Knowing what bank loans for businesses are better, it's essential for entrepreneurs.
Being informed of your alternatives, options, qualifications, and what they could make all the difference in getting an ideal deal - one that perfectly suits you and your company!
This article will explain business lending to ensure you make an educated decision suitable for your needs and potential alternatives you can consider if a bank loan isn't right for you.
Best 6 Banks For Business Loans 2023
Ultimately, the best bank for a business loan boils down to what your company needs from a lender and what you value.
However, to get a general idea of what to seek when considering a bank loan, below are six of the best banks for small business loans
to begin your search.
Capital One is a fantastic option for small businesses that are seeking a variety of business loan types
For example, their business credit cards are helpful for startups and small businesses struggling with poor credit scores.
Their small business loans excel in various loans and fast funding for more straightforward loans.
Additionally, Capital One partners with the Small Business Administration (SBA), making it a great option for small businesses.
This bank is an accessible option for its variety; additionally, much of your banking is completed online.
Below are some lending products available for small businesses from Capital One.
- Commercial Real Estate Loans: these are loans of up to $5 million to support your business when refinancing or refurbishing a property. This loan includes fixed payments and term lengths of up to 20 years.
- Lines of Credit: Capital One allows you to improve the daily operations in your small business by giving you an accessible and reasonable cash flow to achieve the goals you have for your business. Credit lines go up to $5,00,000 with this option.
- SBA Loans: Capital One's SBA loans are perfect for small business owners seeking long terms, low equity requirements, and fixed rates with SBA 504 and SBA7(a) loans.
Capital One is a viable option because the requirements for receiving a loan are relatively laid-back compared to other lenders.
Your business must have been open for at least two years, and you must have or open a business checking account with Capital One to qualify.
If you meet the criteria, you can receive a loan at a minimum of $10,000 and a maximum of $5 million.
Depending on your selected product, you might encounter collateral or deposit amount requirements.
Additionally, there will be a limit of one credit line per EIN or tax.
While Capital One excels because of its quick funding, variety of available loans, competitive terms, and rebate options, there are cons you should consider before selecting this bank.
Capital One requires you to apply in person and has limited SBA lending.
Finally, Capital One is limited to eight states and the District of Columbia, making access impossible for many businesses.
Bank of America
This financial institution is perfect for any small business owner that values banking rewards.
Bank of America offers small business owners fixed-rate secured and unsecured term loans.
The secured loan provides higher borrowing limits beginning at $25,000 versus the unsecured limit of $10,000.
Loans are based on revolving terms that you can renew annually.
Business Advantage Credit Line
This loan is an unsecured credit line with no collateral. Business owners can use the funds whenever needed with competitive interest rates.
If you select this loan, you will pay monthly, depending on your balance.
Your business needs a minimum of $100,000 in annual gross sales within the prior year to qualify for this loan. You must have been in business for two years.
Business Advantage Credit Line Cash Secured
This loan is a credit line with a security deposit.
A secured credit line helps establish your company's credit and move towards unsecured credit.
With this loan, you can access and use funds whenever needed. You pay monthly based on your balance.
Your business needs a minimum of $50,000 in annual revenue to qualify for this credit line.
You must have at least six months in business and place a $1,000 refundable security deposit.
Applications are available online, and business owners can use the Small Business Online Banking system to apply for an unsecured business credit line or loan.
Below are the pros and cons of their bank business loans.
- numerous types of business loans available to you
- a personal guarantee will likely be required
- competitive interest rates
- you might need multiple years in business to qualify for specific loans
- specialized financing for commercial real estate, equipment, and healthcare practices
Wells Fargo excels because it offers SBA loans along with numerous types of credit lines and is helpful for small business owners seeking options for a line of credit.
The bank offers its business line of credit for business owners that have been operating for at least two years and does not charge an annual fee for your first year.
With this option, you get a revolving credit line of $10,000 to $10,000 and automatic enrollment in a rewards program.
Wells Fargo also has its Small Business Advantage line of credit to help customers in business for less than two years.
This option has no annual fee and gives you a revolving credit line of $5,000 to $50,000. You are enrolled in an automatic rewards program with this line of credit.
This is one of the best banks if you seek SBA loans since it's among the most active SBA lenders, approving over $377 million in SBA 7(a) loans during the 2022 fiscal year.
Business owners can apply for various lines of credit online with Wells Fargo in a few steps, making it one of the most accessible options.
This bank is the top SBA lender, has competitive interest rates, and offers additional benefits such as a free rewards program.
However, the bank doesn't offer extensive online information for eligibility, making it difficult to assess if you meet strict loan qualifications.
JP Morgan Chase
Chase has numerous products and services for small business owners, such as credit card lines, payment solutions, business loans, and checking accounts.
The bank offers fixed or adjustable-rate loans beginning at $5,000 with repayment terms from one to seven years.
Below are more details about Chase's lending options and some loans that could be helpful for your business.
- Business Lines of Credit: Chase's business lines go up to $500,000 with a five-year revolving period and repayment term. This option is a revolving credit line that allows you to reuse and repay the amount borrowed.
- Commercial Real Estate Financing: this option allows you to purchase, refinance, or renovate your commercial real estate properties. Chase's real estate financing includes a term loan secured by a lien and terms up to 25 years. With this option, you fully pay back loans in multiple equal installments or as a balloon payment when a term ends.
- Small Business Loans: Chase's Small Business Loans are lump-sum funding to invest in your small business. Businesses receive loans of up to $500,000 with monthly installments for up to five years. You pay back the borrowed money and accrued interest for a loan.
Chase does not require you to have an account when applying; however, if accepted, you must open an account before receiving funding. You must apply in person.
This is a fantastic option for many business owners seeking a bank loan for business operations.
Among the pros of Chase's business loan options are the multiple loan types available with competitive and flexible terms. Additionally, Chase has options for loans surpassing $500,000.
U.S. Bank offers one of the top small business loans for startups and allows you to apply if you've been in business for six months.
The bank has secured term loans at a fixed rate of up to $1 million, and various lending options are seen below.
- Business loans: U.S. Bank offers various business loans and hardship loans for bad credit. With its Quick Loan, small business owners can find business terms, commercial real estate, equipment financing, SBA, and SBA paycheck protection loans.
- Business lines of credit: U.S. Bank offers business lines of credit up to $1 million with an interest-only payment option. U.S. Bank's CashFlow Manager is a revolving credit line, and the bank also offers credit lines for business equity and reserve.
- SBA Loans: U.S. Bank is a viable option for anyone seeking an SBA loan specifically, and you might qualify for an SBA loan with less than one year in operation.
Applying for U.S. Bank is typically done in person. However, you might qualify for an online application if your business has two or fewer owners.
- U.S. Bank is an SBA-preferred lender
- it has various financing options
- you may encounter prepayment penalties
- U.S. bank is only available in 26 states
Live Oak Banking Company
Live Oak Banking Company uses online lenders, making it one of the most accessible ways to apply for a small business loan.
This is SBA-preferred and offers small business SBA 7(a) and 504 loans; additionally, Live Oak Bank has options for agricultural and commercial loans.
Live Oak prioritizes financing for large, costly projects for your business, including expansion or acquisition.
- SBA 7(a): this option is the most common SBA loan product and offers flexible terms and business uses. An SBA 7(a) loan is helpful for small businesses approaching acquisitions, real estate purchases, refinancing, or partner buyouts. With this loan, you can receive up to 90 percent bank financing with no balloons or pre-payment penalties for loan terms below 15 years.
- SBA 504: this loan has similar requirements to the 7(a) loan but varies in the approved uses of loans. With an SBA 504 loan, your funding is reserved for buying commercial real estate, financing improvements in the real estate property, and purchasing large, expensive equipment. This loan has a low down payment of 10 percent, offers fixed or floating interest rates, and provides loan amounts up to $15,000,000.
While there are numerous benefits to SBA lending with Live Oak Bank, it's essential to consider the cons.
For example, the minimum opening deposit required for Live Oak Bank is $2,500, which might not be feasible for some businesses.
How to Choose a Small Business Loan
There are various elements to consider when determining the right small business loan for your organization.
Because of the numerous options available to fund your small business, selecting the right loan takes time and effort.
Deciding which loan will help your business the most should include some of the following considerations to help you make your final decision.
- Lender reputation. Before making a loan deal, conduct your due diligence and ensure that the lender has a solid reputation and reliable references. If you choose an unqualified lender, you will likely incur costs that hurt your business in the long run.
- Loan amounts. Consider how much money you need from your lender before deciding on a small business loan. For instance, small business loans from banks might be too expensive for microbusinesses and startups. In this case, you should consider an alternative loan like microloans.
- APRs. Consider each loan's annual percentage rate (APR) before deciding. Interest rates are only part of your total expenses, while your APR will reflect the actual cost of borrowing from a lender.
- Additional costs. Ensure that there are no unforeseen costs with specific lenders before choosing a loan. Some lenders will have hidden costs, extra fees, and high APRs that could incur unrealistic expenses for your business.
- Funding time. If your small business needs funding immediately, you must consider this factor when choosing a loan. Some lenders can give you the loan almost immediately, while others might involve a weeks-long process until you can access the loan.
- Loan requirements. All loans will have different requirements, meaning that you must consider what your business needs the loan for and what qualifications you meet for different loans. Ensure you go through all of the qualifications for lenders before deciding on a loan.
How to Get a Business Loan From Banks
Getting a business loan from banks might seem complicated, but when you know what to expect, you can navigate the process relatively easily.
Below is a step-by-step guide on getting a small business loan from banks.
- Determine the type of loan your business needs for what you are hoping to fund.
- Check qualifications to ensure that you meet loan requirements.
- Consider payment plans for different loans and decide what you can realistically afford.
- Consider collateralizing your loan.
- Compare bank loans with other lenders.
- Apply for a bank loan at your selected financial institution. Ensure that you have access to application materials with your organization's name, address, plan, loan proposal, tax ID number, and financial statements.
Requirements for Small Business Loans From a Bank
Before applying for a loan, you must remember the requirements for a bank's small business loan.
If your bank lacks specific factors determining whether you qualify for a loan, consider improving these areas before applying. Below are some of the main requirements you should consider before applying for a bank loan.
- Annual revenue compared to the revenue required by a bank
- Adequate number of years in business, depending on bank requirements
- Quality personal and business credit scores
- A business plan and loan proposal
- Business and financial documents
- Collateral or guarantee
Types of Banks That Offer Business Loans
Business owners can find a variety of banks that offer business loans.
- Large national and international banks are great for those who need access to larger loan amounts and want the convenience of banking with a globally recognized institution.
- Regional banks are perfect for businesses looking for a local bank presence and personalized customer service.
- Community banks provide flexible loan terms, competitive interest rates, and more personalized service than larger banks.
- CDFIs (Community Development Financial Institutions) are a great choice for businesses in underserved communities. CDFIs provide loans to small businesses that may find it difficult to access capital from traditional banking sources.
Types of Business Loans Offered by Banks
A vast array of business loan banks could help your business grow.
Below are some of the most prominent business loans to consider when seeking funding for your small business.
- Term loans
- Hardship loans for bad credit
- Lines of credit
- SBA loans
- Invoice factoring
- Invoice financing
- Equipment loans
- Personal loans
- Business credit card
- Short-term loans
- Startup loans
- Merchant cash advances
- Working capital loans
- Commercial real estate loans
- Franchise loans
What Are Small Business Loans?
Small business loans are a way of raising capital for a small or startup business.
These are used for various purposes, including purchasing inventory, acquiring property, or paying employees.
Small business financing
often has better interest rates than personal loans.
Knowing how small business loans work and how long loans last is essential to determine the best small banks available.
What are the most popular loans for small businesses?
Some popular types of loans for small businesses include:
Short-Term Business Loans
These loans offer quick access to capital but come with higher interest rates when compared with longer-term options like an SBA loan or line of credit.
However, these can be useful if you need funds quickly and can afford them in a short period, as repayment terms are usually within two years or less.
Merchant Cash Advances
This form of finance provides quick cash infusions in exchange for an agreed-upon percentage directly deducted from future sales until the advance is repaid in full.
This type may not be suitable if you anticipate slower periods throughout your year when sales will drop significantly from regular averages.
Depending on lender policies, missing payments may result in additional fees/charges added to your debt balance or even termination agreements.
They can be quite expensive too.
Suppose your business needs large equipment purchases such as manufacturing machines or vehicles.
In that case, getting specialized financing can help make it easier on monthly cash flow without needing major upfront expenditures.
This allows companies who lack resources initially due to expense allocations elsewhere to gain access to necessary pieces, which otherwise would take much longer before able to purchase them outright at once (for those who qualify).
Alternatives to Bank Loans For Businesses
Bank loans aren't suitable for every small business owner. Consider alternative options to help fund your small business if that's your case.
If you feel you've exhausted your list of the best banks for commercial loans, you might consider looking into alternative options to bank loans to help fund your small business.
Camino Financial Small Business Loans
We offer one of the best alternatives to traditional bank loans for small businesses.
Camino Financial small business loans
offer business owners between $5,100 to $25,000.
We require no collateral to qualify, and you must have an operating and registered business for at least 12 months.
You will need 12 months' worth of bank data and can apply with your SSN, and if you don't have it, you can apply with an ITIN number.
Apply For A Business Loan!
Online lenders sell financial products that you would see at some banks, including lines of credit.
The primary way they differentiate from traditional bank lenders is that they typically have less strict requirements regarding your personal credit score, annual revenue, and time in business.
However, because online loans
are in high demand, you will likely find higher interest rates than bank loans.
Receiving a bank loan for business operations is challenging if you only need a small amount of money for your company.
Microlenders are the perfect option if you only want a small loan.
Microlenders give loans of under $25,000 to small businesses at a low-interest rate.
Alternative lenders have reached new popularity for startups and newer companies, and many lenders prioritize underrepresented and disadvantaged groups, including business owners with poor credit.
Many people need to consider smaller, community financial institutions, which are nonprofit organizations essential to helping small business owners fund their operations.
While similar to banking solutions, credit unions have some benefits that make them more appealing.
They can give you great rates on your loans and are an excellent not-for-profit alternative to traditional banks.
However, there might be better fits than credit unions if you want to stray far away from bank lending.
Small Business Administration Loans
SBA loans typically have more flexible terms and interest rates than banking institutions.
These are ideal if you want to cover your startup costs, capital needs, real estate purchases, equipment costs, expansions, or other costs essential for a small business.
Get the Right Loan With Camino Financial
Getting your business financed can be challenging, no matter how well-prepared you are.
Camino Financial is the perfect solution for overlooked business owners struggling to fund their long-term goals.
We offer small business loans for businesses with a unique focus on minority-owned businesses and micro-entrepreneurs.
If you need small business loans, Camino Financial is a wise solution to your financial struggles.
Contact us today to get started on expanding your business.
Apply for a business loan today
What's the best bank to use?
The best bank to use really depends on your individual needs and preferences.
If you're looking for a bank that offers a wide range of products and services, large banking networks, great customer service ratings, and competitive interest rates, then the big banks may be right for you.
These include Bank of America, Wells Fargo, Chase, Citibank, and US Bank.
How to get a business loan with no money?
While traditional lenders such as banks and other financial institutions will almost always require an applicant to have some form of personal or business collateral in order to qualify for a loan, there are still many routes you can take.
There are grants and loans specifically designed for small businesses that require little or no cash investment from the borrower.
Additionally, crowdfunding websites such as Kickstarter offer aspiring entrepreneurs a platform through which they can pitch their ideas and get access to funds from investors who believe in them—all without having any cash reserves at hand.
Which banks offer business loans?
One of the most popular options for small businesses is an SBA-backed loan from a lending partner like Bank of America or Wells Fargo.
Suppose your business has been around longer than two years and has made consistent profits during its lifetime (usually defined as net income after taxes).
In that case, you might consider applying with larger banks like Citibank or Chase Bank.
Who lends the most money to small businesses?
Banks are the most common source of financing for small businesses. The amount of funding available varies by lender, with some offering up to $50 million or more in financing.
How to get a business loan for a new business?
Many forms of financing are available to entrepreneurs who want to start their own businesses.
Research all the options, know your credit score, develop a detailed business plan & financial forecast, think about collateral and other forms of security for the loan, and make references and recommendations.
What bank is best for small businesses?
Choosing the best bank for small businesses depends largely on the type and size of business you have and your specific needs.
- First, take into account the services offered by each bank.
- Second, research the fees and terms associated with those fees before deciding on one particular institution.
- Thirdly—and similarly—read online reviews left by existing customers who have used those particular banking services before you commit yourself fully.
Which bank is best for a business loan?
The best banks for obtaining a business loan depend upon many factors, including your credit score and existing relationship with the bank.
Smaller local lenders may have better terms than larger national institutions if you are willing to work within their parameters.
When researching potential options online, review third-party rating sites such as NerdWallet or Bankrate, which typically provide information on current interest rates and fees involved so that you can make an informed decision about which lender is right for you and your particular goals!
Which bank gives the cheapest business loan?
When deciding which bank to go with for a business loan, the most important factor is the total borrowing cost.
Different lenders offer different loan terms and rates, so finding the cheapest option can be tricky. That said, some banks have special offers or competitive rates that make them stand out as great options for business owners looking to get a loan at a low cost.