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. It’s an important number to keep low. You’ll want to compare APRs across small-business lenders to make sure you’re getting the best rate.
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. To help get you started, we’ve rounded up several online financing options, starting with U.S. Small Business Administration loans, which offer the lowest possible APRs.
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If you’re looking for the lowest-cost loan: SmartBiz and Live Oak Bank
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 6% to 8% that are based on the prime rate. The downside? The guidelines are stringent and complicated. That makes the application process a major time commitment — we’re talking months — which small-business owners may not have time for.
SmartBiz and Live Oak offer online options to help streamline the SBA loan process, giving business owners access to financing at low interest rates with less hassle.
SmartBiz: The online lender offers SBA loans from $30,000 to $350,000, which have a 10-year term with no prepayment penalty and APRs between 8% and 8.7%. SmartBiz’s application process is shorter than at a traditional bank, often just several weeks compared with several months. To qualify, you need at least two years in business, a personal credit score starting at 600 and minimum annual revenue of $50,000.
Live Oak: Though Live Oak offers large SBA loans up to $5 million with rates from 5.75% to 7.75%, the bank specializes in certain business sectors. It serves 13 niche industries, including the wine and craft brewery industry, the funeral industry and the insurance industry (see our Live Oak review for the full list). If your business falls into one of these categories, the North Carolina-based online bank can help get you an SBA loan in just 45 days.
- Loan amount: $30,000 to $350,000.
- APR: 8% to 8.7%.
- Loan term: 10 years.
- Funding time: As quickly as seven days but typically several weeks.
- Read our SmartBiz review.
- Loan amount: $75,000 to $5 million.
- APR: 5.75% to 7.75%.
- Loan term: 10 to 25 years.
- Approval time: Average of 45 days to process an SBA loan application.
- Read our Live Oak Bank review
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If you’ve been in business at least a year: StreetShares and Credibility Capital
If you need short-term financing and you’ve been in business a year or more, then Credibility Capital and StreetShares are good options.
Credibility Capital: Credibility Capital offers term loans with APRs between 10% and 25%. While the company does have minimum credit and revenue requirements (650 and $100,000, respectively), it also uses a “holistic” approach to underwriting, meaning it may be flexible on some requirements if you are outperforming in other areas. Term loans are available for one, two or three years and range from $10,000 to $350,000.
StreetShares: Loans from StreetShares come with APRs that range from 9% to 40%, and you need only one year in business, at least a 600 personal credit score and $25,000 in annual revenue to qualify. However, the company limits your borrowing amount to 20% of your revenue, so don’t expect a large loan if you’re just getting started. It also has one of the highest minimum APRs on our list. But the peer-to peer lender connects you with investors who have similar backgrounds and characteristics, a connection the company says helps keep APRs on the lower end of the range. It also offers two products, a line of credit and a term loan, so you can choose the financing option that’s right for you.
- Loan amount: $10,000 to $350,000.
- APR: 10% to 25%.
- Loan term: One, two or three years.
- Funding time: Seven days on average.
- Read our Credibility Capital review.
- Loan amount: $2,000 to $100,000.
- APR: 9% to 40%.
- Loan term: Three to 36 months.
- Funding time: One to five days.
- Read our StreetShares review.
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If you’ve been in business at least two years: Bond Street and Funding Circle
Bond Street and Funding Circle offer alternatives to low-cost SBA loans if you want financing quicker (as fast as several days for the two lenders vs. several months for an SBA loan at a traditional bank). The two lenders offer competitive APRs in the alternative financing market, with Bond Street’s between 8% and 25%, and Funding Circle’s at 7% to 36%. Although both lenders require two years in business, Funding Circle doesn’t have a minimum revenue requirement. Bond Street requires $200,000 in annual revenue to qualify, but stronger businesses looking for lower borrowing costs may want to shoot for the lender’s lower APR range and fast access to cash.
- Loan amount: $25,000 to $500,000.
- APR: 8% to 25%.
- Loan term: One to three years.
- Funding time: Average of three to four days.
- Read our Bond Street review.
- Loan amount: $25,000 to $500,000.
- APR: 7% to 36%.
- Loan term: One to five years.
- Funding time: Average of 10 days.
- Read our Funding Circle review.
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.
Updated Feb. 1, 2017.