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Loans

Best small business loans of 2021

We rounded up the best small business loans that can help you get the capital that your business needs to operate successfully.

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Small business loans can help you get access to cash for starting, expanding or keeping your business up and running. There are several types of small business loans that support a variety of needs, such as starting a franchise, purchasing property or getting cash when you have a stack of unpaid invoices.

With so many choices and so many types of businesses out there, there's no one-size-fits-all answer to the best financing option. In order to help you find the best loan for your needs, CNBC Select reviewed five different types of loans: term loans, equipment loans, commercial real estate loans, microloans and franchise loans.

We evaluated each small business loan on a range of features, including: minimum and maximum loan amounts, time period to repay loan, personal credit score needed, Better Business Bureau rating and business requirements to apply. (Read more about our methodology below.)

The loans on this list are all from private lenders, which can be an organization or individual that isn't tied to a specific bank or credit union. Overall, many lenders are pausing traditional loan applications and focusing on Paycheck Protection Program loans, so there are fewer options than usual.

Here are four small business loans that can help you get the money you need to start or expand your business.

Best small business loans

Business loan FAQs

Best for multiple types of loans

Biz2Credit

Information about Biz2Credit has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Types of loans

    Working capital, term loan and commercial real estate (CRE) loan

  • Better Business Bureau (BBB) rating

    A+

  • Loan amounts

    $25,000 to $2 million+ (working capital), $25,000 to $250,000 (term), $250,000 to $6 million (CRE)

  • Terms

    Daily, weekly or biweekly payments from your business receipts (working capital), 12 to 36 months (term, CRE)

  • Minimum credit score needed

    575 (working capital), 660 (term, CRE)

  • Minimum requirements

    Typical borrowers: in business at least 6 months (working capital) or 18 months (term, CRE), annual revenue greater than $250,000 (all), already own commercial property (CRE)

See our methodology, terms apply.

Pros

  • Top-tier A+ rating with the BBB
  • Variety of loan types for different business needs
  • Low credit score requirement for working capital loans
  • Flexible daily, weekly, bi-monthly or monthly payments, depending on loan type
  • Working capital and commercial real estate loans may let you take out a large amount of money

Cons

  • The minimum loan amount is relatively high

Best for same-day funding

OnDeck

Information about OnDeck has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Types of loans

    Term loan

  • Better Business Bureau (BBB) rating

    A+

  • Loan amounts

    $5,000 to $250,000

  • Terms

    Up to 18 months

  • Minimum credit score needed

    600

  • Minimum requirements

    1 year in business, $100,000 annual revenue, business bank account

See our methodology, terms apply.

Pros

  • Potential for same-day cash disbursement (only available in certain states, for term loans up to $100,000)
  • Top-tier A+ rating with the BBB
  • Low minimum credit score
  • Fixed monthly payments
  • 100% Prepayment Benefit option, so you can pay your loan off early without any penalty or fee

Cons

  • Doesn't lend to businesses in Nevada, North Dakota or South Dakota
  • Early prepayment fee if you don't qualify for the 100% Prepayment Benefit

Best for no prepayment fees

Funding Circle

Information about Funding Circle has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Types of loans

    Term loan

  • Better Business Bureau (BBB) rating

    A+

  • Loan amounts

    $5,000 to $500,000

  • Terms

    3 months to 10 years

  • Minimum credit score needed

    660

  • Minimum requirements

    In business at least 2 years, no bankruptcies within the last 7 years

See our methodology, terms apply.

Pros

  • Top-tier A+ rating with the BBB
  • No prepayment penalties
  • Funding as soon as the next day after accepting an offer

Cons

  • Doesn't lend to businesses in Nevada due to state commercial lending regulations
  • You have to be in business at least 2 years to qualify

Best for microloans

Kiva

Information about Kiva has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Types of loans

    Peer-to-peer crowdfunded loan

  • Better Business Bureau (BBB) rating

    N/A

  • Loan amounts

    $1,000 to $15,000

  • Terms

    Up to 3 years

  • Minimum credit score needed

    No minimum credit score required

  • Minimum requirements

    You must be 18, live in the U.S., use this loan for business purposes, not currently in foreclosure, bankruptcy or have any liens, and have a small number of your friends and family willing to make a loan to you

See our methodology, terms apply.

Pros

  • Ability to borrow with no interest
  • Loans are geared toward borrowers who are unbanked and have trouble qualifying for financial products
  • Ability to market your product to 1.6 million lenders on Kiva

Cons

  • You need to prove your creditworthiness by inviting friends and family to lend to you
  • It can take a while to receive your loan since investors need to raise money
  • No BBB rating

FAQs

What are the different types of small business loans?

There are a variety of loan options that suit different business needs. Here's an overview of nine types of small business loans.

1. Term loans

Term loans are one of the most common types of small business loans and are a lump sum of cash that you repay over a fixed term. The monthly payments will typically be fixed and include interest on top of the principal balance. You have the flexibility to use a term loan for a variety of needs, such as everyday expenses and equipment.

2. SBA loans

Small Business Administration (SBA) loans are enticing for business owners who want a low-cost government-backed loan. However, SBA loans are notorious for a long application process that can delay when you will receive the funding. It can take up to three months to get approved and receive the loan. If you don't need money fast and want to benefit from lower interest rates and fees, SBA loans can be a good option.

3. Business lines of credit

Similar to a credit card, business lines of credit provide borrowers with a revolving credit limit that you can generally access through a checking account. You can spend up to the maximum credit limit, repay it, then withdraw more money. These options are great if you're not sure of the exact amount of money you'll need since you only incur interest charges on the amount you withdraw. That's compared to a term loan that requires you to pay interest on the entire loan — whether you use part or all of it. Many business lines of credit are unsecured, which means you don't need any collateral.

4. Equipment loans

If you need to finance large equipment purchases, but don't have the capital, an equipment loan is something to consider. These loans are designed to help you pay for expensive machinery, vehicles or equipment that retains value, such as computers or furniture. In most cases, the equipment you purchase will be used as collateral in case you can't repay the loan.

5. Invoice factoring and invoice financing

Business owners who struggle to receive on-time payments may want to choose invoice factoring or invoice financing (aka accounts receivable financing). Through invoice factoring, you can sell unpaid invoices to a lender and receive a percentage of the invoice value upfront. With invoice financing, you can use unpaid invoices as collateral to get an advance on the amount you're owed. The main difference between the two is that factoring gives the company buying your invoices control over collecting payments, while financing still requires you to collect payments so you can repay the amount borrowed.

6. Commercial real estate loans

Commercial real estate loans (aka commercial mortgages) can help you finance new or existing property, like an office, warehouse or retail space. These loans act like term loans and may allow you to purchase a new commercial property, expand a location or refinance an existing loan.

7. Microloans

Microloans are small loans that can provide you with $50,000 or less in funding. Since the loan amounts are relatively low, these loans can be a good option for new businesses or those that don't need a lot of cash. Many microloans are offered through nonprofits or the government, like the SBA, though you may need to put up collateral (like business equipment, real estate or personal assets) to qualify for these loans.

8. Merchant cash advances

Like traditional cash advances, merchant cash advances come at a high cost. This type of cash advance requires you to borrow against your future sales. In exchange for a lump sum of cash, you'll repay it with either a portion of your daily credit card sales or through weekly transfers from your bank account. While you can often quickly obtain a merchant cash advance, the high interest rates make this type of loan a big risk. Unlike invoice financing/factoring, merchant cash advances use credit card sales as collateral, instead of unpaid invoices.

9. Franchise loans

Becoming a franchisee can help you achieve your goal of business ownership quicker and easier than starting from the ground up, though you'll still need capital. Franchise loans can provide you with the money to pay the upfront fee for opening a franchise, so you can get up and running. While you're the one taking out the loan through a lender, some franchisors may offer funding to new franchisees.

What information do I need to apply for a small business loan?

When you go to submit an application for a small business loan, you'll need to have both personal and business information handy. Expect to enter some or all of the following information:

  • Personal information (like your name and address)
  • Tax identification number (which is either your employer identification number (EIN) or social security number (SSN), and sometimes both)
  • Business name
  • Business address and phone number
  • Industry type and company structure
  • Years in business
  • Number of employees
  • Annual business revenue
  • Estimated monthly spend

During the application process, you may need to submit documentation, like your business plan, financial statements, bank statements and tax returns. There's also a good chance that your personal credit score will be pulled, so a lender can gauge your creditworthiness.

What credit score is required for a small business loan?

You typically need at least a fair/average credit score (580 to 669) to qualify for a small business loan, but it will vary depending on the lenders.

If your personal credit score is good/very good (670 to 799) or excellent (800 to 850), you’ll have even better odds. As with most financial products, the higher your credit score, the better interest rates and fees you’ll receive.

Lenders focus on your personal credit score when setting minimum credit score requirements, however they may also check your business credit score. But lenders don't state any requirements for business credit scores.

Am I personally liable for a small business loan?

Yes, in most cases you, as the business owner, are personally liable for a business loan. When you take out a business loan, you’ll typically need to put up collateral, which can range from business property and vehicles to personal assets like your own car or home. In the unfortunate event that your business goes bankrupt and you can't repay your loan, you may also lose personal assets.

Our methodology

To determine which small business loans offer the best financing terms, CNBC Select analyzed a dozen U.S. loans offered by both online and brick-and-mortar lenders. We narrowed down our rankings by only considering traditional loans, including term loans, equipment loans, commercial real estate loans, microloans and franchise loans. For this roundup, we didn’t evaluate SBA loans, business lines of credit, invoice factoring/financing, merchant cash advances since they either have a long application process (like SBA loans) or act differently than a traditional term loan, which gives you a lump sum that you pay back over a fixed time period.

We compared each small business loan on a range of features, including:

  • Minimum and maximum loan amounts
  • Length of term
  • Credit score needed
  • Application requirements
  • Streamlined application process
  • Fund disbursement
  • Customer support
  • Better Business Bureau rating
  • Customer reviews, when available

After reviewing the above features, we organized our recommendations by best for overall financing needs, same-day funding, no prepayment fees and microloans.

The rates and fee structures for small business loans are subject to change without notice, and they often fluctuate in accordance with the prime rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee that the interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness.

To take out a small business loan, lenders will conduct a hard credit inquiry and request a full application, which could require both personal and business proof of income, identity verification, proof of address and more. You'll likely also need to put up collateral, which can include business equipment, real estate or personal assets.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.