Find out how to get the best small business loan for you at a fair interest rate with top service.
Are you thinking about getting a small business loan? With so many loan options available, from online lenders to traditional brick-and-mortar banks and financial companies, identifying the best one for your business can be challenging.
- Should you get a bank loan from a traditional bank?
- Maybe you’re considering new business financing from a credit union.
- Perhaps youâre thinking about getting a startup loan from an online loan company.
In this article, Iâll identify the characteristics of the best and worst business lenders, so you know what to look for when you select a provider.
- What makes a business lender âbestâ
- What makes a business lender âNOT bestâ
- How Biz2Credit fits in
What makes a business lender one of the best?
Here are some practices, features, services, and other things that make small business lenders best-in-class.
Complete range of lending options
Your business loan company should provide you with many business financing options, not limit your choices. Some boutique firms specialize in one or a few types of loans. However, financing needs arenât one size fits all. You owe it to yourself to find a loan provider that can explore your options with you to get the perfect type of loan for your business needs. Some standard loan product options:
- Business lines of credit are great for companies that want to have cash available when they need it. The funds can be used to replenish inventory in a crisis or meet payroll in an emergency. You donât have to pay the money back until you use it. Be cautious about your use of a business line of credit. Interest rates can be relatively high compared with other financing types, and you may be required to pay the funds back fast.
- Commercial real estate loans are used to purchase or improve commercial property.
- Invoice factoring is also known as accounts receivable financing or invoice financing. It allows you to sell your outstanding customer invoices to a factoring company at a discount. The factoring company will give you a percentage of the total outstanding amount. Theyâre responsible for collecting payments from your customers. Once the factoring company has received the cash, they will release the rest of the funds owed to you, minus a factoring fee.
- Equipment loans are business loans that provide equipment financing allowing you to buy or lease things like computers, tools, and machinery without putting out any money upfront or making a down payment. These loans use the equipment as collateral. If you canât repay the loan, your loan provider will take your equipment.
- Term loans are given to you as lump-sum payments and you pay them back over a predetermined time, known as the term. They come with fixed or variable interest rates and repayment terms that vary. Short-term loans are a type of term loan used for immediate funding needs. They usually have lower interest rates and must be paid back relatively quickly. Long-term loans are used for more significant purchases and come with additional time to pay them back.
- Merchant cash advances are a form of business funding that allows you to get a one-time payment in return for a percentage of your future credit and debit card sales. You can typically get same-day financing, making this a good emergency option. However, rates for this type of financing can be very high, and you must make payments daily or weekly.
- Franchise loans provide upfront cash to pay franchise fees, legal fees, real estate costs, business expenses, and other costs related to operating a franchise location.
- Working capital loans provide financing to help businesses pay everyday expenses and improve their cash flow.
No one loan provider will offer all the loan types you may need, but if you want to build a long-term relationship with one, the better choice is a loan company that provides you with the most possibilities.
Offers Small Business Administration (SBA) loans
The SBA has programs that make it easier for small business owners to get financing because most of their loans are backed by guarantees from the agency. They also come with attractive interest rates and loan terms. The SBA offers financing, including the popular SBA 7 loans, for various business types and purposes. If a loan company doesnât have SBA loans, you limit your choices and possibilities.
Easy application process.
Many traditional lenders make it challenging to complete small business loan applications. The best online loan companies have made it fast and easy by developing streamlined online applications. You complete a form on their website and upload information like your business license, your business history, tax returns, bank statements, personal credit card and business credit card statements, and more. The lender will use this information, your personal credit score, business credit score, and other factors to determine your creditworthiness and see if you qualify for financing.
Most small businesses donât have days or weeks to wait for loan money to come through. The industry standard for applying for loans, qualifying for them, getting approved, underwriting, and getting funded has been reduced from weeks to one or two business days. Money can be deposited into your business bank account the same day in many cases.
If a financial firm tells you it could take weeks to get your loan money, move on to one that will get you cash when you need it.
Good online tools
Small business owners must understand the ramifications taking out a loan could have on their business finances and cash flow. The best loan companies provide calculators and other tools to help small business owners determine the loan amount they need and the maximum loan amount they can afford, which type of financing is right for them, the monthly payment they can handle, and an appropriate repayment schedule.
Offers loans to all types of small businesses
Some lenders require businesses to be structured as a limited liability company (LLC) or corporation to get a loan. Others need them to be in business for six months, a year, or more or to have achieved a certain level of annual revenue. They won’t work with startups that need a startup loan.
Itâs always easier to partner with a financial company that works with different types of businesses and can scale your lending relationship over time.
Provide benefits for long-time clients
Top lenders offer benefits for customer loyalty. Some may reduce interest rates, provide added services, and waive fees for long-term clients. If youâre thinking about working with a loan company for a while, you should see if theyâll offer you anything for your repeat business.
Conduct business how and when you want
The best financial firms make it easy to do business with them, whether online or over the phone, and with extended business hours. If you find it hard to connect with a loan provider â whether itâs to complete a loan application, ask questions, or check your loan status â find one that makes it simple.
Offers a grace period on loan payments
The best financing companies know small business owners are busy and make mistakes. Thatâs why they offer short grace periods for missed payments. They donât start charging extra interest or fees for a few days, giving you a chance to make things right. Bad loan companies use simple forgetfulness as an excuse to cash in on small business owner clients.
They offer support for you to succeed
The worst small business loan companies bet that your business could fail so they can take ownership of assets you put up as collateral. The best provide you with tools to succeed because when you win, the lender wins. Many loan companies offer blog articles, videos, tips on writing business plans, and other content that supplies information on how small business owners can manage their operations more effectively. They do this because they want those owners to pay off their loans, so their businesses grow to a point where they need additional financing to take their operations to the next level.
Targeted loan programs
Historically, many groups, including women, veterans, and minorities, have had difficulty securing small business financing. Today, the best lenders prioritize giving loans to people in these and other underserved segments. If youâre someone in one of these groups and need a loan, donât give up. Some top-tier lenders want to help out with microloans and other programs that can provide the financing you need to make your dreams a reality.
Superior ratings and reviews
In the end, the surest way to know a lender is among the âbestâ is to check ratings and reviews. They show you what their clients think about all aspects of working with them. The closer a loan companyâs ratings are to five stars, the more likely youâll be happy doing business with them.
What makes a business lender not one of the best?
Not all lenders are on the up and up. Many have business practices unfavorable to small company owners and provide service that makes it challenging to work with them. They also charge higher interest rates. Here are some characteristics of bad small business lenders.
Some lenders are bottom feeders specializing in providing loans to businesses with bad credit scores. The issue: They charge exorbitant annual percentage rates that can destroy a small business. If you find that a lender is offering you a loan with an extremely high interest rate, step away and get another loan offer, or donât get financing now. Wait until your business credit score improves and try again.
Some lenders offer low interest rates. However, they offset them with high â and hidden â fees. Itâs always worth reading the fine print of a loan offer to ensure youâre not forced to pay exorbitant â and unexpected charges, such as an application fee, origination fee, monthly maintenance fee, no draw fee, or prepayment or early repayment fees.
Requires a high-value business lien or personal guarantee
Itâs normal for loan providers to ask for collateral or a guarantee to back up a loan. It helps protect them against default, especially if a borrower has a poor or limited credit history. However, the collateral or guarantee shouldnât be extreme, or that could ruin a borrower. In some cases, you may be required to back up your loan with your entire business, not just some equipment, inventory, or other assets. If a shady loan firm asks for too much, you should find a more reputable provider.
Some loan companies are only licensed to do business in a limited number of states. This could be a problem If you ever grow your operation or expand your footprint. When seeking a loan, make sure a lending company can grow with you.
Poor online capabilities
Many traditional loan providers havenât updated their digital systems to meet the expectations of todayâs borrowers. This can result in a frustrating experience when it comes time to apply, make a payment, or access records.
If you prefer to do business digitally, make sure you work with an online loan company or one that has built systems that meet 21st-century expectations.
How Biz2Credit fits in
Biz2Credit is one of the few lenders willing to put the characteristics of the âbestâ and âworstâ small business loan companies in writing. Thatâs because we pride ourselves on how we do business. When you get financing from us, you can expect:
- To have access to the information you need to determine how large a loan you can afford to take out and the best type of financing and terms for you.
- A fast and easy application process.
- Great customer service.
- A range of loan types to meet most needs.
- The ability to scale with your business.
- Fair interest rates and loan terms.
- Information to help your business succeed.
- Reasonable fees.
- Specialized programs for underserved business owners.
- Great ratings and reviews.
- And much more.
You donât have to take our word for it. When you do your due diligence, youâll find Biz2Credit is among the best small business lenders, and youâll want to get your financing from us.