Best Business Loans for 2019
The Best Business Lenders 2019
Applying for a business loan is a sweat-inducing experience. Despite historically low interest rates, businesses still get denied loans far more often than they’re approved. In fact, a recent study showed that business loan acceptance rates at large national banks are currently hitting all-time highs… of 27%. Yes, in one of the most comfortable business climates in recent memory, 73% of business loan applicants are denied. So what’s a small business owner to do?
Business loans no longer originate solely from banks. Online lenders have much higher approval rates, but often less friendly terms. In this guide, we’ll run down the best available business loan providers – from banks and credit unions to online lenders. Getting a business loan is tough, so be prepared to shop around and make some concessions to get approved.
Be warned, online lenders often have cringeworthy terms. You might get accepted with a 590 credit score, but be prepared for 30% rates. Always apply to banks first and use online lenders as a secondary option. And if you can get an SBA loan, even better.
Now, here are the best business loans of 2019.
Best Business Loans from Banks
Large national banks provide business loans on their own terms and through the Small Business Administration’s various lending programs. SBA loans are the golden goose, but they reject 90% of applicants. Approval rates for regular bank business loans are still low, but if you have a lengthy business history, 700+ FICO, and strong revenue, consider applying at one of these banks.
Founded 50 years ago, US Bank has capital solutions for businesses of all sizes from all types of industries. Amongst the three banks on this list, US Bank offers the largest loans and the best interest rates. But their approval rate is low (even for banks) and the application process is tough. Here’s what US Bank offers:
- Quick Loan – Like the name says, these loans have a streamlined application process and decisions can be made in a single business day. Quick Loans are fixed rate and terms are negotiated depending on your business credit. Borrowers can take out up to $250,000. Quick Loans also have SBA program options.
- Term Loan – Borrow up to $1 million with these larger loans designed for business expansion or expensive equipment purchases. Terms vary but can be as long as 80 months with very competitive rates.
- Equipment Finance Loan – These loans supply businesses with up to $500,000 in capital for one-time equipment costs. Loans are secured by the equipment and payment can be deferred for extended periods.
US Bank interest rates vary from 3.5% to 6% depending on your creditworthiness. But remember, US Bank is the strict Catholic school teacher always looking for mistakes. Gaining the approval of this institution can be a chore.
Despite their less-than-stellar reputation, Bank of America has rebuilt their image in the minds of American businesses thanks to competitive loans. Not only are the rates competitive, but the loans are tailored depending on your business’s needs.
- Business Advantage Term Loans – Unsecured loans with interest rates currently capped at 5.75%. Amounts range from $10,000 to $100,000 with terms between 12 and 60 months. You’ll need a 700 credit score, two years of ownership, and $100,000 in revenue to be considered.
- Real Estate Loans – Loans specifically for purchasing buildings or property. Loan amounts begin at $25,000 and rates can be as low as 5%. With a balloon payment, term is 10 years. An amortized loan has a term of 15 years.
- Equipment Loans – Similar to Real Estate loan in interest rate and borrowing minimums, but only a 5 year term.
Bank of America also offers business lines of credit, SBA loans, and healthcare practice loans. Getting the right loan matters and Bank of America has lots of choices for different business needs.
Another giant with a tarnished reputation, Wells Fargo is still one of the premier banks for business lending in the United States. They offer three different types of business loans:
- Unsecured Business loans – Fixed rates start at 8% and no collateral is required. Businesses can borrow between $10,000 and $100,000 on terms from 1 to 5 years. There’s a $150 opening fee, but it’s waived if you have a Wells Fargo Business Checking Account.
- Equipment Express loans – Businesses can get $10,000 to $100,000 to buy vehicles and equipment with Equipment Express loans. Rates and terms vary depending on what you purchase. Vehicles start at 6.75% fixed and equipment starts at 7.25% fixed. Another $150 opening fee here, but again it’s waived if you bank with Wells Fargo.
- Advancing Term loans – Larger loans secured by non-real estate business assets that function more like lines of credit at first. Businesses can borrow $100,000 to $500,000, but need collateral in the form of equipment, inventory, or cash. There’s a one year draw and then the balance converts to a 5-year amortized loan.
All three Wells Fargo loan types have a 0.50% origination fee. The application process is simple and smaller loans can be approved within a single business day.
Best Credit Union Business Loans
Credit unions function like banks, but with one major exception. Credit unions are nonprofit and have no shareholders looking for ROI. Instead, credit unions are owned by their customers themselves. To join a credit union, you’ll need to file membership forms and usually pay a small fee. Regional restrictions often apply too. But the benefits of credit unions are well worth the price of admission, especially at these next two firms.
To join, you’ll need to be a member of the armed services or related to someone enlisted. But Navy Federal Credit Union has a lot of offer veterans who own businesses. Secured and unsecured loans are available, along with commercial vehicle, real estate, and investment property loans. For members with outstanding credit, rates as low as 3% aren’t uncommon. Business owners can also get lines of credit and credit cards with APRs as low as 8%.
Business loans at Digital Federal Credit Union max out at 5 years for fixed rates and 7 years for floating rates. Businesses can borrow between $20,000 and $3 million and use the cash on anything from real estate and equipment to debt refinancing. For approval, your business must be at least 18 months old and operate in the New England area..
Best Peer-To-Peer Business Loans
Now we’re diving into the world of alternative lenders. Alternative lenders approve far more businesses for loans than traditional ones, but with less favorable terms. If you can get a loan from a bank or credit union, you won’t need to delve into this universe. But if you’re one of the 73% of business owners who can’t get a loan from a bank, peer-to-peer lenders might be your next best option. Peer-to-peer lenders work as intermediaries matching businesses with sources of capital.
LendingClub supplies funding to businesses by matching borrowers with investors. Borrowers describe the type of funding they’re looking for and LendingClub pairs them with suitable funding sources. Borrowers using LendingClub can get unsecured loans worth anywhere from $10,000 to $500,000. Terms range from 6 months to 5 years and annualized interest rates are between 10% and 36%. All loan rates are fixed and there’s no penalty for early repayment.
Funding Circle began as a peer-to-peer lender in the UK, but recently opened their doors to US and German borrowers. Best rates start at 5% and borrowers can take out between $25,000 and $500,000. Terms last from 6 months to 5 years and approval decisions are usually made within 24 hours. Origination fees apply, but there are no penalties for early repayment.
StreetShares is one of the newer entrants to this space, but they have a variety of loan options for business owners. Short-term business loans provide borrowers with $2000 to $250,000 in unsecured capital on term lengths of 3 to 36 months. Rates start at 9%. Secured loans are also available through invoice factoring, merchant cash advances, and equipment financing. StreetShares is owned and operated by military veterans and special terms are available for vets and active service members.
Best Direct Online Lenders
Unlike peer-to-peer lenders, direct online lenders function more like traditional banks. These companies have their own cash to give out while peer-to-peer lenders need suitable investors to match with borrowers. OnDeck Capital is the largest of these direct online lenders, but their interest rates have attracted some much-deserved scrutiny. Here are some direct online lenders who won’t gouge you (too much).
If you need business equipment and can’t get a bank loan, Currency Capital is a reliable alternative specializing in equipment loans and financing. Long and short-term loans up to $2,000,000 are available with interest rates varying from 6% to 24%. Unlike most direct online lenders, Currency Capital offers terms up to 7 years. Businesses can get up to $5,000,000 for special equipment financing, but you’ll need at least 6 months of business history and $75,000 in annual revenue.
Founded in 2011, Fundation is a direct lender offering loans up to $500,000. Terms can be as long as 4 years and rates range from 8% to 25%. Fundation earns high marks for their exceptional customer service and transparency. You’ll be walked through the underwriting process and your rates will be based on clearly-defined criteria. One downside: payments must be made twice per month. Fundation requires applicants have a 660 credit score and $100,000 in annual business revenue.
Best Business Loan Marketplaces
Loan marketplaces sound similar to peer-to-peer lenders, but they don’t look for investors to match borrowers with. Instead, they interact with a network of lenders to get borrowers the best possible rates.
Lendio is the top business loan marketplace with over 75 different lenders in their network. Since they have such a wide net, Lendio has many different types of loans to offer. Short-term, long-term, SBA, equipment financing, and startup loans can be acquired through Lendio with rates ranging from 8% to 30%. Borrowers can take out $2,500 to $500,000 with repayment terms of 1 to 3 years. You’ll need a minimum credit score of 550 and $10,000 in monthly revenue to be approved, but individual requirements can vary since so many lenders will be vying for your business.
Options Outside Business Loans
If you have bad credit and no business history, a business loan will be tough to come by. But loans aren’t the only sources of capital. Here are a few options other than loans for business funding.
Business Line of Credit – Kabbage
Kabbage offers working lines of capital up to $250,000 for qualified businesses. Terms are 6, 12, and 18 months and fees depend on your terms. Each month, you’ll repay principal plus a monthly fee. The 6 and 12 month term credit lines have floating fee rates while the 18 month term has a flat rate. Fee rates range from 1.5% to 10%.
Invoice Factoring – BlueVine
Invoice factoring works by borrowing capital against your customers’ unpaid invoices. Basically, you sell your unpaid invoices to a lender for a cash advance or line of credit. BlueVine will approve businesses for a line of credit up to $5,000,000 based on their unpaid invoices. No collateral is required and approval rates are high. When your customers pay their invoices, you repay the money you’ve used from the credit line. BlueVine charges a 0.25% to 1% discount rate fee each week that invoices go unpaid.
Business owners have plentiful funding sources thanks to the internet, but it’s more important than ever to do research on lenders. Business loan applications are tedious and you don’t want to spend time gathering all your company documents just to be rejected. At the same time, taking the first loan you’re pre-approved for is a recipe for a ripoff. Ask specific questions of your potential loan providers about interest rates and hidden fees. Getting the best possible loan for your business takes time and effort, but the work is well worth it.
June 21, 2019
Dan is a financial research and analysis expert. He has been sharing his research on personal finance for years and has previously been published on Benzinga and Loan Gifting.