Best Bank for Small Business Loans
So, you are just starting out in your small business. You hardly have enough funds to pay rent, employees, and other utilities. Or maybe you are just affected by late payment from clients and bad debts.
You seriously need a boost to reduce or eliminate this financial gap. This is the same narrative in almost every business. For the longest time, banks have been the main sources of funds for businesses.
Despite such inefficiencies as longer application and approval time, they remain to be among the most reliable and affordable sources of business loans. In this article, we’ll find out which is the best bank for small business loans.
We’ll also show you other suitable lenders and some of the ways you can guarantee your approval. Check this out;
- Interest rate
- Amount
Wells Fargo
- 6.25% to 22.99%
- $10,000 to $100,000
Bank of America
- From 4.50%
- $10,000 to $100,000
JPMorgan Chase
- Not disclosed
- From $5,000
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
Pros and Cons of small business loan banks
| Pros | Cons |
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Multiple ways of financing – for small business loans you have multiple options to explore. You can either apply for term loans or equipment loans. A business line of financing, invoice financing, and cash advances are also available options for small businesses. You can also go for franchise or real estate loans. Qualification for each depends on the individual condition of a borrower |
Strict credit application process – banks are naturally known to be a little extra when vetting potential lenders. They hardly overlook even the smallest things. Most of them have very strict credit requirements that borrowers must meet to be considered for a loan. A credit score below 600 will hardly get you a loan from a bank |
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Lower rates – most small business loans are given as a result of the collaboration between the Federal government, private institutions, and lenders. Most small business loans are subsidized and meant to stir the growth of small businesses. As a result, they usually attract lower rates compared to other loans |
Longer approval – Banks could take weeks, even months to approve a loan. And, even after approval, it could take longer to have the funds wired to you. That is a shortcoming, especially if the funds were meant to fill urgent cash gaps in a business |
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Loans available for all businesses – small business loans are meant for both established and start-up businesses. Both develop cash gaps from time to time, and such need to be filled. Banks know that, too. |
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Fewer extra fees – Most banks hardly charge extra loan fees such as origination or early repayment fees. And for the few that do, they make sure that the amounts charged are affordable |
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Top 5 banks for small business loans
Different banks have different loan products suitable for different small businesses. The following are the top lenders;
Bank of America – Best Overall
Bank of America is a one-stop lender for most lenders. The lender offers both secured and unsecured loans. And it goes a step further to offer auto financing, which is not the case with most lenders.
The Bank of America also has special financing programs for businesses in the healthcare sector. Unsecured loans from this lender are known to attract among the lowest start-up rates in the market.
But on the flip side, small businesses can find it harder to qualify for loans here. however, you can still qualify for financing, especially if you are an existing customer. A credit score of above 650 gives you an upper hand.
The Bank of America offers small business loans ranging from $10,000 to $100,000 starting from a low APR of 4.75%. You’ll have between 12 and 60 months to repay your loan at a fixed interest rate.
Pros and cons
Pros
- Unsecured loans attract lower cost than other lenders
- The bank is available in all the 50 states in America
- The lender features a special program for healthcare providers
Cons
- Not preferred for SBA loans
- Small and new businesses may have trouble qualifying
Best for large loan amounts: US Bank
The list of the best banks for small business loans would be incomplete without the US Bank. This is one of the best lenders for SBA loans, equipment financing, lines of credit, and real estate loans.
US bank is among the most notable lenders for quick business loans. that would come in handy for day-to-day business expenses, equipment purchase, and when looking for funds to expand.
You can borrow up to $250,000 with this lender, and a repayment term of up to 7 years. The faster application process and subsequent approval are what earn the bank the title of the ‘King of Quick loans’.
Most business loans from the US Bank come with fixed interest rates and monthly repayments. But here’s the best part – there are no origination fees charged.
Pros and cons
Pros
- No origination fees charged
- High loan limits
- Faster application process and approval
Cons
High financial requirements
Capital One: Lowest APR
Capital One is a notable name that wouldn’t miss out on the list of top business loan lenders. They are best-known business credit cards, and best of all because they have among the lowest APRs.
They also have pretty good offers for all borrowers, from ones with poor to excellent credit profiles. Such include 0 annual fees.
From equipment financing to SBA loans, and business lines of credit, Capital One has it all. You can also get more options for traditional loans here. the broker also has much of its operations online so you can carry your bank with you wherever you go.
The lender has friendly rates and specifically tailored loan products for existing customers. They’ve invested heavily in small businesses and I’ve been offering heavy financial support.
You can borrow from $10,000, and the application and subsequent approval are simple and fast.
Pros and cons
Pros
- Low APR
- Highly flexible, you can carry your bank wherever you go
- Accommodates borrowers with poor to excellent credit scores
Cons
You should have existed for two or more years to qualify
JPMorgan Chase: Best for low credit score
JPMorgan has continued to give out billions of dollars to support small businesses for the longest time. It’s one of the biggest lenders of SBA 7(a) loans.
From SBA loans, real estate financing, and equipment financing, Chase has a wide range of financing options for small businesses. And, if traditional loans aren’t your thing, or what your business needs at the moment, then Chase has something for you.
You’ll love the multiple credit cards available for small businesses. And you can use the credit card as a loan which comes with additional benefits like reward points, easier qualification, and special interest rates.
Businesses can borrow from $5000 and repay for up to 7 years (fixed monthly repayments).
Pros and cons
Pros
- Easier application and approval
- Lower interest rates
- Higher loan limits
- Multiple credit card options for small businesses
Cons
- Lacks flexibility
Wells Fargo: Approval Guaranteed
Wells Fargo has been in existence for the longest time. It’s been serving as one of the best lenders for small business loans; mostly known for SBA 7(a), Express, and 504 loan programs.
The lender features a swift loan application and approval process so you can take care of your urgent business cash needs. you also have the option of either applying online or walking to their physical office.
You can apply from $10,000 to $100,000 at fixed rates of 6.25% to 22.99%, payable be in between 12 to 60 months.
Pros and cons
Pros
- Minimal loan fees
- Multiple business loan options
- Multiple customer discounts and other offers
Cons
- Online application reserved for existing customers only
Making the right choice with the lender is also crucial in making the right financial decision and getting a good loan product.
How to qualify
The financial markets and the US economy at large have had a hit since the onset of the pandemic. That has seen many banks close down, while the remaining few in operation downsizing. However, you can still qualify for a loan.
First off, you must be aged 18 years and above. You must also be a legal resident of the United States.
Other factors you should consider include;
- Relationship with the lender – most banks require that you must at least have been their existing customers before application. That ranges from 6 to 12 months with most banks
- Credit profile – Most banks will require that you have your credit score in the 700s. you, therefore, might want to take care of your unpaid debts, utility bills, and anything that might harm your score
- Strong revenue – how much your business makes in a year will play a crucial role in whether or not the bank will approve your loan. The bank, before lending you, will need to see that you can afford to repay your loan. Most will need to see at least $100,000 in annual revenue
- Collateral – most banks offer both secured and unsecured small business loans. You may, therefore, not necessarily need to offer your vehicle, house, or other valuable assets to qualify for a loan
Since most banks are strict, it would be a smoother experience with most lenders if your business has been operational for at least 6 months.
Alternatives to bank small business loans
If you don’t qualify for a small business loan from a bank, then the following options can come in handy;
- Online lenders – online lenders are known for faster business loan approval and funding. Most of them tend to approve loans more easily compared to banks and other lenders. They also tend to have lower interest rates, with a wide range of financing options including SBA loans. Since the application is online, they are highly convenient, fast, and flexible; you can apply for a loan and get it at the comfort of your couch
- Community banks – smaller less-known banks tend to approve business loans more easily than the big names. Most of these small banks are looking to attract more customers hence the higher loan approval rate. The only problem is that most of them tend to lack the extra benefits that come with bigger brands such as having multiple locations
- Microlenders – non-profit organizations also offer microloans. These would especially come in handy for new businesses. Since most banks don’t approve loans for businesses that haven’t been operational for at least a year, micro-lenders can come in handy. They offer loans of up to $50,000 with short repayment terms. The costs tend to be higher than those of traditional banks, though.
Frequently Asked Questions (FAQ)
The most critical step would be to first go through different banks’ policies and requirements. see if you meet them. Rather, search for banks with more friendly requirements. Once you find a suitable lender, submit a formal application. This can either be done online or physically at the branch, depending on the bank in question.
Of our chosen lenders, Bank of America offers some pretty decent rates. However, don’t be confined by this. A closer and thorough look at other lenders might just prove this statement wrong. Focus on getting a suitable lender with the best rates and more friendly loan terms.
Most banks offer small business loans. The table above has some of the best lenders in the market. They offer loans at reduced rates, have flexible terms, and less strict application and approval. Community banks, online lenders, and credit Unions also have some good offers for business financing
Most banks offer small business loans to borrowers with their credit scores in the 700s. However, some lenders would go lower. Typically, with a credit score above 650, you’ll be safe.
SBA loans, business lines of credit, and business credit cards are the most common sources of business financing. Check them out.
