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Small Business Loans: What You Need To Know

If you own a small business, you may need a loan at some point to grow your operations or cover a large purchase. A small business loan may also be necessary for startups to buy inventory, purchase manufacturing equipment, or hire staff. There are several sources for loans, including online lenders, banks or credit unions, and government agencies. Learn more about the different types of small business loans and what you need to do to qualify.


Types of Small Business Loans

Interest rates, loan terms, and qualifications vary by lender, but these are the features you can typically expect from the most popular types of small business lenders.

Bank and Credit Union Loans

Banks and credit unions offer a variety of funding products for small businesses, including traditional loans, lines of credit, and equipment loans. To qualify for a loan with a national bank, you need a credit score above 700, several years of revenue, and a solid track record. A bank loan officer may require collateral for owners with limited credit or new businesses. It is typically easier to qualify for funding with regional credit unions.

  • Loan amounts: $5,000 to $1 million
  • Approximate interest rates: 2.5% to 8.5%

Small business loans from banks and credit unions are best for expansion and working capital.

Online Lenders

Online lenders are an alternative to traditional bank loans. You can apply for a loan online, and you may be able to get access to your loan funds quickly. Online lenders typically also have fewer requirements than banks. While the qualifications vary, you likely need to show 12 months of continuous business operations and a credit score of 650 or above. You can often access as much money as you need, but the interest rates are usually higher.

SBA Loans

The Small Business Administration operates a government-backed loan program that works with traditional banks to offer loans with low interest rates and flexible repayment terms. However, the requirements are strict, and the application process is extensive. You need a credit score of 690 or higher, strong finances, and the flexibility to wait for funding.

  • Loan amounts: $35,000 to $5 million
  • Approximate interest rates: 5.5% to 8%

SBA loans are best for large one-time purchases such as equipment or real estate.

Choosing the Best Small Business Loan 

When choosing the best financing option for your small business, take into account these factors:

  • How fast you need the funds
  • The amount of money
  • Your company’s qualifications
  • The cost of repayment
  • The purpose of the funds

After you’ve decided which option is right for your business, there are a few things you can do to make the process easier. Before approaching your lender, solidify your business plan, evaluate your company’s finances, and prepare your paperwork.

Work With a Small Business Loan Expert

Are you ready to apply for financing so you can grow your business? [Company Name] provides many financial products, including loans, lines of credit, and automobile financing. Learn more about our application process by speaking with an experienced loan officer.




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