Business loans

Business loans are financial products designed specifically to support businesses. Unlike personal loans, these loans are tailored to meet the unique needs of a company, whether it’s funding a startup, expanding operations, or covering day-to-day expenses.

Common uses for business loans include:

• Purchasing equipment or inventory
• Funding marketing campaigns
• Expanding to new locations
• Managing payroll during slow periods

How to qualify for a business loan

Qualifying for a business loan requires preparation and meeting specific criteria. Here’s what lenders typically look for:

1. Check credit scores

• A personal credit score of 675 or higher is ideal for securing the best rates.
• Some lenders may approve loans with scores as low as 500, though interest rates will be higher.

2. Review business history

• Most lenders require six months to two years of operational history.
• Providing collateral such as real estate, equipment, or inventory can improve your chances of approval.

3. Collect business transactions

• Annual revenue of $100,000 to $300,000 is a common requirement.
• Be prepared to provide at least three months’ worth of business checking account statements.

4. Compare lenders

• Request quotes from multiple lenders to secure the lowest rates and most favorable terms.
• Compare eligibility requirements to find the best fit for your business.

Business loans vs. regular loans

Types of business loans

Term loans

Perfect for large, one-time expenses like purchasing equipment or expansion. They come with fixed interest rates and set repayment terms.

SBA loans

Backed by the Small Business Administration, these loans offer lower interest rates and longer repayment terms, making them ideal for small businesses seeking affordable financing.

Business lines of credit

A flexible funding option for ongoing expenses. You only pay interest on what you borrow, which is great for managing cash flow and unexpected costs.

Invoice financing

Get an advance on outstanding invoices. This provides quick access to funds without waiting for customer payments, useful for businesses with longer payment cycles.

Merchant cash advances

Receive a lump-sum payment in exchange for a percentage of future sales. Fast approval and funding make this ideal for businesses with consistent credit card sales.

Business lender interest rates, terms, and loan amounts

Interest rates

Interest rates vary widely depending on the type of loan. For example:

• SBA loans: lower rates, typically the most affordable
• Merchant cash advances: higher rates due to faster approvals and less stringent requirements

Loan terms

Loan terms range from a few months to several years. Choose a term that aligns with your repayment ability and financial planning.

Loan amounts

The amount you can borrow depends on the type of loan and your business’s financial health. Term loans and SBA loans often offer larger amounts, while options like invoice financing may be more limited.

Choosing the Right Loan

1. Assess your needs

• Determine the amount needed and the purpose. Consider your repayment ability and timeline.

2. Compare interest rates and terms

• Look for the lowest interest rates and favorable terms to save money in the long run.

3. Check eligibility requirements

• Ensure you meet the lender’s criteria, including credit score and business history.

4. Read reviews

• Learn from other businesses’ experiences to choose a reputable lender.