The Best Low-Interest Small Business Loans For 2020
Whether you need extra capital for emergency expenses, or you’re ready to expand, a small business loan may be the logical next step for your business. Before you fill out that application, though, you need to consider the total cost of borrowing. One of the most crucial factors in determining the cost of your loan is your interest rate.
While fees, your total borrowing amount, and the repayment terms of your loan also contribute to your payment amounts and the total cost of your loan, interest rates play a significant role in determining your cost of borrowing.
The lowest interest rates are reserved for the most creditworthy borrowers that have established businesses with stable revenues. However, even the most qualified business can get sucked into a high-interest loan if the business owner doesn’t know where to look. The promise of instant approvals, quick funding, and low paperwork requirements make it easy to sign on for a loan that’s too expensive.
Before you fall into that trap, hit the brakes and consider your options. We’ve done the heavy lifting already by compiling our list of the best low-interest small business loans. From personal loans for business to Smart Business Administration loans made easy, read on to learn more about the most affordable loan options to consider in 2020.
Learn More About Our Top Picks
| Company | Summary | Next Steps |
|---|---|---|
 | Low-cost SBA loans for small businesses with a strong borrowing profile | |
 | Low-cost installment loans and lines of credit with a somewhat fast application process for businesses that at least a year old | |
 | Installment loans and lines of credit with a fast application process for businesses that are at least a year old | |
 | Fixed-rate loans and lines of credit with a fast application process for businesses that are at least a year old | |
 | Low-cost installment loans for businesses that are at least two years old |
Other Featured Options:
- BlueVine: Invoice factoring, installment loans, and lines of credit for businesses that are at least six months old
- LoanBuilder: Fixed-rate loans with a fast application process and customizable loan options
- Accion: Nonprofit financing for young businesses
- Breakout Capital: Fixed-rate loans and invoice financing for small businesses
Read more below to learn why we chose these options.
1. SmartBiz
SmartBiz
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It’s no secret that qualifying for a Small Business Administration loan is difficult. The process can be long and arduous, but qualified borrowers get rewarded with extremely affordable and flexible loans with long repayment terms.
While SBA loans are available through banks, credit unions, and other traditional lenders, more people are turning to online intermediaries to simplify and expedite the process. One of the most popular online SBA lenders is SmartBiz.
Through SmartBiz, you can apply for a working capital/debt refinancing or commercial real estate loan.
With a SmartBiz working capital/debt refinancing loan, you can apply for $30,000 to $350,000. APRs are between 9.02% and 10.26%, with repayment terms of up to 10 years. Loan proceeds can be used to purchase inventory or equipment, launch a marketing campaign, pay operating expenses, or hire more employees. You can also use your funds to refinance high-interest business debt. You may receive funds as quickly as seven days after approval.
To qualify, you must be in business for at least two years. You must have a personal credit score of at least 650 and enough cash flow to cover your new loan payment. Your credit report must also be free of bankruptcies or foreclosures within the last three years, outstanding tax liens, and prior defaults on government loans.
For your business expansion, SmartBiz also offers SBA loans for commercial real estate. You can borrow from $500,000 up to $5 million with APRs of 6.62%-6.66%. Repayment terms are up to 25 years. Loan proceeds can be used to purchase commercial real estate or refinance your existing commercial mortgage. You can receive funding as quickly as 30 days after credit approval.
To qualify, you must be in business for at least two years. Your personal credit score should be at least 675, and you must have enough cash flow to pay your loan payments. The property being purchased or refinanced must be at least 51% owner-occupied. Your credit report must be free of bankruptcies or foreclosures within the last three years, outstanding tax liens, and past defaults on government loans. This type of loan cannot fund investment properties and new construction.
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2. Fundation
Fundation
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Banks and credit unions offer some of the most competitive terms and fees. However, many qualified business owners avoid these loans due to the long and sometimes difficult application process and the time it takes to receive funds. Alternative online loans are more convenient, but those come at a higher cost, right? Not with Fundation.
Fundation offers installment loans and lines of credit with rates and terms comparable to bank loans. These products are available to the most creditworthy borrowers, and if you qualify, you can receive an affordable loan much sooner (weeks or even months sooner) than you’d get from a bank.
With a Fundation installment loan, you can apply for $20,000 to $500,000 to be repaid bi-weekly over terms of one to four years. Fundation’s APRs range from 7.99% to 29.99%.
Fundation’s lines of credits are available in amounts from $20,000 to $100,000. Repayment terms are monthly for 18 months. APRs are 7.99% to 29.99%, and you must pay a $500 closing fee and a 2% draw fee.
To qualify for either financial product, you must have a personal credit score of 660 and annual revenue of $100,000. You must be in business for at least one year and have a minimum of three full-time employees.
The time it takes to receive your funds is significantly shorter than it would be with a traditional bank loan; most borrowers receive their funding within two to seven days of submitting their applications.
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3. StreetShares
StreetShares
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StreetShares is an online lender that offers short-term installment loans and lines of credit. This lender is veteran-friendly, but you do not have to be a veteran to apply.
StreetShares’ installment loans are available in amounts from $2,000 to $100,000 with repayment terms of three to 36 months. Installment loan APRs start at 7% for the most creditworthy borrowers, with rates up to 39.99%. Your installment loan is paid back through weekly payments.
You can also apply for a line of credit from $5,000 to $100,000. Repayment terms are three to 36 months. Lines of credit have APRs of 7% to 39.99%. With each draw from your line of credit, you’ll pay a fee of 2.95% of the total borrowing amount. Line of credit draws get paid back through weekly payments.
To qualify for StreetShares’ financial products, you must be in business for at least one year, and a minimum revenue of $25,000 is required. You can only borrow up to 20% of your annual revenue. You also need a minimum credit score of 620 to qualify.
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4. OnDeck
OnDeck
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Through OnDeck, you can apply for a term loan or line of credit for your business. You can receive your approval decision in just minutes with no impact to your credit score. With OnDeck’s financing, you could have the money you need in your bank account in as little as 24 hours.
OnDeck offers term loans up to $500,000 for any business expense. For short-term financing needs, such as inventory or seasonal hiring, you could qualify for a short-term loan with terms of three to 36 months. These loans come with fixed monthly fees between 0.4% and 0.43%. This makes OnDeck’s loans a little harder to compare against some of its competitors that will frequently give you a flat fee for the entire term. To find out the total amount you’d owe, multiply your monthly fee by the number of months in your term.
OnDeck’s term loans have an origination fee of 0% to 4%. Fixed daily or weekly payments get deducted from your business bank account. To qualify, you must be in business for at least one year, have at least $100,000 in annual revenue, and have a personal credit score of at least 600. The most creditworthy borrowers will receive the lowest rates.
If you want more flexible financing to use as working capital, cover payroll, or pay for emergency expenses, apply for OnDeck’s line of credit. Lines of credit are available up to $100,000, and the APRs range between 11% and 57.9%. There are no draw fees, but a monthly maintenance fee of $20 is required. However, this fee is waived for six months if you withdraw at least $5,000 within five days of opening your line of credit. Weekly payments are automatically deducted, and maximum repayment terms are 12 months.
To qualify for an OnDeck line of credit, you must be in business for at least one year. You must also have at least $100,000 in annual revenue. The minimum credit score required to qualify is 600.
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5. Funding Circle
Funding Circle
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For many business owners, peer-to-peer lending has opened up new opportunities to receive affordable loans. If you’re looking for competitive interest rates, one of the top choices is Funding Circle.
Through Funding Circle, you can borrow from $25,000 up to $500,000 with repayment terms between six and 60 months. Interest rates for the most creditworthy borrowers start at just 4.99%. Less creditworthy borrowers may qualify for rates up to 22.99%.
Funds from a Funding Circle loan can be used for any purpose. These loans are particularly popular with franchise owners.
To qualify, you must be in business for at least two years. Your personal credit score must be at least 620. Borrowers with higher scores will be eligible for the lowest interest rates. Most borrowers receive their funds within ten days of applying with this lender.
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6. BlueVine
BlueVine
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BlueVine may be known for invoice factoring, but it also offers short-term loans and lines of credit to qualified businesses.
A BlueVine term loan will allow you to borrow up to $250,000, at a term length of either six or 12 months. Interest rates start at 4.8%, but there’s no origination fee.
BlueVine offers two types of lines of credit, one lasting six months, the other 12 months. The lender can extend you a credit line of up to $250,000 with a draw fee between 1.6% and 2.5%. Depending on which line of credit you get, interest rates are calculated weekly (0.3%-1.5% in the case of a six-month line of credit), or monthly (1.5%-6.5% for a 12-month line of credit).
To qualify for a term loan or a six-month line of credit, you’ll need to have been in business for six months and have a credit score of 600. For a 12-month line of credit, you’ll need to have been in business for two years and have a credit score of at least 620.
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7. LoanBuilder
LoanBuilder
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PayPal’s LoanBuilder is a service that allows you to “build” a business loan with the borrowing amount and terms that work for your business. LoanBuilder is available to borrowers with credit scores as low as 550. Borrowers with high credit can get approved for higher amounts with lower fees.
LoanBuilder is a bit different from some other lenders on this list because its loans do not have an annual interest rate. Instead, you’ll pay one fixed fee for borrowing.
LoanBuilder loans are available in amounts from $5,000 to $500,000, and you can receive funds as soon as one business day after approval. There are no origination fees or hidden fees. Instead of interest, you’ll pay one fixed fee starting at just 2.9% of the borrowing amount. Less qualified borrowers may qualify for loans with fees up to 18.72%.
To qualify for a LoanBuilder loan, you must have been in business for at least nine months and a minimum annual revenue of $42,000. You must not have any open bankruptcies on your credit report, and your personal credit score should be at least 550, although the lowest fees are reserved for borrowers with good to excellent credit.
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8. Accion
Accion
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Accion is a nonprofit lender with low barriers to entry for small businesses, particularly those falling into one of its specialty areas. Initially, the organization specialized in offering microloans and financial education to low-income communities across the globe. Since then, Accion has continued its mission to improve local communities by lending capital to startups and other businesses that may not qualify for other lending options.
To qualify, you’ll just need a credit score of 575 (550 in some places), enough cash flow to be able to repay your loan, and be up-to-date on your bills.
Accion offers loans from as small as $300 to as high as $1 million. APRs range from 7% to 34%, which takes into account a 3% to 5% origination fee.
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9. Breakout Capital
Breakout Capital
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Businesses having a hard time qualifying for a loan may want to check out Breakout Capital. It offers two products: a business loan and a loan that combines elements of invoice factoring called FactorAdvtange.
Both products have terms of up to two years and fixed fees that start at 1.25% per month. While this rate can get expensive pretty quickly, Breakout Capital will give you a discount if you pay your loan off early. You can borrow up to $250,000 with the business loan product or $500,000 with FactorAdvantage.
To qualify for the loan, you’ll need to have been in business for a year and have a credit rating of 600+. Because it’s backed by your invoices, there are no similar prerequisites for FactorAdvantage.
Get Started with Breakout Capital
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Low-Interest Financing For Business Startups
Even with good credit, you may run into challenges when applying for small business loans as a startup. That’s because most lenders — particularly those that offer loans with competitive rates — require a minimum time in business and annual revenue. If you’re a new business just getting off the ground, are you stuck with loans with less-than-desirable rates and terms?
While you may not qualify for some business loans, there are low-interest options for business startups. If you have a high personal credit score, one of the best ways to fund your business is with a personal loan for business. With a personal loan, your personal credit score and income are factors for approval. If you meet a lender’s requirements, you can score a low-interest personal loan to cover your startup costs. Some lenders have restrictions on how funds get used, so make sure you only apply with lenders that don’t restrict personal loans for business use. Check out our comparison of top personal loans for business to get a side-by-side overview of the low-interest options available to you.
For smaller capital needs, consider applying for a microloan. Many nonprofits provide microloans up to $50,000 for qualified startups. One loan to consider is the SBA Microloan program, which is available through nonprofit intermediary lenders. Loan amounts up to $50,000 are available for qualified small businesses, although the average microloan distributed is $13,000. SBA microloans can be used to purchase inventory, supplies, or equipment. Loans can also be used as working capital. Repayment terms of up to six years are available, and interest rates are around 8% to 13%.
Some startups may also qualify for small business grants, which provide funds that don’t have to be repaid. Before you apply, know that competition is very tough, and most traditional small businesses won’t qualify. However, there are grants available for innovative companies, businesses located in rural areas, or businesses that are owned by women, veterans, or minorities. Learn more about qualifying for startup grants.
Compare Offers From Multiple Lenders With Lendio
Any smart business owner knows you have to shop around to find the best rates and terms. But filling out multiple loan applications and comparing small business loans can be extremely time-consuming for the busy entrepreneur. This is when a loan aggregator comes in handy.
Think of a loan aggregator as a loan matchmaker. One of the most reputable is Lendio. With just one application, you’ll find the loans that are best for your business. You can apply for SBA loans, short-term loans, equipment financing, commercial mortgages, and other types of business loans through Lendio. Lendio works with a network of over 75 lenders, so you’ll be matched with the lender that offers the best rates and terms for your financial needs.
Final Thoughts
One of the most crucial steps in applying for and accepting a loan is to understand the total cost of borrowing. Even if you’re in a sticky financial situation, accepting a high-interest loan with lots of added fees can be financially destructive for your business. If you have a high credit score, there’s no reason to accept a high-cost loan. Explore different options and take the time to apply with a reputable lender to find the best loan for growing or launching your small business.
A Last Look At Our Top Picks
- SmartBiz
Summary - Low-cost SBA loans for small businesses with a strong borrowing profile - Fundation
Summary - Low-cost installment loans and lines of credit with a somewhat fast application process for businesses that at least a year old - StreetShares
Summary - Installment loans and lines of credit with a fast application process for businesses that are at least a year old - OnDeck
Summary - Fixed-rate loans and lines of credit with a fast application process for businesses that are at least a year old - Funding Circle
Summary - Low-cost installment loans for businesses that are at least two years old - BlueVine
Summary - Invoice factoring, installment loans, and lines of credit for businesses that are at least six months old - LoanBuilder
Summary - Fixed-rate loans with a fast application process and customizable loan options - Accion
Summary - Nonprofit financing for young businesses - Breakout Capital
Summary - Fixed-rate loans and invoice financing for small businesses
Erica Seppala
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