Top 8 Small Business Loans in the United States in 2024

Starting or expanding a small business often requires additional capital to cover expenses such as equipment, inventory, marketing, and personnel. Small business loans are a popular financing option that can provide the necessary funds to fuel growth and support entrepreneurial ventures. In this article, we will explore some of the best small business loans available in the United States, along with their key features, requirements, and benefits.

It is a matter of fact, loans from traditional banks are lower in interest rates. If you qualify to receive a loan from banks, that is the best thing that can happen in financing your startup venture. If you don’t, no need to worry. There are several reputed online lenders who are working directly with small business owners in providing startup loans. Receiving loans from these lenders are more simple, and more transparent and most importantly the loan processing time is quick.

Before applying for business loans from lenders, let us put forward some suggestions. Firstly, try to clean your personal credit score if it is a mess. Secondly, prepare a proper business plan so that investors feel interested in investing in your business. And thirdly, choose the best business lender as per your needs.

List of 8 Small Business Loans in the United States

1. SBA Loans

The Small Business Administration (SBA) offers a variety of loan programs designed to support small businesses. SBA loans are known for their competitive interest rates, longer repayment terms, and flexible eligibility criteria. The most popular SBA loan program is the 7(a) Loan Program, which provides funding for various business purposes, including working capital, equipment purchase, and commercial real estate.

2. Traditional Bank Loans

Traditional banks and financial institutions offer small business loans with competitive interest rates and favorable terms. These loans often require a strong credit history, collateral, and a well-documented business plan. Moreover, traditional bank loans are ideal for established businesses with a proven track record of revenue generation.

3. Online Lenders

Online lenders have gained popularity in recent years due to their fast application process and more relaxed eligibility requirements. These lenders offer small business loans with varying interest rates and repayment terms. Examples of online lenders include Funding Circle, OnDeck, and Kabbage.

4. Credit Unions

Credit unions are member-owned financial institutions that offer small business loans with attractive interest rates and personalized customer service. These types of small start-up loans are particularly beneficial for entrepreneurs who are members of the credit union or meet specific membership criteria.

5. Peer-to-Peer (P2P) Lending

P2P lending platforms connect borrowers with individual investors willing to lend money. These platforms offer small business loans with competitive interest rates and flexible repayment options. Examples of P2P lending platforms include LendingClub and Prosper.

6. Microloans

Microloans are small loans typically offered by nonprofit organizations and community development financial institutions (CDFIs). These loans are ideal for startups and businesses in underserved communities. Microloans often have lower loan amounts and may come with additional business support and mentoring.

7. Business Lines of Credit

Business lines of credit provide a revolving credit line that allows businesses to access funds when needed. Interest is only charged on the amount used. Business lines of credit are flexible and can be used for various purposes, such as managing cash flow, covering unexpected expenses, or taking advantage of growth opportunities.

8. Equipment Financing

Equipment financing allows businesses to acquire or lease equipment needed for operations. Lenders provide loans specifically for purchasing equipment, with the equipment itself serving as collateral. Equipment financing can be beneficial for businesses in industries such as manufacturing, construction, or transportation.

Conclusion:  For entrepreneurs looking for finance to establish or grow their companies, finding the correct small business loan is critical. Some of the greatest small business loans available in the United States are described in this article. However, it is critical to thoroughly investigate and evaluate interest rates, terms, eligibility criteria, and repayment flexibility for each choice. To make an informed selection, carefully assess your company’s needs and financial status. Remember that obtaining a small business loan might give you the financing you need to move your company forward and achieve your entrepreneurial ambitions.

Best 12 Online Lenders for Startups in the United States

1. Lending Club

Lending Club is the most popular peer-to-peer lender for small businesses. They started lending to small businesses in the year 2014. You can ask for a minimum loan of $5000 to a maximum of $300,000 from the Lending Club. Interest rates range from 5.99% to 29.99% APR.

To qualify for a business loan from the lending club, you must be in the business for more than 1 year with at least a $50,000 annual sales turnover. In addition to this, you must have 20% ownership of the business.

2. Kabbage

Kabbage is very helpful for small business owners who fail to get approval for a cheaper loan. The easiest part of getting a loan from Kabbage is less paperwork. You just need to fill up an online application form which takes just a few minutes. If you have a low credit score, try Kabbage.

Kabbage was founded in the year 2008. However, in 2020 it was acquired by American Express. Hence Kabbage has become a more trustable name in the finance industry after it is part of the American Express Group.

Kabbage offers loans of up to $250,000 with repayment terms of six or 12 months. Kabbage’s annual interest percentage rates range from 24% to 99% APR.

3. OnDeck

Ondeck started funding small businesses in the year 2007. The company is listed on the New York Stock Exchange. To avail of a business loan from Ondeck, you must be running your business for at least a year with gross annual revenue of more than $100,000. In addition, you must have a minimum of 500+ personal credit scores.

On Deck offers interest rates as low as 13.99 APR depending upon your financial health. The maximum loan that you can get from Ondeck is $500,000.

4. Prosper

Prosper is much like Lending Club. Though they don’t offer small business loans, you can opt for their product on unsecured business loans to solve an immediate small amount of funding. You can ask for a maximum of $35,000 from Prosper.

The interest rate ranges from 5.99% to 35.99% APR. Normally it takes two weeks to process the loan request.

5. BlueVine

BlueVine offers lines of credit and invoice factoring for small businesses. They provide fast and easy online application processes, competitive rates, and flexible financing options.

6. Fundbox

Fundbox offers lines of credit and invoice financing for small businesses. Their application process is straightforward, and they provide fast access to funds. They also consider business performance rather than personal credit scores.

7. PayPal Working Capital

PayPal Working Capital offers business loans for PayPal users. Their loans are based on the business’s PayPal sales history, making it convenient for businesses that rely on PayPal for transactions.

8. Credibility Capital

Credibility Capital offers term loans for small businesses. They focus on borrowers with good credit histories and provide competitive rates and flexible repayment terms.

9. Fundera

Fundera is an online marketplace that connects small businesses with multiple lenders. They simplify the loan application process by allowing borrowers to compare loan offers from different lenders.

10. National Funding

National Funding offers a variety of small business financing options, including term loans, equipment financing, and merchant cash advances. They have a straightforward online application process and quick funding.

11. StreetShares

StreetShares provides small business loans and lines of credit. They focus on serving veteran-owned businesses and offer competitive rates and personalized customer support.

12. Funding Circle

Funding Circle is a peer-to-peer lending marketplace. This peer-to-peer funding platform allows investors to lend money directly to small and big businesses. Funding Circle started its operation in the UK and presently caters to the UK, the US, Germany, and the Netherlands.

You can ask for $25,000 up to a hefty $500,000 from Funding Circle. Interest rates are 4.99% to 26.99% APR. you can pay it back in six months to five years.

This is our list of top lenders for small businesses in the United States. However, it must be mentioned here, receiving loans from these lenders will prove a little costly. If you are looking for cheaper loans, try traditional banks, credit unions, and government loan schemes.

Pros and Cons of Small Business Loans

Pros:

Accessibility

Online lenders offer a convenient and accessible way for small businesses to access funding. The application process is typically online, making it easier and faster compared to traditional lending institutions.

Speed

Online lenders often provide quick funding decisions and disburse funds faster than traditional banks. This can be crucial for small businesses that require immediate access to capital.

Flexibility

Online lenders offer a range of financing options, including lines of credit, term loans, invoice factoring, and merchant cash advances. This allows small businesses to choose the financing product that best suits their needs.

Competitive rates

Online lenders often provide competitive interest rates and terms, especially for businesses with good credit. Comparing multiple lenders can help businesses find the best rates available.

Less stringent requirements

Online lenders may have more flexible eligibility criteria compared to traditional banks. They often consider factors beyond credit scores, such as business performance and cash flow, making it easier for businesses with less-established credit histories to qualify.

Cons:

Higher interest rates: While online lenders may offer competitive rates, the interest rates on small business loans can still be higher compared to traditional bank loans. Small businesses should carefully consider the cost of borrowing and ensure that the loan terms align with their financial capabilities.

Shorter repayment terms

Some online lenders may require shorter repayment terms, which can result in higher monthly payments. This can put additional strain on a small business’s cash flow.

Limited loan amount

Online lenders may have limits on the maximum loan amount they can offer. If a business requires a significant amount of capital, it may need to explore other financing options.

Fees and additional charges

It’s important to carefully review the terms and conditions of the loan, as some online lenders may charge origination fees, processing fees, or other associated costs. These fees can add to the overall cost of borrowing.

Reliance on online platforms

Online lenders operate primarily through digital platforms, which may not suit every business owner’s preference. Some businesses may prefer face-to-face interactions and a more personalized lending experience.

Frequently Asked Questions

What is the minimum credit score required to qualify for a small business loan?

The minimum credit score required can vary depending on the lender and loan program. Traditional banks may have stricter credit score requirements, typically around 680 or higher, while online lenders and alternative financing options may consider borrowers with lower credit scores.

What documents are typically required to apply for a small business loan?

The required documents can vary, but commonly requested documents include business and personal tax returns, financial statements, bank statements, business licenses, and a business plan. The specific documentation will depend on the lender and loan program.

How long does it take to get approved for a small business loan?

The approval process can vary depending on the lender and loan program. Traditional bank loans may take several weeks or even months for approval and funding. Online lenders and alternative financing options often have faster application processes and can provide funding within a few days.

What is the average interest rate for small business loans?

The average interest rate for small business loans in the United States depends on several factors, including the lender, loan program, borrower’s creditworthiness, and the loan amount and term. On average, interest rates can range from around 6% to 40% or higher.

Are there any specific eligibility criteria for SBA loans?

SBA loans have specific eligibility criteria, including being a for-profit business, operating in the United States, meeting size standards based on industry, having a sound business purpose, demonstrating repayment ability, and having owners with good character.

Can I use a small business loan to start a new business?

Yes, you can use a small business loan to start a new business. However, lenders may have additional requirements and may consider factors such as your personal credit history, business plan, and collateral.