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Writer | Small business, business banking, business loans
Randa Kriss is a small-business writer who joined NerdWallet in 2020. She previously worked as a writer at Fundera, covering a wide variety of small-business topics including banking and loan products. Her work has been featured by The Washington Post, The Associated Press and Nasdaq, among others. Randa earned a bachelor's degree in English and Spanish at Iona College.
Sally Lauckner has over a decade of experience in print and online journalism. Before joining NerdWallet, Sally was the editorial director at Fundera, where she built and led a team focused on small-business content. Her prior experience includes two years as a senior editor at SmartAsset, where she edited a wide range of personal finance content, and five years at the AOL Huffington Post Media Group, where she held a variety of editorial roles. She has a master's in journalism from New York University and a bachelor's in English and history from Columbia University. Email: slauckner@nerdwallet.com.
Online business lenders often provide faster and easier access to capital than traditional lenders, though at higher interest rates.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Online business loans are a type of business financing that you can apply for completely online. Although any lender can use an online application, online business loans are usually offered by financial technology companies, not banks.
Compared with traditional lenders, online business lenders typically have more flexible qualifications and streamlined underwriting processes — but charge higher rates for these conveniences. As a result, these small-business loans are a good fit if you can’t qualify with a bank or are willing to pay extra for faster funding.
250+ small-business products reviewed and rated by our team of experts.
95+ years of combined experience covering small business and personal finance.
NerdWallet's small-business loans content, including ratings, recommendations and reviews, is overseen by a team of writers and editors who specialize in business lending. Their work has appeared in The Associated Press, The Washington Post, MarketWatch, Nasdaq, Entrepreneur, ABC News, MSN and other national and local media outlets. Each writer and editor follows NerdWallet's strict guidelines for editorial integrity to ensure accuracy and fairness in our coverage.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Minimum FICO score of at least 660 at the time of application. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.
Must have started your business at least a year ago.
Average monthly revenue of at least $3,000.
All businesses are unique and are subject to approval and review.
The American Express® Business Line of Credit is a good option for business owners with fair credit who want access to working capital.
Pros
Streamlined application process with minimal paperwork.
Financing from $2,000 to $250,000 available.
Accepts borrowers with a minimum FICO score of at least 660 at the time of application.
Monthly repayment schedule (as opposed to daily or weekly).
No prepayment penalties, account maintenance fees or draw fees.
Cons
Must have online checking or PayPal account to verify cash flow.
Personal guarantee required.
Complex monthly fee structure makes it difficult to compare costs to other lenders.
Qualifications
Minimum FICO score of at least 660 at the time of application. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.
Must have started your business at least a year ago.
Average monthly revenue of at least $3,000.
All businesses are unique and are subject to approval and review.
Our pick for
Online business loans for bad credit
Fora Financial’s minimum credit score requirement is 570, lower than any other lender on our list.
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Pros
Cash can be available quickly.
Get a discount for prepaying.
No collateral required.
Low minimum credit score requirement.
Cons
Charges a factor rate that makes it more difficult to compare costs with other lenders.
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Pros
Cash can be available quickly.
Get a discount for prepaying.
No collateral required.
Low minimum credit score requirement.
Cons
Charges a factor rate that makes it more difficult to compare costs with other lenders.
Can’t build business credit.
Longest loan term is 18 months.
Qualifications
In business for at least six months.
At least $20,000 per month in revenue.
No open bankruptcies or dismissed bankruptcies within the past year.
AltLINE offers fast invoice factoring with competitive factoring rates.
Pros
Capital available within 24 to 48 hours.
No collateral required.
Manages payment collection from your customers.
Accepts startups and businesses with bad credit.
Cons
Fees can become expensive the longer it takes your customers to pay.
Difficult to compare factoring costs to other types of business loans.
Qualifications
All credit scores may be accepted (ranging from 300 to 850).
No minimum time in business requirement.
No minimum annual revenue requirement.
Must be a B2B business.
How Much Do You Need?
4.6 Excellent
4.6 Excellent
What is an online business loan?
An online business loan is generally offered by nonbank lenders, also called alternative lenders. Unlike banks or credit unions, which may require you to visit a branch to complete the financing process, alternative lenders typically process and fund small-business loans entirely online.
Online business loans are usually fast to fund, with more flexible qualification requirements than other types of business financing. Some online business lenders work with startups or businesses with bad credit.
Speed and flexibility come with a cost, however. Online business loans tend to have higher interest rates than bank or U.S. Small Business Administration loans. Annual percentage rates for online loans range from 6% to 99%.
Many online lenders don’t require collateral — pledged assets such as real estate, equipment and unpaid invoices that can be seized by the lender if you don’t repay the loan. However, offering collateral may help you access lower rates and better terms.
Online loans can require weekly payments and also have lower maximum funding amounts and shorter repayment periods than bank loans — although terms ultimately vary by lender.
Types of online business loans
There are several types of online loans that you can use to finance your small business. Here are some of the most common options.
Business term loans
Small-business term loans provide a lump sum of cash that you repay, with interest, over a fixed period of time. Some online lenders offer short-term loans, with terms of 12 months or less — while others offer longer repayment terms of seven years, for example.
Because you can repay business term loans over an extended period, these online loans are usually a good choice for larger investments and long-term growth.
Business lines of credit
A business line of credit allows you to draw funds as needed up to a set limit and only pay interest on the money you’ve borrowed. You repay the funds over a specific period of time, typically on a monthly or weekly schedule.
Compared with term loans, business lines of credit are a more flexible form of financing — making them well-suited for managing cash flow, covering payroll and other short-term needs.
Equipment financing
Equipment financing is a type of small-business loan designed specifically for the purchase of machinery or equipment. Equipment loans are often structured as term loans — with repayment periods based on the anticipated life of the equipment you’re looking to buy. Depending on the equipment, that could mean loan terms of a year to up to 10 years, potentially.
With equipment financing, the equipment you purchase serves as collateral on the loan, which means you may not have to rely as heavily on your credit or financial history to qualify.
Invoice financing and invoice factoring
Invoice financing allows you to borrow money against your outstanding invoices. A lender gives you a percentage of your unpaid invoices upfront in the form of a loan or line of credit with the invoices serving as collateral. Once your customer pays the invoice, you pay the lender back the amount borrowed, plus fees and interest.
With invoice factoring, on the other hand, you sell your outstanding invoices to a factoring company at a discount. The factoring company then collects payments from your customers directly.
Both of these types of financing are good options for business-to-business companies that need to cover cash flow gaps. Invoice factoring and financing can also be easier to qualify for than other types of business loans — but may have higher interest rates.
Merchant cash advances
A merchant cash advance, or MCA, provides you with a lump sum of capital that you repay using a percentage of your future credit and debit card sales, plus a fee. A merchant cash advance isn't technically a loan — instead, an MCA company is buying your future sales at a discount.
Although merchant cash advances are fast to fund and easy to qualify for, they’re one of the most expensive forms of online business financing. You'll want to consider all other options before turning to an MCA.
Pros and cons of online business loans
Pros
Online business loans offer you the ability to apply for funding without having to leave your business. While emails, phone calls and faxes may be used to complete the online application process, you won’t need to visit a branch location.
While bank and SBA loans can take weeks to fund, some online business loans can provide capital in as little as 24 hours. And even if you don’t receive a loan that quickly, many online lenders offer funding within days.
Online business loans often offer streamlined application processes with minimal documentation. While traditional lenders tend to rely on a manual review system to evaluate loan applications, many online lenders leverage technology so that they can underwrite your business more quickly and provide a faster application decision.
There are many different types of online business loans available — depending on your business size, funding needs, qualifications and more. Among these choices, small-business lenders offer a range of interest rates, repayment terms and loan amounts, so you can compare your options to find the right loan for your business.
To qualify for a business bank loan, you’ll generally need strong credit and several years in business. With online business loans, on the other hand, qualification requirements are typically more flexible. Lenders may consider factors other than your personal credit score, time in business and annual revenue when evaluating your application. Some lenders will also work with new businesses or those with bad credit.
Cons
Because online business loans are faster to fund and easier to qualify for — and therefore pose greater risk for lenders — they will generally be more expensive than bank and SBA loans. While the average business loan rate for banks ranges from about 6.13% to 12.36%, APRs for online loans can vary anywhere from 6% to 99%. And APRs for merchant cash advances can reach even higher — up to 350%.
Although some online lenders offer phone-based customer support, you’ll typically complete the entire loan process online — meaning you may not interact with anyone from the lending company. If you’re looking to build a relationship with a lender or have someone address your questions one-on-one, an online business loan might not be the best option for you.
There are a multitude of reliable online lenders on the market, but there are also bad actors that are looking to take advantage of small-business owners. These predatory lenders are often trying to trap businesses with offers that seem too good to be true, especially if those businesses are having trouble finding financing elsewhere. You can avoid these business loan scams by thoroughly researching and vetting an online lender to make sure they are reliable and trustworthy.
Although loan applications vary from lender to lender, you’ll typically be able to apply for an online business loan within minutes. Here are the steps you can follow:
1. Understand your financing needs
You’ll want to determine how much capital you need, how much debt you can afford and what type of loan is right for your business.
2. Evaluate your qualifications
Most lenders will look at your personal credit score, time in business and annual revenue when underwriting your loan application. Online lenders may also look at your cash flow, financial accounts or outstanding invoices. You’ll want to review your business qualifications ahead of time so you know where your company stands. Also, you may want to estimate the value of any assets you plan to offer as collateral for your loan.
3. Compare lenders
You should explore and compare multiple lenders to find the best fit for your needs. This includes reviewing factors such as:
Loan amounts.
Interest rates.
Additional loan fees.
Repayment terms.
Prepayment penalties.
Customer support options.
A business loan calculator can help you understand the total cost of a loan when comparing lenders. You’ll also want to research the lender and read reviews to make sure they’re reputable.
4. Submit your application
With most online lenders, you should be able to complete and submit your business loan application in minutes. Some lenders have you fill out a simple form and connect your financial data to their system so that they can evaluate your business information more quickly and provide a faster application decision.
You may also, however, need to provide financial documentation, such as:
Business and personal tax returns.
Business and personal bank statements.
Business financial statements (e.g., profit and loss statement, balance sheet).
Additionally, your lender may secure the loan by taking out a blanket lien on your business assets — and you’ll likely be required to sign a personal guarantee.
5. Review your loan agreement and receive funds
Online lenders typically fund business loan applications within a matter of days. Some lenders offer funding in as little as 24 hours. Before signing a business loan agreement, make sure you review the terms and conditions and talk to your lender if you have any questions.
Alternatives to online business loans
If an online loan is not the right fit for your business, you may want to consider these other types of funding.
Business bank loans can be a good alternative to online loans because these loans generally offer the most competitive rates and terms. However, because banks often require multiple years in business and excellent credit, bank loans can be difficult to qualify for. And if you need money quickly for your business, bank loans are typically slower to fund than an online loan.
SBA loans, which can be easier to qualify for than bank loans, offer low interest rates and long repayment terms. However, you’ll still often need multiple years in business and good credit to qualify. Although, SBA microloans typically offer more flexible eligibility requirements and may be an option if you need $50,000 or less in funding. And, like bank loans, SBA loans are slow to fund.
Business credit cards can be used in a similar way to a business line of credit. They can be easier to get than business loans because qualification typically relies on your personal credit, instead of your business credit. However, credit cards can have higher APRs than traditional business loans which can make this type of financing more expensive for your business.
Bootstrapping involves self-funding your business through your personal resources which may include using your own savings, taking out personal loans and tapping into retirement accounts, including withdrawals called Rollovers as Business Startups (ROBS) transactions. If your business should fail, however, your personal assets could also be in jeopardy.
When traditional forms of financing are not available, family and friends loans for your business may be a funding option. Although this type of loan doesn’t typically involve a formal loan application, you do want to put the loan details in writing to avoid any misunderstandings in the future that could affect your personal relationships.
Crowdfunding for business allows you to create a fundraising campaign for your funding needs. This financing option doesn’t involve taking on additional debt, but you typically need to offer rewards, or possible equity in your business, as an incentive to contribute to your cause.
Small-business grants can be an option if you don’t need funding immediately because it takes time to research and apply for this free funding. Business grants are offered by federal and state agencies as well as private and public companies and nonprofits.
Last updated on May 3, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
Online business loans are a safe and legitimate way to fund your business. These loans can be good options if you need fast financing or if you can’t qualify for other types of business loans.
Predatory lenders do exist online, however, looking to take advantage of small businesses. Watch for these red flags: Lenders that guarantee approval, make you pay a fee upfront or don’t have a physical address.
Some online business lenders can approve applications within minutes and offer funding within 24 hours. Ultimately, funding speed varies based on the individual lender, but many online lenders issue loans within a matter of days.
Many online business lenders don’t require you to provide physical collateral to secure your loan. Your lender may take out a blanket lien on your business assets, however. You’ll also likely be required to sign a personal guarantee.
Although physical collateral may not be required for an online business loan, you may be able to offer it to access better interest rates and repayment terms.
An online business loan can be a good option for businesses with low credit scores. Online lenders generally have more flexible qualification requirements than traditional lenders like banks. For example, Fora Financial, one of the lenders on our list, has a minimum credit score requirement of
570
.
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