Small Business Loans - Compare Loan Types and Start Your Application (2024)

FAQs

What type of loan is best for starting a business? ›

Term loans are the standard business loan option for both established businesses and startups. They meet individual expenses and are repaid over time — usually five or more years. You can use a term loan for many costs, such as buying new equipment or expanding your business. They may be secured or unsecured.

SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.

The 7(a) Loan Program, SBA's primary business loan program, provides loan guaranties to lenders that allow them to provide financial help for small businesses with special requirements. 7(a) loans can be used for: Acquiring, refinancing, or improving real estate and buildings. Short- and long-term working capital.

SBA-qualified lenders usually set their own criteria when assessing your eligibility. Most lenders will require a minimum FICO score of 620 or higher for their SBA Loans.

There's no industry-wide credit score requirement for small business loans. Still, a higher credit score of 700 or above generally means you'll be eligible for funding with more attractive terms.

The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.

Obtaining a loan for your business can be challenging, especially when you are required to put collateral on the line. The Small Business Administration (SBA) is a great resource for business owners because it provides financing opportunities without the need for collateral.

While there's no official required SBA loan minimum credit score from the Small Business Administration, lenders will often set minimum credit score requirements for both personal and business. An SBSS of 140 to 160+ or a personal score of 620 to 640+ are commonly needed to qualify.

How much can I realistically get for a small business loan? ›

How much of a business loan you can get depends on your business's annual gross sales, creditworthiness, current debts, the type of financing, and the chosen lender. In general, lenders will only provide loans up to 10% to 30% of your annual revenue to ensure you have the means for repayment.

The Q4 2023 Small Business Lending Survey found that large banks approved the least amount of business loans, with approval rates at 49 percent. Small banks were significantly more likely to approve loans, with approval rates at 89 percent.

Any assets you pledge should be worth at least as much as the amount your business wants to borrow. In other words, if you want to take out a $100,000 secured business loan, you may need to provide $100,000 worth of collateral to back the financing.

Many statistics say that large banks approve SBA loans at rates as low as 20-30%, while smaller banks approve SBA loans at around 40% or less. All this to say: SBA loan approval rates hover at half or below all loan applications that are submitted.

Your business can get an SBA 7(a) loan for any amount of up to $5 million. The loan has no minimum, which is good news for small businesses.

Getting a loan for startup money is, in fact, possible. But, you'll have to produce a well-researched business plan to get any consideration from lenders. It's likely you'll also have to personally guarantee the amount you borrow for your business or offer collateral.

The U.S. Small Business Administration (SBA) has several programs to help finance small business loans. Many SBA loan programs combine business coaching and technical assistance, as well as access to financing, on more flexible terms. One example is the 7 (a) Loan Program, SBA's most widely-used loan guarantee program.

Many small business owners need help funding their business when they are starting out, growing, or experiencing cash flow problems. They may ask, “Can I make a loan to my LLC?” The answer is often yes: Entrepreneurs may be able to use their own money to found a business or help keep their businesses afloat.

Your startup, though, may not even have a business credit score yet. If that's the case, lenders will rely on your personal credit score and report. Although requirements vary, you'll generally need a high credit score to get a business startup loan.