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Business Loans: What You Need To Know

It’s not unusual to need a business loan to cover expenses you can’t handle with your current budget. Seasons and circumstances change, impacting daily cash flow and your ability to support continued growth. Before approaching a lender, educate yourself on the types of loans available, the terms you can expect, and what documentation will be required to determine eligibility.

What Are the Types of Business Loans?

Business Loan Type
Best For
Secured loans
Companies with property to put up as collateral
Unsecured Loans
Good credit scores
Line of credit
Ongoing working capital expenses
Merchant Cash Advance
Good credit, low risk
Accounts receivable
Outstanding invoices, short term debts
Equipment loans
Necessary equipment to grow business
Construction loans
Expansion or new facility
Invoice factoring
Filing cash flow gap

Lenders offer a variety of loans for businesses depending on what the money is going to be used for and how companies are able to guarantee payment.

  • Secured loans require collateral to back up the amount of the loan, meaning you could lose what you put up if you fail to pay in full.
  • Unsecured loans are granted to companies with solid credit ratings and may offer lower interest rates than secured loans.
  • Lines of credit work like a credit card, allowing you to borrow against a set amount as needed and only requiring interest payments on the money you use.
  • Merchant cash advances are based on your volume of monthly credit card sales and are paid back using a percentage of each future sale.
  • Accounts receivable loans use outstanding invoices as collateral to help pay off short-term debts.
  • Equipment loans are granted specifically for the purchase of new equipment, using what you purchase as collateral.
  • Construction loans provide funding to expand your existing location or build a new facility, and the building is considered collateral.
  • Invoice factoring lets businesses with rigid cashflow constraints operate more flexibly by providing them with access to the funds they require until invoices are paid in full.

Each loan type has a specific payment structure, term length, and interest rate. Some are more difficult to qualify for than others, and most require you to present detailed paperwork when applying.

The Top 3 Business Loan Providers

1. LendingTree

  • Ideal for:
    LendingTree is ideal for small businesses looking to shop for a more personalized financing solution.
  • Funding Amounts:
    LendingTree offers lines of credit from $2,000 to $1,000,000.
  • Minimum Requirements:
    LendingTree is a loan marketplace that offers a variety of loans from different lenders, therefore minimum time in business and monthly revenue will change according to lender.
  • Repayment Terms and Fees:
    LendingTree offers long or short-term loans with loan terms that can range from 5 months to 10 years or more. Customers can find loans and financing with APRs as low as 5.00%, though the upper range depends greatly on the lender extending the financing and the business’s specific circumstances.
  • Funding Time:
    The in initial application process for LendingTree takes less than 5 minutes to complete and customers match with up to 4 lending results in seconds.
  • Bottom Line:
    LendingTree’s expansive network of lenders helps businesses find the appropriate financing solution. A simple application and matching process enables businesses to quickly go from shopping to funding, giving them the ability to quickly finance an expansion. Though LendingTree is not a direct lender, its positioning between borrowers and lenders helps connect companies to the proper financing choice that is most likely to help them grow and cover funding needs as they arise. Read more about this lender in LendingTree’s in-depth review.

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2. Lendio

  • Ideal for:
    Lendio is ideal for businesses with less than stellar credit who want to fill out one loan application and get offers from multiple lenders on a number of different loan types.
  • Funding Amounts:
    Lendio is a network for lenders that offer loans from $1,000 to $2 million for a variety of business needs.
  • Minimum Requirements:
    To qualify for a loan from Lendio, you must be in business for at least 6 months and have $8,000 in monthly revenues. There is no minimum credit score requirement, although individual lenders may have their own credit requirements.
  • Repayment Terms and Fees:
    Lendio works with lenders who offer APRs from 0% to 30% with 1 to 5 year loan terms on traditional business loans.
  • Funding Time:
    Lendio's online application process is quick and easy, particularly because only one application must be filled out for multiple lenders. Once you’ve been approved, funding can be obtained in as little as a few days, depending on the individual lender.
  • Bottom Line:
    Lendio is an entire marketplace of lenders competing for your business. By filling out a single application you can see what type of loans you’re eligible for and which lenders are competing for your business. You’ll have a selection to choose from, allowing you to shop around for the best APR and most favorable repayment conditions. Our full-length review of Lendio  provides more details about this great lender.

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3. Kabbage

  • Ideal for: 
    Businesses that want a quick, easy-to-attain line of credit for their business, which they can access by way of the company’s “Kabbage card.”
  • Funding Amounts: 
    Kabbage can provide a line of credit from as little as $2,000 up to $250,000 for your business, and you only pay back what you use. Minimum Requirements:
    Kabbage doesn’t require a minimum credit score, rather, it takes a holistic view of your business performance to determine how much funding to provide. You must have been in business for at least one year and have a minimum of $50,000 in annual revenue or $4,200 per month for the past three months.
  • Repayment Terms and Fees:  
    Kabbage offers two repayment terms - 6 months and 12 months. With the 6 month plan you’ll pay ⅙ of the loan every month, and with the 12 month you’ll pay 1/12 each month. Fees range from 1.5% to 10% based on your business performance. For example, if you have a $10,000 loan at a rate of 4%, your fee will be $400 per month.
  • Funding Time: 
    Kabbage promises to provide funds quickly, and that this is central to the company’s goal of quickly connecting small businesses with capital. The company says the entire application process can take 10 minutes or less and that funds can be deposited within your account in up to 3 days.
  • Bottom Line: 
    Kabbage is a good option for businesses that are looking to increase their cash flow, and for whom a $250,000 limit isn’t a hindrance. Applying is easy and approval doesn’t rest solely on having a superb credit rating - though this can be reflected in the fees, which can be costly. The company also provides users with a handy “Kabbage card” which they can use whenever and wherever they need it, making cash flow issues less of a pain. Read more about Kabbage in the comprehensive review.

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Applying for a Small Business Loan 

When seeking financing for growth or to cover gaps in cash flow, small businesses have a surprisingly easy pathway to funding thanks to the tailored loan solutions available. Unlike traditional loans extended to enterprise level companies, small business loans are easier to access, quicker to apply for, and have friendlier terms for repayment.

Finding the right loan is not a problem thanks to the rise of financial services providers and new companies that offer quick funding and straightforward approval processes. Additionally, the requirements many companies set for approval tend to be much accommodating for small businesses.

Unlike enterprise-level loans, which are usually extended by large banks, small businesses have different options when seeking financing which can be much more beneficial. Aside from banks, small companies can take advantage of federal loans such as Small Business Administration loans, work with credit unions, or even consider online alternative lenders.

For these online lenders, working with smaller companies is more useful considering they can be growth partners and create lasting working relationships. Additionally, these lenders often provide different forms of financing outside of traditional loans, which are better suited for some businesses. Services such as invoice factoring, lines of credit, and equipment loans can help small businesses more as they provide a targeted influx of capital. These financing types offer flexibility and let smaller companies take loans without putting themselves at a disadvantage.

Generally, lenders are looking for small businesses that meet the following requirements:  

  • Companies whose owners have good to excellent credit
  • A proven flow of income that can be used to repay the loan, or financing extended
  • More than one year in operation, although this may vary from lender to lender
  • In some cases, proof of collateral that can be used to secure the loan
  • A plan for investing the capital being extended

Requirements will vary between the different alternative online lenders, but small business loans are a great way for expanding companies to find the funds they need to sustain growth and help them reach performance targets.  

How Do Business Loans Work?

Acquiring a business loan can be more difficult than obtaining funding for other purposes. Business loans represent a big risk to lenders because of the volatility of the consumer market. Although marketing analytics are making it easier to predict customer behavior, many unknown variables still affect business cash flow and profits. This is another reason why banks want to know exactly what you plan to do with the loan should your application be approved.

When applying for a loan, you’ll discuss terms, interest rates, and other details with the lender. It can be a long process requiring a lot of detailed financial information from both personal and company accounts, and you’ll likely need to speak with more than one lender to find the right fit.

Remember, a loan is a binding agreement for a given period of time, and once you sign the documentation, you’re committed to paying the money back according to the agreed-upon terms. Make sure you know exactly what you’re getting into before the loan is finalized.

Questions to Ask About Business Loans

Because of the time and expense involved, consider whether you actually need a business loan and if it will benefit your company before applying. If you determine that a loan is necessary, prepare a list of questions to bring along when you compare loans from different lenders. Your list should help you narrow down your choices to banks and other lending institutions offering options closely aligned with your business needs. You may want to ask:

  • If the lender has experience lending to your type of business
  • How much the lender typically loans to businesses of similar size
  • Who is in charge of application review and approval
  • What documentation is required to apply for a loan
  • How long a typical application-and-approval process lasts
  • Whether interest rates are fixed or variable
  • If there’s a penalty for paying the balance off early

How to Apply for a Business Loan

Once you decide what type of loan you need, your lender will request certain documents and financial records to determine if your business qualifies. These documents may include:

  • A business plan showing your intentions for the loan
  • Tax returns for your business
  • Three to five years of company revenue figures
  • Personal and business credit information
  • Personal and business bank statements
  • Cash flow history and future projections
  • Business licenses and certificates
  • Current profit and loss statements
  • Detailed resumes of key executive staff members
  • Franchise, partnership, and other legal agreements

The lender will review this information along with your application. However, before taking the time to gather such an extensive amount of paperwork, review the specifics of the loan one more time. Ask questions about anything you still don’t understand, and be ready to move on to another lender if something doesn’t sound right. If the cost of the loan is more than the benefit you’ll get from it, you’re better off seeking alternative options.

A business loan can give your company the boost it needs to make it through a difficult time or fund growth to catapult you to future success. Talk to a variety of lenders before making your final decision to find the terms and conditions compatible with your financial situation. Structure your budget so that you stay on top of loan payments to ensure your business winds up stronger and more profitable once the balance is paid off.

On this page, you’ll find a list of some of the highest-rated lenders in the industry. Check out their reviews , compare their features, and find the lender that’s best suited to meet the needs of your business.

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Credit Score
Business owners with higher personal FICO scores may qualify for better loans
  • Poor (350-629)
  • Fair (630-689)
  • Good (690-719)
  • Excellent (720-850)
Monthly Rev.
Businesses with more revenue often qualify for better loans
Age of Business
Older businesses usually qualify for better loans than new businesses
  • 1-2 years
  • 2 or more years
  • Starting a business
  • Less than 1 year
Loan Amount
Larger loan amounts are usually harder to qualify for
  • Less than $10,000
  • $10,000 - $24,999
  • $25,000 - $199,999
  • $200,000 - $499,999
  • $500,000 - $1M
  • $1M - $2M
  • More than $2M
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