Looking for the best small business loans online? You may not be sure what to expect, particularly if you’re a new small business owner and you’re applying for loans for the first time.
In this guide, we will discuss the basics of business loans, how they work, how you apply, and other such topics – and ensure you have all the information you need to get the business funding you need.
What Is A Small Business Loan?
It may be self-explanatory, but a small business loan is any loan made by a bank, credit union, online lender, or other financial institution to a small business owner.
These loans can be used for a wide variety of purposes, including opening new locations, buying new products, expanding service offerings, purchasing equipment, renovating offices, and much more.
In most cases, small business loans are a type of “unsecured” loan. This means that they do not require any collateral from you or your business. In other words, you don’t have to put up your assets to qualify for small business loans.
How Do I Apply For A Small Business Loan?
There are a few different ways to apply for a small business loan. Some business owners may choose to visit a local bank or credit union to apply in-person. But usually, finding a small business loan provider online and applying over the internet is faster and more convenient.
Online small business loans are usually more flexible than loans from traditional banks, and you can usually apply for a loan even if you have sub-par credit. It’s also easier to apply online, and you can do so from the comfort of your own home or business.
Regardless of the type of loan you apply for, though, you will usually need to furnish some personal and business information, such as:
● Social Security number
● Business Tax ID number
● Paper bank statements or a connection to your digital bank account
● Financial statements such as balance sheets, income statements, and P&L (profit & loss) statements
Using this information, the lender will determine if you qualify for a loan, based on things like your credit score, profitability, the length of time your business has been in operation, and other such factors.
How Long Are Small Business Loan Terms?
This depends on the type of loan you apply for. There are two primary types of small business loans.
● Short-term small business loans – Short-term small business loans usually have a repayment term of between 3 to 24 months, and usually have a slightly higher interest rate compared to long-term loans. You may want to take out a short-term loan to do things like stock up on inventory, purchase some new equipment, or cover payroll during a slow season.
● Long-term small business loans – This type of business loan usually has a higher loan limit and is issued for a term of 1-5 years. If you want a long-term source of funding for a large-scale expansion of your business, these are the best small business loans for you. With a long-term small business loan, you can renovate existing business locations, expand your operations, hire more staff as you grow, and take many other steps to build a more successful business.
What Interest Rates & Fees Will I Pay For A Small Business Loan?
There are two primary costs associated with small business loans.
● Loan origination fee – This is the fee charged by the lender to cover the costs of doing things like due diligence on your income statements, checking your credit and background, and the other costs associated with managing and issuing loans. It’s usually between 0.5% and 1% of the loan’s value.
● Interest rate – The better your credit and profitability, the less you’ll pay in interest. A profitable business with great credit is a lower risk, so you may pay rates as low as 4-6% APR if you’re highly qualified.
On the other hand, if you have lower credit, you may pay an interest rate of up to 30% or more, which can dramatically increase your monthly loan payments. Be aware of this when applying for loans. Using an online loan calculator can help you budget properly for a small business loan.
Can I Get Small Business Loans With Bad Credit?
If you have bad credit, you may not be able to get the best small business loans with the lowest rates. However, if your business meets revenue criteria, is profitable, and has been in operation for at least 1-2 years, you may be able to qualify for a loan with a credit score as low as 500-650.
In some cases, though, you may find that you are rejected by both online lenders and traditional small business loan providers. If this is the case, you may want to think about a different option, such as a Merchant Cash Advance (MCA).
With an MCA, the merchant cash advance provider will provide you with a lump sum payment in exchange for 10-20% of your future credit card sales. This “holdback” will be paid to the MCA provider until the lump sum and associated fees are repaid in full.
MCAs are not a loan, so your credit score doesn’t matter. If you are not having any luck finding small business loans for bad credit, an MCA may be the best option for you and your company. At ProBizCap, we can help you find both MCAs and traditional small business loans to get you the funding you need.
Get Business Funding Online With The Best Small Business Loans From ProBizCap
We are an experienced loan broker offering small business loans and merchant cash advances. Whether you want traditional small business loans or are interested in alternative methods of funding your business, ProBizCap is here to help.
Apply now or give us a call at (800) 508-4532 for more information about how we can help you get the small business funding you need.