Banks are best for small-business loans if your company has been around more than a year and doesn’t need cash fast. Approvals can take months and are far from a sure thing — even with good credit.
Banks approve only about 13% of business loan applications, according to the latest data from the Biz2Credit Small Business Lending Index. That means the right bank for you not only offers the type of business loan you need, but also funds enough loans to make financing possible.
Here are the best banks for small-business loans based on their commercial and industrial lending volume and product offerings, as well as alternative options to consider.
1. Bank of America
Bank of America had the most commercial and industrial loans among banks as of September 2020 — surpassing the next closest lender by almost $100 billion, according to S&P Global Market Intelligence.
Bank of America business loans are a good choice if you value rewards. By meeting certain account requirements, you can qualify for interest rate discounts, no fees on wire transfers and other benefits. Bank of America may also make sense for veterans and service members, as it offers them a 25% discount on loan administration or origination fees.
Bank of America is currently not processing new applications for unsecured business loans as it prioritizes the Paycheck Protection Program.
» MORE: Compare unsecured business loans
Term loans. Bank of America offers both fixed-rate secured and unsecured term loans. Its secured loan requires greater annual revenue: $250,000 versus $100,000 for the unsecured option. But it offers higher borrowing limits — up to $250,000 — and a potentially lower interest rate. Both business loans require at least two years in business and can have repayment terms of up to five years, which is less than other banks may offer.
Business lines of credit. Bank of America also offers secured and unsecured business lines of credit, with the same revenue requirements as its term loans. The secured line of credit comes with additional borrowing power — starting at $25,000 compared with $10,000 for the unsecured option. There is no set borrowing maximum. Both have revolving terms, meaning you use the money as needed, that renew annually.
SBA loans. Bank of America is a preferred Small Business Administration lender, but it is less active in issuing SBA loans. For example, Wells Fargo and U.S. Bank lend more 7(a) loans — the most common type of SBA funding.
Other business loans. Bank of America offers business auto loans starting at $10,000. The bank also has commercial real estate loans and equipment loans, which both start at $25,000.
2. JPMorgan Chase
Term loans. Chase offers fixed- and adjustable-rate loans starting at $5,000, which is less than lenders like Bank of America or PNC Bank. Repayment terms can last from one to seven years.
Business lines of credit. Chase has business and commercial lines of credit. Its business line of credit provides $10,000 to $500,000 in funding on a renewable five-year revolving term. The commercial line is $500,000 and up, with one- to two-year terms that may be renewed.
SBA loans. Chase is an SBA-preferred lender and funds multiple types of SBA loans. That includes SBA Express loans and credit lines, which offer faster funding of up to $350,000.
Other business loans. Chase has multiple equipment loans with fixed or variable rates, terms up to seven years (or up to 75% of the equipment’s estimated useful life) and up to 10% included for soft costs — such as shipping and installation. Loans start at $10,000. Its commercial real estate loans are also fixed or variable and start at $50,000, with terms of up to seven or 10 years.
Citibank may be better known among entrepreneurs for its small-business credit cards. But the bank also offers business loans — though it has fewer products than other lenders. You might prefer that simplicity, but it also means you may want to consider other lenders if Citi doesn’t advertise the kind of loan you want.
Term loans. Citibank’s term loan ranges from $5,000 to $3 million. Interest rates are fixed, terms last up to seven years and loans require a personal guarantee. Citi doesn't offer an equipment loan, but term loans can be used for this purpose.
Business lines of credit. Citibank offers two business lines of credit, with amounts ranging from $10,000 to $3 million. Both lines come with variable interest rates and revolving terms and require a personal guarantee.
4. Wells Fargo
Wells Fargo has suspended new applications for some of its business loans to assist borrowers with PPP loans.
Typically, Wells Fargo is a good choice if you value flexibility, with its multiple types of term loans and lines of credit. However, Wells Fargo’s lending maximums are less than some banks, so consider other options if you have collateral and need more than $500,000 in financing.
Term loans. Wells Fargo has two types of fixed-rate unsecured term loans that use the same application. The bank’s traditional term loan offers $10,000 to $100,000 and a repayment period of one to five years. It also offers the FastFlex Loan, which is available for smaller amounts ($10,000 to $35,000) and must be repaid weekly over a year.
Business lines of credit. Wells Fargo has three different lines of credit — one unsecured and two secured by collateral — ranging from $5,000 to $500,000. Credit lines of up to $100,000 have variable rates and are revolving. Those greater than $100,000 have a one-year term. You’ll typically need at least $2 million to $5 million in annual sales to qualify for Wells Fargo’s most generous business line of credit. Fees vary by product.
SBA loans. Wells Fargo is one of the most active SBA loan lenders. As of September 2020, it had approved more than $114 million in SBA 7(a) loans in the 2020 fiscal year — the most among traditional national banks.
Other business loans. Wells Fargo equipment loans range from $10,000 to $100,000. Interest rates are fixed, and rates and repayment terms depend on what you’ll use the loan for. The bank also offers semi truck financing, commercial real estate purchase loans and equity financing, as well as specific products for starting or buying a medical practice.
PNC’s business loans are best for more mature businesses. You generally need to have been in business for at least three years to qualify, which is longer than other banks may require.
Term loans. PNC offers $20,000 to $100,000 for unsecured term loans and $100,001 to $3 million for loans secured by collateral. Unsecured loans come with a fixed interest rate and terms of up to five years, whereas rates on secured loans can be fixed or variable and terms can last up to seven years.
Business lines of credit. The amounts for PNC’s lines of credit mirror the bank’s term loans, with unsecured options ranging from $20,000 to $100,000 and secured options from $100,001 to $3 million. Both have variable interest rates and revolving terms. The unsecured line has an annual fee of $175, while the secured line charges 0.25% of the committed line amount.
SBA loans. PNC is a preferred SBA lender, but the bank is less active than others issuing these loans.
Other business loans. PNC business auto loans range from $10,000 to $250,000 with repayment terms up to six years. The bank’s commercial real estate loans come with fixed or variable interest rates, repayment terms up to 10 years and financing amounts from $100,001 to $3 million.
6. U.S. Bank
U.S. Bank has fewer locations than other brick-and-mortar banks, including Bank of America and Wells Fargo. But if there’s a branch near you, U.S. Bank may be a good choice for startups with collateral, as you may be able to qualify for an SBA loan with less than a year in business.
Term loans. U.S. Bank offers fixed-rate, secured term loans of up to $1 million. It doesn't have an unsecured business loan. If you need fast access to working capital, the bank has a quicker version of its term loan product. The Quick Loan has a lower borrowing maximum ($250,000) but a faster application process. It’s best for companies in business for at least two years.
Business lines of credit. U.S. Bank’s business line of credit also goes up to $1 million and has an interest-only payment option. The bank’s revolving line of credit, called CashFlow Manager, goes up to $250,000 and is for companies that have been in business for at least two years. That product has a $150 annual fee if the line or credit is less than $50,000.
SBA loans. U.S. Bank may be another good choice if you’re in the market for an SBA loan. As of September 2020, it had approved the second-most 7(a) loan applications in the 2020 fiscal year.
Other business loans. U.S. Bank offers equipment loans of up to $500,000, and soft costs of up to 25% can be included. The bank has fixed- and variable-rate commercial real estate loans of up to $10 million with five-, 10- or 15-year repayment terms, with amortizations up to 25 years.
How to get a small-business loan from a bank
Due to the pandemic and market conditions, business loan approvals at banks were down more than 50% in December 2020 compared with the same time the previous year, according to Biz2Credit. To be able to still get a business loan from a bank, you’ll likely need the following:
An existing relationship. Most banks require you to have at least a business checking account at their institution. While you can simply open an account at some banks to meet this qualification, others want a longer-term relationship. For example, you need an account with Wells Fargo for at least 12 months to receive some kinds of financing.
Good credit. You’ll likely need a personal credit score in at least the 700s. Potential deal-breakers could include too much debt, too many open accounts or negative marks — like late payments, loan defaults and bankruptcies. The bank will check your business credit score for similar red flags.
Strong revenue. The bank will look to see whether your business is in good shape and has enough revenue to support how much you want to borrow. For example, Bank of America’s unsecured business loans require at least $100,000 in annual revenue; its secured options increase that number to $250,000.
Enough time in business. Two years under the same ownership is the standard. But there are exceptions — in both directions. For example, some U.S. Bank lending products are available if you’ve been in business for six months, whereas PNC Bank generally requires at least three years of operations for you to qualify.
Collateral. You don’t necessarily need to put up business collateral like commercial property or equipment to get a bank loan. Some banks offer both unsecured and secured business loans. But the bank may fund larger amounts for secured loans, while also providing longer terms and lower interest rates to make payments more affordable.
Alternatives to bank business loans
If you can’t get a small-business loan from a big bank, consider these alternatives:
Community banks. Business loan applicants report higher approval rates with smaller banks than big-name financial institutions, as well as greater overall satisfaction, according to a 2020 Federal Reserve survey. However, the number of community banks is dwindling, and a local bank may lack benefits you want — like online loan management or multiple locations.
Online lenders. Online business loans come with faster funding and higher approval rates than bank loans. Some online lenders even specialize in small-business loans. For example, as of September 2020, Live Oak Bank is the most-active SBA 7(a) lender by loan volume. Online lenders are also less likely to require traditional collateral and may provide funding for newer businesses. But the trade-off will likely be higher costs than a traditional bank offers.
Microlenders. Nonprofit organizations offer microloans, and these can be a good choice for startups or small businesses that need working capital but can’t qualify for a bank business loan. Microloans are typically less than $50,000 and come with short repayment terms. Their costs will also likely be higher than a bank business loan.