Comparing the best business loans 2018
As a business owner, small business loans are important not only for business growth but also to maintain a steady cash flow. But as much as a business loan is imperative, it is always tricky to access the best business loans in traditional banks and especially for startup entrepreneurs. Luckily, you no longer have to rely on traditional banks to secure a loan for your business. With the emergence of online lenders, you can easily get a loan/product at affordable rates. Small business loans can be used to cater for both short-term and long-term needs of the business. While most lenders do not have restrictions on how to use the funds, there are also loans that can only be used for specific purposes like working capital, purchase of equipment, commercial mortgage among others.
Types of small business loans
- SBA loans
Part of SBA loans is government guaranteed. The government works with banks to provide longs with flexible repayment terms and at affordable rates. However, applying for an SBA loan is time-consuming. The loans also have strict requirements. Most lenders issue the loan to borrowers with good credit, strong business finances and are flexible enough to wait for funding. The loan amount ranges from $30,000 to $5 million with an APR of between 6.5-99%. You can use the funds for long-term investments, purchase of equipment or real estate, refinancing debt or buying an existing business.
- Term loans
Online lenders provide businesses with term loans of up to $500,000. The repayment period is between 6 months and 12 years for short-term loans. Long-term loans can have a repayment term of more than 10 years. Financing is also available for specific purposes like purchase of inventory or equipment. The loan attracts an APR of between 6% and 99%. The loan can especially come in handy when used for one-time investment.
- Business line of credit
This is among the best options to access flexible cash. With this borrowing option, you are approved for a revolving line of credit with a maximum borrowing limit. Borrowers are charged interest on the fund they withdraw and not on the maximum amount. Credit line ranges from $2,000-$500,000 with an APR of up to 8%. The funds can be used to manage cash flow, pay for unexpected expenses and other short-term needs.
- Invoice factoring
With invoice factoring, businesses can access short-term funding in exchange for their unpaid invoices. Factoring works by businesses selling their unpaid invoices to a factoring receivables company, and the company collects the invoice from customers. The factoring amount ranges from $500-$500,000 with an APR of 16-77%. The money can be used for short-term business financing.
- Other funding options
Besides the above options, you can also opt for business credit cards or personal loans for business. The latter can be the best option if you have a startup business and do not qualify for loans in traditional institutions due to lack of collateral or low revenue. Online loan lenders consider your personal income and credit score, and do not focus much on your business history. It is also easier to qualify for a business credit card when compared to other loans for business.
Best small business loans 2018
Lenders with the best reputation, fewer restrictions and affordable rate are a good starting point for your best business loans search. Here are some of the best small businesses financing options for your business, including their benefits and drawbacks
The company is based in Atlanta and has used more than $4 billion to finance small businesses. Since the loans are provided online, the application process is much easier and convenient. Kabbage funds businesses of every size. Small businesses that may not access a loan from other lenders can also benefit from Kabbage small business lines of credit for amounts between $2,000 and $250,000. But compared to other lenders, Kabbage small business loans attract a higher rate of interest. They can be a perfect solution for businesses with low credit and need immediate cash with short-term repayment period.
OnDeck offers two financing options to small businesses, lines of credit of up to $100,000 and up to $500,000 term loans. Until now, the lending company has used more than $76 billion to fund small businesses. It can be a good option if you have poor credit. With long-term loans, the repayment term can be as long as 36 months. But while collateral is not required for you to access business funds, you have to commit to repay the funds on either daily or weekly basis. The funds also attract an origination fee of 2.5% and you should have a business that has been operating in the last one year with minimum revenue of $100,000. OnDeck small business loans can be the best fit for businesses that are struggling with their cash flow and do not want to issue personal assets as security to access a business loan.
Accion’s main objective is to offer financial tools for the betterment of people’s lives. Accion provides business loans of between $300 and $1M. The organization lends different types of businesses including women-owned enterprises, startups and minority-owned businesses. They specialize in providing business loans that are less than 6 months of age. The loan term is up to 60 months and there are no business revenue requirements. But to access a loan, personal guarantees are required. Collateral is also a requirement for higher loan amounts. The loans work well with startups that generate low revenue.
If you are looking for a loan with a low APR, LendingClub can be a perfect solution for you. They are a peer-to-peer lender with more than 10 years of providing loans to small businesses. The loans have a low APR, flexible repayment terms and a quick application process. The funds are also provided with a few business days. If you apply for higher loan amounts, LendingClub requires you to provide your business assets collateral. If you have good credit, you can qualify for higher loan amounts with low APR. But with poor credit and low annual revenue, you may be subjected to higher rates. The loans can work well for businesses that require quick funding and generate low annual revenue.
- Fundbox Invoice factoring is among the easiest ways to access funds for short-term business needs. Fundbox is known to provide small business owners with lines of credit and invoice financing. With the invoice factoring, there are no minimum revenue or business experience requirements. You also don’t have to issue any of your business assets as collateral. Besides, you don’t have to worry about maintenance fees, origination fees or inactivity fees. However, there are no long-term loan options available. Fundbox line of credit also has a short repayment term of only 3 months.
How can you get a business loan?
When it comes to applying for small business financing, every lender has their own requirements, but among the similar requirements include annual revenue, personal credit score and the number of years the business has been in operation. Most lenders also consider your cash flow as a requirement for the loan. Depending on the lender you decide to work with, you will be asked to provide your financial documents like bank statements and tax returns. If you have a strong personal credit, you also stand a higher chance of qualifying for low interest rates.
Choosing a small business loan
When looking for the best loan/product for your business, some of the things that you need to consider include;
- Loan options
- The cost
- Lender reputation
These factors will help you choose the best small business loan lender with lower rates and flexible repayment terms. To save on time, you also have to come up with a business plan before beginning your search since this is also among the requirements by many lenders.
Before taking out a small business loan, it is also important that you read the fine print. Getting a business loan is easy, but some loans also come with restrictions on what you can spend the money for, the ongoing reports the lender requires and activities that should not be done. Such restrictions among others may become unbearable for a small business owner. Going through the loan agreement will help you understand the terms and conditions of the loan.
As a business owner, there are many small business lending options available. You can easily access funds for working capital, to start a business, purchase equipment, business growth among other uses. Before you apply for a business loan, lenders will also require you to understand the loan application process. Understanding the terms and conditions of the loan will also help you get the best product for your business with less inconveniences. You also need to do background research and ensure that you only work with a lender who offers affordable rates and flexible repayment terms.