Ratings Methodology for Small-Business Loans

NerdWallet’s overall ratings for small-business loans are weighted averages of ratings in six major categories:
  • Cost.
  • Transparency.
  • Credit.
  • Underwriting and loan flexibility.
  • Application experience.
  • Customer service.

Data collection and review process

NerdWallet evaluates and rates small-business loan products from both traditional banks and online lenders. We collect over 30 data points on each product using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives.

Information is gathered on a regular basis and reviewed by our editorial team for consistency and accuracy. Final star ratings are presented on a scale of one to five stars, where a one-star score represents “poor” and a five-star score represents “excellent.”

The review team

The writers and editors behind our business loan reviews are small-business specialists who have had their work featured by The Associated Press, The Washington Post, Entrepreneur, MarketWatch and many other publications. Each writer and editor follows NerdWallet’s strict guidelines for editorial integrity.

Our small-business editorial team also covers business bank accounts, business credit cards, business insurance and business software.

Methodology, broken down by category

We assess six categories and 17 subcategories for all loan products. Here’s how we weigh these categories.

Cost (37.04%)

Small-business lenders that don’t charge an origination fee or prepayment penalty rank higher in this category.

Transparency (22.22%)

We review lenders’ websites and practices to determine if it’s possible for borrowers to reasonably assess whether the business loan is the right option for them, and how easy it would be to do so. This includes whether information like the loan’s rate, fees and terms are easily accessible. It also includes transparency in terms of qualification requirements, such as minimum personal credit score, time in business and annual revenue.

Credit (14.81%)

Small-business lenders earn high marks for credit if they report timely payments to the commercial credit bureaus. This reporting allows borrowers to establish business credit, which can help them qualify for better rates and terms on future financing.

Underwriting and loan flexibility (11.11%)

We assess the rigorousness of each lender’s underwriting practices, including whether they require physical collateral and whether they take out a Uniform Commercial Code (UCC) lien on funded borrowers. We also consider whether the lender offers multiple payment options (e.g. daily, weekly, monthly) and prepayment discounts.

Application experience (7.41%)

We consider the experience of the small-business owner trying to get a loan, including the ways in which they can apply (e.g. online, over the phone, in person) and the speed of funding.

Customer service (7.41%)

We reward lenders that offer multiple avenues for customer support (phone, email and live chat), as well as those that provide access to an online dashboard for loan management.

Discretionary (not weighted)

A lender’s rating may be lowered if it has faced governmental regulatory action in the past five years or been accused of predatory business lending practices by a reputable source. A lender that offers a unique, small-business-friendly feature (outside of the scored categories above) that few others offer may earn a higher score.