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Small Business Loan Reviews

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  • Kabbage Review

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    Pros Suited for small businesses Relaxed borrower qualifications No additional fees Fast application process Cons Unsuited for startups Potentially high APRs Overview Founded in 2009, Kabbage is an online lender that offers lines of credit to eligible businesses. Originally, the company only worked with online retailers, but they’ve expanded their reach to service brick-and-mortar businesses as well. Finding […]

  • Direct Capital Review

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    Pros Low factor rates Good public reputation Cons Opaque terms and fees Stringent borrower qualifications Overview Direct Capital is a New Hampshire-based online funder serving small businesses. The company offers three categories of financing: working capital, equipment financing, and franchise financing. This review will focus on Direct Capital’s working capital line. Direct Capital makes a […]

  • Kickfurther Review

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    Pros Good for popular brands Low fees No paid subscription required Cons Makes sense only for certain retailers Many investors have lost their investment Inadequate help materials Overview A few weeks ago, I wrote an article about the primary forms of business crowdfunding — Rewards, Equity and Debt — and how they work. Well, forget […]

  • IOU Financial Review

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    Pros Suited for small business Relaxed credit score requirements Transparent terms and fees Cons High origination fee Some additional fees Overview IOU Financial is a short-term lender serving small, profitable businesses. The Georgia-based company has provided nearly $400 million worth of funding to businesses throughout the country since 2008. As a short-term lender, IOU’s processes […]

  • Strategic Funding Source Review

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    Pros No credit score requirements Good customer service 2-7 days time to funding Cons Fair public reputation Moderate factor rates Opaque terms and fees Overview Strategic Funding Source is a New York City-based online funder of small businesses. Like similar companies, it offers capital on the basis of a business’s profitability rather than its credit […]

  • Backed Review

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    Pros Suited for startups Relaxed borrower qualifications Competitive terms and fees Easy application process Cons Only available in six states Typical time to funding: 1 – 4 weeks Unsuited for large businesses Overview Any business owner can tell you that starting a business isn’t easy. Unless you’re independently wealthy, there comes a point when you just […]

  • ApplePie Capital Review

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    Pros Suited for franchises Relaxed borrower qualifications Competitive terms and fees Excellent customer support Cons Unsuited for non-franchise businesses Potentially long application process Overview Taking its name from CEO and co-founder Denise Thomas’s famous dessert, ApplePie Capital is an online lender that specializes in franchise financing. I’m normally more of a donut person myself, but […]

  • CapFusion Review

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    Pros Relaxed credit score requirements Low factor rates Cons High origination fee Fair public reputation Overview CapFusion is a Kansas-based alternative lender. Companies like CapFusion eschew the focus on credit ratings favored by traditional banks and look instead at your monthly revenue. This allows previously overlooked businesses to access capital quickly, though at a premium […]

  • Dealstruck Review

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    Note: Dealstruck is no longer originating new loans (though they are continuing to service borrowers who already have a loan). For lenders similar to Dealstruck, take a look at StreetShares or Fundation. Highlights Mid-prime business lender Term loans Working capital loans Asset based lines of credit Inventory lines of credit Competitive rates and fees Excellent customer […]

  • Funding Circle Review

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    Pros Competitive terms and fees Few additional fees No prepayment penalty Excellent customer support Cons Somewhat long application process Somewhat stringent borrower qualifications Overview Funding Circle is an online lender that offers medium installment loans to established small- and mid-sized businesses. The company was established after one of the founders started a gym franchise and discovered how […]

What is a Business Loan?

A business loan is a way for merchants to secure funds without giving up equity or control of their company. Business loans are a type of debt financing, meaning the merchant takes on debt they must repay in exchange for access to immediate funds.

There are many types of business loans available, from traditional installment loans to invoice financing and business lines of credit. Some types work better than others depending upon the business’s history, financial situation, and assets.

Types of Small Business Loans

Below are descriptions of the most common business loan terms and types you may find during your search for a loan. Which is best for your business?

Bank Loans

Banks loans are, simply, business loans originated by a bank. Banks may offer many types of business financing, including installment loans, lines of credit, and equipment loans. These institutions can normally offer the best rates and fees, but also have a reputation for low acceptance rates and very long application processes.

Bank loans are alternately referred to as traditional financing or traditional business loans.

Business Expansion Loans

These are loans used to purchase and open additional business locations. Most business expansion loans are installment loans, but some businesses may use lines of credit if they do not know exactly how much the project will cost.

Equipment Loans

These are loans used to purchase equipment. Normally, the lender will loan about 80% of the cost of the equipment, and the merchant is responsible for paying the remaining 20%. Equipment loans are an alternative to leasing or purchasing equipment outright.

Installment Loans

Also commonly called term loans, installment loans are loans repaid in fixed, regular installments over a set period of time. The repayment period for business installment loans is normally between one and 10 years, though some lenders will allow for shorter or longer terms.

Installment loans may also be called short-term loans (loans with repayment terms under two years), medium-term loans (repayment terms between two and five years), or long-term loans (repayment terms of six years or more).

Invoice Financing

A catch-all term that includes (among other non-loan financing products) loans that are backed by unpaid invoices. If you have cash flow problems caused by unpaid invoices, invoice financing may be for you.

Lines of Credit

Loans that grant you a credit facility from which you can draw any time without the need for application. These loans are convenient for businesses that have occasional cash flow problems, those that often have to deal with unexpected expenses, or any other businesses that need financing but don’t want to go through an application process each time. For our full list of line of credit reviews, head over here.

Online Loans

Also called marketplace loans or alternative loans, online loans are originated by a variety of non-bank lenders that utilize technology to make fast and easy lending decisions. Individual online lenders may offer products including installment loans, lines of credit, short-term loans, or other loan types, but are similar in that most can offer funding within two weeks or less.

SBA (Small Business Association) Loans

While SBA loans are usually originated by banks, the application process is handled by the Small Business Association itself. The SBA also guarantees a portion of the amount borrowed, which means these loans are often easier to get and require less collateral than standard bank loans.

Short-Term Loans

Unlike most loans, in which the fee is calculated by an interest rate, short-term loans carry a fee that is calculated once based on the original borrowing amount. As you would expect, short-term loans carry short term lengths; normally they are intended to be repaid in under two years, but some lenders allow term lengths up to three.

Head over here for a list of all our reviews of short-term loans (and their non-loan counterpart, merchant cash advances).

Startup Loans

Quite simply, these are loans used to finance startups. As startups are very risky, there are very few lenders that will finance this type of business. However, entrepreneurs may be able to get a loan through certain nonprofits or by utilizing their personal creditworthiness to get a personal loan for business.

Working Capital Loans

These loans are used to cover business operating costs while business funds are tied up elsewhere.

Are You Eligible For a Loan?

Eligibility for a loan is contingent upon a number of different factors; lenders cannot make the final decision about whether or not you’re eligible, and what rates they can give you, until they have performed the full underwriting and verification process. However, lenders can look at a few business factors to determine whether you have a good chance of getting a loan from their company.

Here are four big factors lenders will look for when deciding if your business is eligible for a loan:

  • Time in business: Lenders want to be able to see that your business has successfully been operating for some time.
  • Personal credit score: You must have a track record of making payments in a timely manner.
  • Business revenue: Your business has to be making enough money to meet the incremental payments. Many lenders will not let you borrow more than 15% – 18% of your total business revenue.
  • Collateral: In the event that you can no longer pay, some lenders want collateral so they will be able to recoup the lost money. While plenty of lenders do not require collateral (or don’t require specific collateral) businesses that can put up collateral will find the search for a business loan much easier.

Each lender has different requirements regarding each of these categories; the stronger your case, the more lenders you will have access to. However, most businesses will have access to some form of business loan.

Each of our reviews list the borrower qualifications for individual lenders, so don’t spend your time considering lenders you aren’t yet qualified for!

For more information on the business loan process, take a look at our Small Business Loans 101 series:

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