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Small-Business Loans

Get the right financing for your business needs.

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How Fundera by NerdWallet works

Getting a business loan can be challenging, and several factors — cost, speed, repayment schedule — can play a role in deciding which product is right for you. Let us help you through the process.

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1. Fill out one simple application

Answer a few questions about your business to get personalized lending options. It’s free and won’t impact your credit score.

2. See your business loan options

It takes about three minutes to get options from our network of vetted small-business lenders. Compare interest rates and repayment terms to choose the best product for your needs.

3. Get your loan

If the lender approves you, you’ll sign closing documents in order to receive funds. Some lenders can approve and fund loans within one business day.

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A beginner’s guide to small-business loans

What is a small-business loan?

A small-business loan allows you to borrow money from a lender to finance your operations. You can use a business loan for a wide variety of purposes, including but not limited to:

  • Working capital.
  • Renovations or expansions.
  • Buying inventory or equipment.
  • Hiring staff.
  • Business acquisitions.
  • Real estate purchases.
Small-business loans are available from traditional lenders, like banks and credit unions, as well as online lenders, fintech companies and community lending institutions.

How do small-business loans work?

With most small-business loans, you borrow capital from a lender and repay it, plus interest, over a predetermined period. Maximum loan amounts, interest rates and repayment terms will vary based on the type of business loan, the lender you’re working with and your business’s qualifications.

When applying for a small-business loan, the lender will evaluate your business based on underwriting criteria to determine if you qualify. Every lender has different requirements, but they’ll typically consider criteria such as your personal credit score, annual revenue and time in business.

In general, having strong business credentials can help you qualify for a small-business loan with the most competitive interest rates and repayment terms.

Types of small-business loans

SBA loans
SBA loans are small-business loans partially guaranteed by the U.S. Small Business Administration and issued by participating lenders, such as banks and credit unions. SBA loans offer low-interest rates and long repayment terms and can be used to finance a variety of business expenses. Although there are multiple types of funding within the SBA loan program, the SBA 7(a) loan is the most popular.
Business term loans
Business term loans are perhaps one of the most well-known types of small-business loans. Like a car loan or mortgage, you receive a lump sum of capital from a lender and pay it back (with interest) on a fixed schedule over a set period. Repayment terms range between days, months and years — depending on your lender and your business’s qualifications.

Business term loans are available from banks, credit unions and online lenders. Banks and credit unions tend to offer term loans with lower interest rates and longer terms but have stricter requirements and are slower to fund. Online lenders may have more flexible requirements and fund quickly, but often at higher interest rates.
Business lines of credit
A business line of credit allows you to draw from a set limit of funds when you need access to capital. Unlike a small-business term loan, you only pay interest on the portion of the money you borrow. You repay the funds over a period, typically on a weekly or monthly schedule. In most cases, you can continue to draw on the line as long as you make your payments on time and don’t exceed your credit limit.

Although business lines of credit are more flexible than term loans, they may carry additional fees, such as draw fees, monthly maintenance fees or inactivity fees. You can get a business line of credit from traditional and online lenders.
Equipment financing
Equipment financing is a type of small-business loan used specifically to purchase machinery or equipment. The equipment itself serves as collateral on the loan, meaning you may not need to rely as heavily on other criteria to qualify for this type of financing.

You can get an equipment loan equaling up to 100% of the value of the equipment you’re looking to purchase, depending on your lender and your business’s qualifications. You then repay the loan over time, with interest. Some lenders may also pay for soft costs, such as installation, delivery, assembly and other expenses required to get your equipment up and running. Repayment terms on equipment financing are generally based on the anticipated life of the equipment you’re purchasing.
Invoice financing
Invoice financing allows you to borrow money against your outstanding customer invoices. Because your invoices serve as collateral, this type of financing can be easier to qualify for than other types of small-business loans — although the cost of debt can be higher.

With invoice financing, a lender gives you a portion of your unpaid invoices — potentially as much as 90% — upfront in the form of a loan or line of credit. Once your customer pays the invoice, you pay the lender back the amount borrowed, plus fees and interest. Invoice financing is often confused with its similar counterpart, invoice factoring.

With invoice factoring, however, you sell your outstanding invoices to a factoring company at a discount and the company collects repayment directly from your customers.
Merchant cash advance
A merchant cash advance (MCA) gives you an advance of capital that you repay using a percentage of your future debit and credit card sales, plus a fee. A merchant cash advance isn’t technically a loan, however — instead, a company is purchasing your future sales at a discount.

Although merchant cash advances are often fast to fund and easy to qualify for, they’re one of the most expensive forms of small-business financing, with annual percentage rates as high as 350%. MCA providers also typically charge their fees as factor rates rather than standard interest rates, so it’s important to calculate these fees into an APR to understand the total borrowing cost.

What is the right small-business loan for me?

The right loan for your business will depend on a combination of factors. You’ll want to consider why you need funding, how much capital you need and the total cost of any potential debt. You’ll also want to think about how fast you need financing and what type of loan you can qualify for.

When applying for a small-business loan with Fundera by NerdWallet, you can see all of the loan options you qualify for and compare them through a single platform for free. As a marketplace, we connect you with a network of vetted business lenders and offer tailored knowledge and expertise to ensure you have everything you need through each step of the funding process.

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