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Best Low-Interest Business Loans of 2020

Jackie ZimmermannApril 27, 2020

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Low-interest business loan options include SBA loans and online loans. You'll need good credit and strong finances to qualify.

As a business owner with good personal credit and strong financials, it’s easier to qualify for cheap financing — meaning you can borrow money at a lower annual percentage rate. APR is an accurate measure of the cost of financing. It includes the interest rate as well as all the fees you’ll pay over the life of the loan.

Even if you can’t qualify for a loan from a traditional bank, which typically offers the best rates, there are alternative lenders that offer low rates on small-business loans.

We’ve rounded up several online financing options, starting with Small Business Administration loans, which offer the lowest possible APRs.

LOOKING FOR CORONAVIRUS BENEFITS INFORMATION?

CARES Act: Coronavirus relief and SBA loans for small businesses.

Does your small business need COVID-19 relief? Learn about the SBA Paycheck Protection Program and apply on Fundera.

Does your small business need COVID-19 relief? Learn about the SBA Paycheck Protection Program and apply on Fundera.

Our picks for

Lowest-cost loans

SmartBiz - SBA loan

SmartBiz - SBA loan

Est. APR

6.73 - 10.29%

Min. Credit Score

650

SmartBiz’s low-cost SBA loans work best for established businesses that want to finance an expansion or refinance debt.

Pros

  • Competitive rates among online lenders.
  • Faster than getting an SBA loan from a bank.

Cons

  • Must have strong financials, supported by personal and business tax returns for the past 3 years.
  • Stringent rules on use of proceeds.
  • Requires business lien and personal guarantee.
Read full review

Qualifications

  • Minimum credit score: 650.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: $50,000.
  • No bankruptcies or foreclosures in the past 3 years.
Live Oak Bank - SBA loan

Live Oak Bank - SBA loan

Est. APR

5.50 - 8.25%

Min. Credit Score

650

Live Oak Bank's SBA loans work best for established businesses looking to finance an expansion.

Pros

  • Competitive rates among online lenders.
  • Faster than getting an SBA loan from a bank.

Cons

  • Must have strong financials, supported by personal and business tax returns for the past 3 years.
  • Only for specific industries.
  • Stringent rules on use of proceeds.
  • Requires business lien and personal guarantee.
Read full review

Qualifications

  • Minimum credit score: 650.
  • Cash flow must be able to support the debt.
  • No bankruptcies or foreclosures.
  • No outstanding tax liens.

Our picks for

Businesses two or more years old

Credibility Capital - Online term loan

Credibility Capital - Online term loan

Est. APR

19.99 - 24.99%

Min. Credit Score

680

Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.

Pros

  • Competitive rates among online lenders.
  • No prepayment penalty.
  • Extra monthly payments can save interest cost.

Cons

  • Short repayment term results in higher payment amounts.
  • Requires high minimum credit score and revenue.
  • Requires business lien and may require personal guarantee.
  • Not available in Nevada, North Dakota, South Dakota, or Vermont.
Read full review

Qualifications

  • Minimum credit score: 680.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: $250,000.
  • No bankruptcies in the past 5 years.
Funding Circle - Online term loan

Funding Circle - Online term loan

Est. APR

12.18 - 36.00%

Min. Credit Score

660

Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.

Pros

  • Cash can be available within 3 business days.
  • Competitive rates among online lenders.
  • No minimum revenue requirement.

Cons

  • Requires business lien and personal guarantee.
Read full review

Qualifications

  • Minimum credit score: 660.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: None.
  • No bankruptices in the past 7 years.

Does your small business need COVID-19 relief? Learn about the SBA Paycheck Protection Program and apply on Fundera.

Does your small business need COVID-19 relief? Learn about the SBA Paycheck Protection Program and apply on Fundera.

Summary of Best Low-Interest Business Loans of 2020

LenderBest ForEst. APRMin. Credit Score
SmartBiz - SBA loan

SmartBiz - SBA loan

Best for: Lowest-cost loans

6.73 - 10.29%

650

Live Oak Bank - SBA loan

Live Oak Bank - SBA loan

Best for: Lowest-cost loans

5.50 - 8.25%

650

Credibility Capital - Online term loan

Credibility Capital - Online term loan

Best for: Businesses two or more years old

19.99 - 24.99%

680

Funding Circle - Online term loan

Funding Circle - Online term loan

Best for: Businesses two or more years old

12.18 - 36.00%

660

If you’re looking for the lowest-cost loan

SBA loans are by far your best bet for the lowest possible rates if your business is strong. With the SBA guaranteeing 75% to 85% of the financing, lenders can offer SBA loan rates of about 7% to 9% that are based on the prime rate. But the application process is a major time commitment — we’re talking months — and small-business owners may not have time for that.

SmartBiz and Live Oak streamline the SBA loan process, giving business owners access to financing at low interest rates with less hassle.

SmartBiz provides SBA loans that can be used for working capital, inventory, expansion and debt consolidation.

If you do business in one of these 17 highly specialized industries, you can turn to Live Oak Bank for SBA loans. The North Carolina-based online bank can help get you an SBA loan in just 45 days.

If you’ve been in business less than two years

Many traditional lenders, such as banks, require at least two years of business history to qualify for a loan. But if you have just one year under your belt, consider StreetShares for financing.

StreetShares offers term loans and a standard line of credit of up to $250,000. The lender is takes a different spin on peer-to-peer lending, matching borrowers with investors who share similar interests.

If you’ve been in business two or more years

With two years in business, you may have an additional financing option that comes with competitive rates and quick funding.

Credibility Capital requires at least 24 months in business. It has minimum credit and revenue requirements — 680 and $250,000, respectively — but it also uses a “holistic” approach to underwriting, meaning it may be flexible on some requirements if you are outperforming in other areas.

Funding Circle offers competitive interest rates for established companies. Typical borrowers have at least 10 employees and have been in business for 10 years.

If you’re looking for business loan alternatives

Outside of traditional business loans, you can also consider using a personal loan for business or a business credit card. You typically need to have good to excellent credit to get the lowest APRs.

Personal loan: Using a personal loan for business is typically best for starting your company. Since your company is brand new, you won’t have any business or revenue history, which are two key components that small-business lenders consider. Instead, personal loan providers will qualify you based on your personal credit score and income.

Personal loans also tend to have lower APRs than many online alternative lenders, but defaulting on them could hurt your personal credit score.

Business credit card: Using a business credit card not only gives you access to a revolving line of credit, but you can also earn valuable rewards, like cash back. Credit limits on business credit cards are typically higher than what’s offered for personal credit cards.

Business credit cards are a good option for recurring or everyday purchases. You can qualify based on your personal credit even if you don’t have an established business history.

Find and compare small-business loans

If none of these options seems like a good fit, NerdWallet has created a comparison tool for the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and filtered them by categories that include your revenue and how long you’ve been in business.

Last updated on April 27, 2020

To recap our selections...

NerdWallet's Best Low-Interest Business Loans of 2020

Frequently asked questions

Businesses and nonprofit organizations with fewer than 500 employees may be eligible for coronavirus relief, which includes the deferment of existing SBA loans, access to forgivable loans and immediate emergency funds.

The U.S. Small Business Administration’s Paycheck Protection Program helps small businesses keep employees on the payroll. The program provides forgivable small-business loans when used to cover payroll and operating costs.

Online lender SmartBiz provides low-cost SBA loans, with APRs of about 7% to 9%. The loans work best for established businesses that can wait a bit longer to obtain financing.

Online business loan rates range from 6% to 99% APR, while SBA loans have a fixed-rate ranging from 5.50% to 8% APR, based on the size of the loan and repayment period. The rate you receive depends on factors such as your credit score, annual revenue and time in business.