Best Small Business Loans to Review

You know that you want to own and operate your own business. You love the idea of being your own boss, and you're willing to put in the hard work to make it happen. But how are you going to finance this massive undertaking?

Anyone looking to step out on their own and start a business or purchase an existing one is committing to paying for equipment, labor, rent/mortgage payments, and more. Fortunately, there are many different options to help new business owners finance those expenses to get their new operation up and running.

Let’s take a closer look at some of the best small business loans available today.

The Best Small Business Loans for New Business Owners

1.  Business Line of Credit

If you value flexibility, then a business line of credit is one of the best small business loans you can get. With a business line of credit, you can get anywhere from $1,000-$500,000 and the money will typically arrive within a few weeks at the most. Rates will vary from 8-24% depending on how much money you request.

Not only is this loan flexible but qualifying is easy. If your business has been in operation for over six months and is generating $50,000 or more in revenue annually, and you have a credit score of 560 or higher, you’re a prime candidate. Depending on the lender you seek a business line of credit from you may need to make a personal guarantee.

2.  SBA 7(a) Loan

SBA 7(a) Loans are among the most common option for new business owners because of the variety of options and commonly promoted by the government. The Small Business Administration guarantees them, but the borrowers will have to check all the necessary boxes during the approval process depending on what type of SBA loan they’re applying for. There are nine different types, which can be grouped into three main categories: standard, small, and express.

• Standard SBA 7(a) loans offer a maximum amount of $5 million with a minimum 85% guarantee from the SBA on all loans up to $150,000 and 75% for loans greater than $150,000. Both lenders and borrowers can negotiate the interest rate, but it cannot exceed the SBA maximum for the loan amount. Turnaround time for an SBA decision is typically 5 to 10 business days.

• The small SBA 7(a) loan offers a maximum of $350,000 but comes with many of the same stipulations as the standard loan – the same 85% guarantee for loans less than $150,00 and 75% for those over $150,000, the same negotiable interest rate, and the same turnaround time.

• Express SBA 7(a) loans have a quicker turnaround time for review – within 36 hours of your application. Like the small loan they offer a maximum of $500,000 and have a negotiable interest rate but the SBA only guarantees 50% regardless of this express loan amount. Additionally, the credit decision is made by lenders not the SBA itself.

While these loans differ in their maximum amount and guarantees, they are quite similar when it comes to collateral. Standard loans don’t require lenders to take collateral for loans less than $25,000 but for loans over $350,000 the SBA requires the lender to provide collateral equal to the value of the loan. For a loan that falls in between these two amounts lenders follow the same established policies for non-SBA commercial loans. Small loans also don’t require collateral for loans less than $25,000 and follow established policies for non-SBA commercial loans for amounts between $25,000 and $350,000. Lastly, Express loans of $25,000 or less don’t require the lender to take collateral, but the lender will have to use existing collateral policy for loans between $25,000 and $350,000.

Important note about SBA loan lead times: While sba.gov mentions that their SBA loans have a quick turnaround time, there is a significant amount of documentation that must be submitted during the process and verified. Applicants are also at the mercy of vetted lenders, which means it can take 2 to 3 months to see the requested funds.

3.  Short-term Loan

Short-term loans are very similar to Express SBA loans, only they’re even faster. With a short term loan, you can get the amount of money you need in as little as 24 hours! It’s perfect for the times when you run into a costly and unexpected issue you may not have the funds to address immediately but requires a quick fix or if there’s a great opportunity you can’t pass up but need some extra cash to make it work. It’s the best small business loan for the times when you find yourself in dire circumstances.

These loans max out at $500,000 and because you’re getting them quickly you need to pay them back quickly, typically within a few years. Interest rates can be quite fair and affordable though, with rates starting as low as 8%.

4.  Merchant Cash Advance

Unlike some of the other types of small business loans, qualifying for a merchant cash advance can be a quite simple process because the loan’s nature and terms make it incredibly low risk for lenders. You won’t have to submit a mountain of paperwork when applying, the lender won’t ask for collateral, and you could even get the loan without your credit ever being pulled! Funds can be expected within 24 hours so merchant cash advances are not only easy but convenient as well.

The tradeoff for this easy application process and convenience is the high interest rate, most start at around 18%, and you can only apply for $5,000-$200,000 at a time. Still, though, the ease and convenience can’t be beaten.

Qualifying for these loans will require you to provide your personal credit history, the track record of the business you are purchasing, and your qualifications for running the company once you acquire it.

5.  Unsecured Loan

In many cases, the best small business loan is an unsecured loan — and it's worth understanding why it earns that reputation. Unlike a business line of credit or an SBA 7(a) loan, an unsecured loan isn't tied to your business assets or real estate. Approval comes down to your creditworthiness and cash flow, not what you're willing to put up as collateral, so you're not risking equipment, property, or personal assets if the business hits a rough patch.

That structure also makes unsecured loans considerably more flexible than some of the options above. Where a merchant cash advance tops out around $200,000 and comes with steep rates to offset the lender's risk, or an SBA loan can take months of documentation before funds arrive, an unsecured loan can often move faster and scale to a much higher amount — especially for borrowers with strong personal or business credit.

The tradeoff is that qualification leans harder on your credit profile than any of the other options here. The better your score, the more favorable your rate and the higher the amount you're likely to qualify for.

Looking for a startup or business acquisition loan? Submit your inquiry here and connect with a Jumpstart Advisor today for a prequalification.