $150,000 to $750,000, and 3.5 percent on loans that are more than $750,000.
Note that lenders can’t charge a separate origination fee on an SBA-guaranteed loan.
Additional fees: Other fees associated with a small business loan include late payment fees, check processing fees and prepayment fees, which are charged if you make early payments.
Restrictions
It’s important to carefully read the fine print of loan agreements, says Sury. “In some situations, small businesses may be given loans, but these loans come with such restrictive terms on what it can be spent on, what ongoing reports must be made to the lender, and what activities can or cannot be done, that it makes the relationship untenable.” By carefully combing over the fine print, you won’t be blindsided by the terms and agreements of the loan.
Reputation
A lender’s reputation can tell you what you should expect from it. You can research a lender’s reputation by finding information on current and past customer experiences. The J.D. Power U.S. Small Business Banking Satisfaction Study is a good place to start. The annual study surveys banking customers and measures factors including overall satisfaction, fees and problem resolution.
Not every lender is included in the J.D. Power study, particularly alternative lenders. For lending companies that aren’t included, look at reviews in comparable categories from Trustpilot, which rates companies based on an aggregate of customer reviews, and the Better Business Bureau.
Best Small Business Loans of 2018
U.S. News conducted an in-depth review of the top small business loan companies to recommend the best traditional and alternative lenders. By looking at the top 25 most active small business banks and the top 25 most active alternative lenders based on eligibility, loan options, costs, reputation and other key factors, U.S. News found the five best lenders.
These lenders are a good starting point for most businesses. But there is no one-size-fits-all loan that is perfect for every business, so you should carefully research each option yourself.
Best for very small businesses: Kabbage
Best for borrowers with low credit scores: OnDeck
Best for new businesses: Accion
Best for low APR: LendingClub
Best for invoice financing: Fundbox
Top Lender for Very Small Businesses
Kabbage
Overview:
Based in Atlanta, Kabbage has extended more than $4 billion in financing to small businesses around the world since 2008. Using an automated lending platform, there’s a quick application process.
Best Features:
While Kabbage lends to small businesses of any size, very small businesses that would typically be denied by other lenders will benefit from Kabbage's small business lines of credit, which range from $2,000 to $250,000.
Drawbacks:
Kabbage has high interest rates relative to the other lenders recommended by U.S. News. For every month you carry a balance, there’s an additional 1.5 to 10 percent monthly fee based on a number of performance factors.
Best for Businesses That:
Want a shorter repayment period
Have less-than-stellar credit
Need cash immediately
Highlights:
Loan types: Line of credit
Minimum years in business: One
Minimum annual revenue: $50,000
Origination fee: None
Customer satisfaction rating:
BBB rating: A+
TrustPilot score: 9.3
Top Lender for Borrowers With Low Credit Scores
OnDeck
Overview:
Founded in 2007, OnDeck offers two types of financing to small businesses: term loans of up to $500,000 and lines of credit of up to $100,000. To date, OnDeck has extended more than $7 billion in products and services to small businesses.
Best Features:
OnDeck has some of the lowest minimum credit scores available. You need a minimum FICO score of 500 for term loans, or 600 for lines of credit. Loan terms are available for up to 36 months. OnDeck also boasts an A+ rating from the Better Business Bureau.
Drawbacks:
While OnDeck doesn’t require personal assets as collateral, it does take a blanket lien on all business assets. You’ll be required to commit to either a fixed daily or weekly payment schedule. There’s also a 2.5 percent origination fee, and your business needs to have been operating for at least one year and generate $100,000 minimum in revenue.
Best for Businesses That:
Have fluctuations in cash flow
Want a longer term length
Don’t want to use personal assets as collateral
Highlights:
Loan types: Term loans, lines of credit
Minimum years in business: One
Minimum annual revenue: $100,000
Origination fee: 2.5 percent
Customer satisfaction rating:
BBB rating: A+
TrustPilot score: 9.4
Top Lender for New Businesses
Accion
Overview:
A nonprofit with a mission of providing financial tools to help improve people’s lives, Accion typically offers small business loans of $300 to $1 million. Accion lends to a variety of different businesses, such as women-owned businesses, minority-owned businesses, startups and those starting a green business.
Best Features:
Accion specializes in startup loans for businesses that have been established for less than six months. There are no business revenue requirements. Term lengths can be up to 60 months. Accion also has an A+ rating from the Better Business Bureau.
Drawbacks:
This lender requires personal guarantees and may require collateral for higher loan amounts. There are loan limits of $100,000 in six U.S. states, $20,000 in two states and only $10,000 in the remaining states. There’s a closing cost of 3 percent on the total loan amount and a $165 processing fee.
Best for Businesses That:
Are startups
Generate little revenue
Are ethnic minority- or women-owned
Highlights:
Loan types: Term loans
Minimum years in business: Zero
Minimum annual revenue: Zero
Origination fee: None
Customer satisfaction rating:
BBB rating: A+
Top Lender for Low APR
LendingClub
Overview:
Headquartered in San Francisco and founded in 2007, LendingClub is a peer-to-peer lender. More than $20 billion in loans has been originated from its lending platform.
Best Features:
Besides extending loans with a low APR, LendingClub also offers flexible payment terms, a quick application process and disperses funding anywhere from two days to two weeks.
Drawbacks:
If you are taking out a loan or line of credit that is more than $100,000, a UCC-1 lien is required, which means you’re putting up your business’s liquid assets as collateral. And while small business owners with strong credit most likely will be qualified for a loan with a low APR, those with poor credit and a low annual revenue will be subject to much higher rates.
Best for Businesses That:
Want quick access to cash
Generate little revenue
Prefer not to use personal assets as collateral
Highlights:
Loan types: Term loans
Minimum years in business: Two
Minimum annual revenue: $75,000
Origination fee: 1.99 to 6.99 percent
Customer satisfaction rating:
TrustPilot score: 8.1
Top Lender for Invoice Financing
Fundbox
Overview:
Headquartered in San Francisco, since 2013 Fundbox offers small business owners invoice financing and lines of credit. To date, more than 500,000 customers have received funding.
Best Features:
There are no minimum revenue or years in business requirements for invoice financing. No personal guarantees or collateral are required. There are also no origination fees, maintenance fees or inactivity fees.
Drawbacks:
There are limited options available. Fundbox’s line of credit has a short, three-month term. No term loans are available, and the longest term is six months for invoice financing. The maximum loan limit is $100,000.
Best for Businesses That:
Need to fill gaps in cash flow
Have unpaid invoices
Don’t qualify for invoice financing through other lenders
Highlights:
Loan types: Invoice financing, line of credit
Minimum years in business: Invoice financing: zero; Line of credit: six months
Minimum annual revenue: Invoice financing: zero; Line of credit: $25,000
Origination fee: None
Customer satisfaction rating:
BBB rating: A+
TrustPilot score: 9.7
The Best Banks for SBA Loans
Traditional banks can offer a good reputation, stability and potentially lower interest rates. However, they only approve around 25 percent of small business loans on average. They tend to have more strict eligibility requirements than alternative lenders.
Alternative lenders outperformed traditional banks in the data researched by U.S. News. However, banks can still be a source of funding for your small business.
Applying for a government-backed SBA loan increases the likelihood you’ll be approved for a small business loan with a traditional bank. SBA loans have fairly standard eligibility requirements and fees, and limits on the loan and APR, so it is difficult to compare banks solely based on their SBA offerings. Instead, you should compare them based on their likelihood of approving your application, as meeting SBA requirements does not necessarily mean you’ll be approved by the lender.
Below are the banks that most actively approve SBA loans as of September 2017. They offer SBA and non-SBA loans, however, non-SBA small business loans have more strict eligibility requirements that typically limit lending to businesses that are well-established and successful. These lenders are a good place to start your search for small business loans with a traditional bank.
Wells Fargo
Huntington Bank
JPMorgan Chase
TD Bank
U.S. Bank
Wells Fargo
Overview:
Founded in 1852, Wells Fargo has more than 8,500 branches nationwide. In addition to SBA-backed loans, Wells Fargo offers small business credit products including business lines of credit, unsecured business loans and commercial purchase loans.
Highlights:
Current year approval count: 4,180
Current year approval amount: $1,274,286,700
SBA Loans Offered:
7(a)
504
Express loans
Huntington Bank
Overview:
Headquartered in Columbus, Ohio, Huntington Bank offers SBA-backed loans, term loans, business lines of credit and real estate loans to small businesses.
Highlights:
Current year approval count: 2,956
Current year approval amount: $574,825,700
SBA Loans Offered:
7(a)
504
Express loans
JPMorgan Chase
Overview:
JPMorgan Chase offers small businesses a variety of financial products including SBA-backed loans, business lines of credit, business term loans, commercial real estate financing, equipment financing and trade financing for small businesses.
Highlights:
Current year approval count: 2,480
Current year approval amount: $534,496,000
SBA Loans Offered:
7(a)
504
Express loans (an express subprogram is available)
TD Bank
Overview:
TD Bank has about 1,300 branches nationwide. In addition to SBA-backed loans, small business owners can apply for a business line of credit, commercial mortgage loans, equipment loans and loans for expansion and renovation with TD Bank.
Highlights:
Current year approval count: 1,681
Current year approval amount: $186,993,300
SBA Loans Offered:
7(a)
504
Express loans
U.S. Bank
Overview:
Founded in 1863 and with more than 3,000 branches, U.S. Bank’s small business financing includes SBA-backed loans, equipment financing, real estate loans, business lines of credit, franchise financing, and financing specifically for dentists, veterinarians, optometrists and ophthalmologists who want to start or grow their own practices.
Highlights:
Current year approval count: 1,588
Current year approval amount: $398,168,600
SBA Loans Offered:
7(a)
504
Express loans
What to Do if You’re Denied for a Small Business Loan
If you are denied a small business loan, you aren’t at a complete loss for options. Consider the following:
1. Take out a personal loan. With a personal loan, you can spend the money on whatever you like, including business-related costs. One thing to keep in mind is that secured personal loans, in which you use a valuable asset such as a car or home as collateral, can be risky because the lender can seize your assets in the case you default.
2. Get a business credit card. While by no means a loan, a business credit card may be a good option for a line of credit if you aren’t able to obtain a small business loan. They are easier to get than a small business loan. On the downside, the interest rates tend to be much higher than with small business loans.
Some perks of a business credit card are that you have access to a revolving line of credit, and you can use rewards points toward travel or purchases for your small business. If you have solid credit, it’s best if you look into a small business loan and lock in favorable interest rates.
3. Apply for a small business grant. There are a number of grants available for small business owners. For instance, if your small business is engaged in scientific research and development, you may qualify for federal grants under the Small Business Innovation Research and the Small Business Technology Transfer programs.
There are also grants that are specifically for women and minorities, for those who are either currently operating or want to start a small business in a specific region or state, or are opening a franchise. Some grants even include additional resources to get your small business off the ground such as mentorship and workshops.
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