Learn more about small business loans

No matter whether you own a brand new business and are looking for funding to make your first major supply purchase, or if you’ve been in your industry for years and are searching for financing that will help you deal with a major repair, there is bound to be a kind of funding that’s right for you.

There are six common types of business financing, including online term loans, lines of credit, Small Business Administration loans, equipment loans, merchant and business cash advances. Choosing the one that’s right for you depends on your financial qualifications as well as the amount of cash that you need. Let’s take a look at the basics of each of type of funding.

Types Of Loans For Small Businesses

Online Term Loans

An online term loan is a form of funding that’s issued through an online lender or bank and is repaid on a monthly, weekly or daily basis over a fixed period of time.

Lines of Credit

A line of credit gives borrowers access to funding as they need it, up to a specific amount that is set by the lender. Credit lines differ from term loans in that the borrower only pays interest on the cash that they use, and can make multiple withdrawals before hitting the credit limit. This type of funding can be ideal for businesses that are looking to address cyclical expenses.

» MORE: Business Line of Credit Options

SBA Loans

The Small Business Administration (SBA) is a U.S. government agency that gives small business owners access to certain forms of funding. SBA loans have some of the lowest interest rates and most flexible repayment terms in the small business loan industry.

» MORE: Compare SBA Loans

Equipment Loans

Equipment loans are loans that are issued specifically for the purpose of buying new equipment or machinery. With this form of funding, the equipment purchase itself becomes the collateral for the loan.

» MORE: Equipment Financing Options

Merchant Cash Advances

With a merchant cash advance, a lender or financing company advances you a certain amount of money that you repay from a percentage of your daily credit or debit card sales, along with interest and fees. This is one of the more expensive and less regulated forms of business financing.

» MORE: Merchant Cash Advance Options

Business Cash Advances

A business cash advance functions similarly to a merchant cash advance, but is also available to businesses outside of the retail or merchandising industries.

How do you qualify for a small business loan?

When lenders evaluate your business loan application, they’re mainly taking a look at your personal and business credit report and history, your credit score, annual revenue, time in business and loan pitch. Having a credit score above 640, an annual revenue above $50,000 and at least two years in business will greatly increase your chances of being approved for a loan with an affordable rate. However, there are still many loans available to borrowers who don’t fit one or more of those qualifications.

» MORE: How to qualify for a small business loan

What is the easiest business loan to get?

Merchant cash advances are often much easier than traditional or online loans to obtain, because they’re repaid on such a frequent basis and are based on your short-term income. This option, however, can be more expensive than traditional or online loans.  

Lines of credit can also have lower financial requirements than some term loans, and sometimes offer lower rates. 

What credit score is needed for a small business loan?

Most lenders require a credit score above 640. However, some lenders only require a score of 500, while others do not have any credit score requirement whatsoever. If you have poor to average credit, it could be worth taking a look at a lender that offers a holistic application evaluation process instead of one that bases your approval primarily on your credit score.

Can you qualify for a small business loan with bad credit?

It is possible to qualify for a small business loan, even with bad credit. If you have bad credit, financing options like invoice factoring, lines of credit and merchant cash advances might be more accessible to you than traditional or online loans. However, there are also several term loan lenders that don’t require a minimum credit score. Your chances of approval might also go up if your business has a high annual revenue or has been operating for multiple years.

» MORE: Poor credit business loans

Can you get a business loan with no money?

Getting a business loan without having any cash in the bank might be difficult. However, if you have decent credit and your business is making a solid annual revenue, you can still find funding. In this case, having a cosigner with a strong financial history can also be helpful.

How can I get a business loan without collateral?

While many lenders do require some form of a personal guarantee or collateral, especially for large loans, it’s not always necessary. If you have a great credit score and strong annual revenue, a collateral requirement will be less likely. Additionally, for types of loans like equipment financing, the equipment that the funds are being used to purchase or lease will often serve as the collateral for the loan.

» MORE: Small business loans with no collateral

Do I need a downpayment for a business loan?

Most loans do not require a down payment. However, if you’re looking for financing for property expansion, commercial real estate loans often function like mortgages and do require down payments.

What is the best way to get a small business loan?

In addition to having a credit score above 640, at least two years in business and a high annual revenue, it’s also important to have a strong business plan and statement of purpose for the loan. Before starting the application process, make sure to research different lenders and their requirements, and establish how much financing you’re looking for, as well as the type of funding that’s right for you.

» MORE: How to get a small business loan in 5 steps

$500,000 Unsecured Business Loans

Here at PrimeRates.com, we have 3 lenders that offer $500,000 business loans. With a business loan this size there are many factors that go into what type of loan you can qualify for. It’s no surprise with a $500k unsecured business loan that your reoccurring payments will be substantially higher than much smaller business loans. We recommend lenders including OnDeck and FundingCircle for loans up to $500,000 or even $250,000.

We also have a variety of term loans ranging from $50,000, $100,000, $250,000, $300,000, and up to $500,000.

Conclusion

Different types of funding will fit various needs and types of borrowers. If you’re looking for a form of funding that can help you finance your cyclical expenses such as payroll or routine supply purchases, a business line of credit might be right for you. However, if you’re looking to make a one-time equipment purchase for your business, an equipment financing lender could help you secure a lower rate than with a traditional loan. No matter what your financial status is, make sure to evaluate different offers from multiple lenders before making a final decision on a loan.