Best Small Business Loan Rates

Point of Interest: Small Business Loan Rates

Businessowners can take advantage of small business loans available in order to increase cash flow, expand inventory, grow operations and more.

Businesses at any stage of the growth process can be unpredictable and create unexpected needs for capital. Small business loans help business owners fill the gaps and keep companies moving forward in the right direction. Choosing the best option for your business should include a thorough look at small business loan rates, term lengths, amounts available and any other significant details of the deal.

6 best small business loan rates of 2020

LenderAPRLoan AmountLoan Terms
Bank of AmericaStarts at 3.75%$25,000 and upUp to 15 years
Rapid FinanceMust apply for rate quote*$5,000 – $1,000,0003 – 60 months
TD BankMust apply for rate quote*$10,000 – $1,000,0003 – 5 years
Street Shares8.00% – 39.99%$2,000 – $250,0003 – 36 months
Santander BankMust apply for rate quote*$10,000 and up3 – 25 years
PayPalMust apply for rate quote*$5,000 – $500,00013 – 52 weeks

*Banks and lenders offer rates contingent on location as well as other details including loan size, term, and creditworthiness. Some banks choose to disclose rates only when able to give an accurate picture of what the loan will look like.

What is a small business loan?

The phrase “it takes money to make money” is cliché, but it carries a lot of truth when talking about the world of small business. Whether your business is working through unexpected and challenging times, stumbled upon a can’t-miss opportunity or needs to bridge cash flow shortages, a small business loan or a business line of credit can help. Similar to traditional loans, these business-focused loans give immediate access to cash in return for a promise to pay that amount back with an associated interest as payment for the service.

There are two types of business loans — secured and unsecured. Secured small business loans require borrowers to provide something of value as collateral in the unexpected chance the borrower is unable to pay back your loan. Unsecured loans do not require collateral and provide funding based more on the borrower and their business’ creditworthiness. While putting up collateral may sound like the less ideal choice, doing so typically provides access to better small business loan interest rates.

Small business loans vs. personal loans

A popular question asked by business owners is whether they can use a personal loan for business purposes.  Some lenders allow personal loans to be used for their business, but it varies from lender to lender.

However, if business partners are involved or the business is structured in a way that separates your personal finances and business finances, this can get messy. Ideally, you’re better off using business loans for business purposes and vice versa.

The only reason to use a personal loan instead of a business loan would be when you’re a sole proprietor, or you operate a single owner LLC and are able to get a better rate through a personal loan or it’s the only way you can be approved. Keep in mind, though, intermingling these funds will have an impact on your business and your personal liabilities, so please do your homework before intermixing these two financial instruments.

Small business loans vs. business line of credit

Another common option you can utilize when your business needs funding is a business line of credit. When you use a small business loan, you’re given the entire amount you request, which means you are liable for paying the interest on the loan. On the other hand, a business line of credit is an authorization for a particular amount of money. You only use the amount you need and incur no costs until you start utilizing the funds.

In general, small business loans are better for longer-term investments like purchasing equipment, leases and expansion while business lines of credit are better suited for quick cash infusions like temporary staff, inventory purchases and more.

6 best small business loans of 2020

Bank of America: Best for real estate and equipment purchases

While many banks only offer generic small business loans, Bank of America offers loans for specific needs, as well as generic loans. Those looking to purchase equipment or commercial real estate can secure loans with rates as low as 3.75% and terms up to 5 years for equipment and the same rate up to 15 years for real estate.

Rapid Finance: Best for fast turnarounds

There are times when you need money for your business yesterday. When time is not your friend, you need a way to secure small business funding quickly. Rapid Finance allows borrowers to get up to $1,000,000, with $500,000 of that available by the next day. Furthermore, it does not perform hard credit pulls for businesses organized as an LCC or corporation — but the opposite is true for sole proprietorships and general partnerships. This will be a good option for the former to secure funds quickly in the event of a business emergency.

TD Bank: Best for large loans

If you’re looking for funding up to $1 million you’ll want to add TD Bank to your list. TD Bank works closely with small businesses to ensure that owners get the funding they need to continue with their livelihoods. It also offers loans larger than $1 million for agricultural small businesses and restaurants who need cash to get started or keep going. Through TD Bank, business owners can also apply for SBA loans that have flexible and favorable terms and rates.

Street Shares: Best for veterans and low credit scores

This veteran-run company boasts ‘Made in the USA’ proudly on its website. Regarding what they can do for you with a small business loan, the company offers secured and unsecured business loans for those with a minimum credit score of 600, which is about 50-60 points lower than the other options on this list.

Santander Bank: Best for owner-occupied commercial real estate

Those interested in purchasing commercial real estate that their business will occupy should consider using Santander Bank as a lender. While most lenders cap out loan terms around 10 or 15 years, Santander allows borrowers up to 25 years to pay back funds on this particular type of loan.

PayPal: Best for short-term loans

Online merchant PayPal is no longer just processing payments. The company now offers short-term business loans to customers from $5,000 to $500,000. Unlike many of the other lenders covered here, the maximum repayment term on PayPal’s small business loans is one year. Instead of making monthly payments, you’ll make weekly payments to PayPal directly from your bank account. Eligibility does require a PayPal business account (free), a business that’s been around for at least nine months, and at least $42,000 in total annual revenue.

The final word

Requiring funding for your business can be exciting whether it’s to grow a startup or to capitalize on a unique and time-sensitive opportunity. It can also be a scary time when unexpected expenses or the market turns require you to acquire funding to keep afloat. Thankfully, there are plenty of high-quality small business loan lenders available to help you bridge the gap and keep your business driving forward.