The Top Online Small Business Lenders in 2022 (and the Loans They Offer)
November 1, 2022
The best small business loan options aren’t just found in traditional banks and credit unions any longer. Online lenders have sprung up to offer new businesses and established businesses alike access to capital. With streamlined application processes, enhanced eligibility requirements, and the ability to seek out dozens of funding options with ease, online lenders take several approaches to make the lending process simple for borrowers.
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When you’re ready to consider which online lender is best for your small business, you should first sit down and consider the types of business funding available. Small business lenders, both online and in brick-and-mortar financial institutions, offer a number of different types of financing, and no two businesses have the same needs.
Some small business financing requires a specific purpose for borrowed money. Other types of lending can be used as general working capital used for anything from rent to wages. On top of that, some online loans are unsecured, meaning that the lender holds no assets as collateral. Others are secured with a valuable asset. Some forms of online lending also require a personal guarantee, meaning that lenders can come after your personal credit and assets in the case of default.
Term Loans (short and long): Much like personal loans, business term loans are lump sum loans that are paid back by the borrower over an agreed-upon repayment term. Borrowers will also pay interest on the loan, which can be reduced by paying the loan back faster.
Term loans are often sorted into short- and long-term loans. Short-term loans tend to be smaller but with higher interest rates. They usually require repayment in under 18 months. On the other hand, long-term loans can take as long as 10 years or more for repayment and can sometimes stretch into millions of dollars.
SBA Loans: SBA loans are comprised of several forms of term loans all guaranteed by the U.S. Small Business Administration. That means if the borrower is for some reason unable to pay back their loan, the government steps in and pays the bank up to 85% of the total balance of the loan. With that guarantee that they’re protected from massive financial loss, SBA loans are underwritten with highly competitive rates and favorable repayment terms.
But because these loans are guaranteed by taxpayer dollars, the SBA is very careful about the small businesses receiving them. The application process is arduous: you’ll need to show all sorts of bank statements, tax returns, and even your business plan. Be prepared for the process to take weeks or months, and even then you may not be approved.
The SBA 7(a) loan program is the SBA’s most popular form of lending. 7(a) loans are term loans of up to $5 million and are general-purpose, so you can use them for a number of business needs, from working capital loans to equipment purchases.
SBA 504 loans are intended for upgrading or modernizing some infrastructure in order to create jobs or build the local economy.
Microloans are, on average, about $13,000 but can range up to $50,000. The SBA works with nonprofit lenders in local communities to offer them.
Lines of Credit: Instead of a lump sum, lines of credit lie in wait for when you need them. And unlike a traditional loan (where you immediately begin making monthly payments), you only need to make payments and pay interest on the money you withdraw under your agreed-upon credit limit. Business lines of credit are an excellent way of having a credit-based rainy day fund.
Equipment Loans: If you’re looking for debt funding in order to buy a piece of equipment, equipment financing is worth a look. The borrower applies for equipment financing for a specific purchase, repair, upgrade, or replacement. The borrower will also need to put up a down payment. After that, the lender finances the rest of the purchase and holds the equipment as collateral. If the borrower can’t repay the loan, the lender repossesses the equipment and sells it, hopefully recouping much of the loan.
Business Credit Cards: They work just like your personal credit cards. The card provider grants a particular credit limit and you’ll make payments based on what you spend under that limit. Like personal credit cards, business credit cards are sometimes used to accrue points or rewards that are unavailable for, say, a line of credit.
Merchant Cash Advances: Merchant cash advance (MCA) providers purchase a significant share of future debit and credit card transactions. They’re not loans. Instead, a company receiving an MCA agrees to a factor rate, which is a number typically between 1 and 2 which, when multiplied by the size of the advance, shows how much money must be repaid. If you take out a $5,000 MCA at a factor rate of 1.2, you’ll repay $6,000. Because the repayment amount is fixed, the annual percentage rate (APR) on MCAs can reach the triple digits, but MCAs are a useful option for companies in need of fast funding or that have poor credit.
Invoice Factoring: Invoice factoring companies purchase a company’s unpaid invoices. The responsibility for accepting that invoice then falls on the factoring company. This is another form of financing that’s a transaction, not a loan. Invoice factoring companies make money by advancing less than the full value of the invoices. If you run a retail-based company, this might not be a particularly helpful form of financing as it requires a high volume of invoicing.
What Online Lenders Look For In a Borrower
Online lenders tend to be more generous than traditional banks when it comes to approving business loans. Many online lenders use a more holistic view of companies instead of the black-and-white credit-score-based applications more common in traditional lending. Online loans also tend to have more streamlined, simple application processes than bank loans. However, there are still a few factors nearly every online lender will look at when reviewing your loan application:
Credit: While not the be-all-end-all, most online lenders do have a minimum credit score in order for consideration for a loan, and some also have personal credit score requirements. If you’ve got good credit, you’ll likely see higher loan amounts and lower interest. But online lenders are more likely than traditional lenders to work with companies with bad credit.
Industry: What industry do you operate in? Are you operating a trucking company? A yoga studio? A cannabis dispensary? The fact is, some industries are riskier lending propositions than others.
Revenue: How much money are you bringing in each month? Some financing options, like invoice factoring or merchant cash advances, depend more on your income than your credit.
Time in Business: While there are funding options out there for startups, many business loans will require some time in business to show that you’re able to generate revenue on a long-term basis.
The Top Online Business Lenders
This isn’t meant to be an exhaustive list. However, here are a few companies known for easy online applications, varied loan products, generous loan amounts, and dispersal as soon as a single business day after business submit applications.
Founded in 2013, BlueVine offers several financial products for small businesses, including checking accounts.
Types of Loans: Business line of credit.
Size of Loans: BlueVine’s lines of credit can be as large as $250,000 at interest rates as low as 4.8%
Repayment Terms: BlueVine’s lines of credit come with repayment terms of either six or twelve months. The six-month repayment term comes with weekly payments, while the 12-month repayment term means monthly payments.
Additional Notes: Approval happens as soon as the same day, and funds hit your business bank account within a few days. You can qualify for a line of credit with a credit score as low as 625 and at least six months in business.
OnDeck was founded in 2006 and specifically offers several lending products for small business owners.
Types of Loans: term loans and lines of credit.
Size of Loans: Term loans run from $5,000 to a maximum loan amount of $250,000, while lines of credit go from $6,000 to $100,000.
Repayment Terms: Term loans go up to two years, while lines of credit have a 12-month repayment term.
Additional Notes: OnDeck makes note of their fast process and quick payment. In fact, they offer Same Day Funding, which allows qualified borrowers to receive their funds on the very same day they apply. You’ll qualify for a loan from OnDeck with a minimum personal credit score of 600, a year in business, and $100,000 in gross revenue.
Fundbox has loaned over three billion dollars to small businesses since its inception in 2013. In addition to its funding opportunities, the company offers an AI-powered tool that allows small business owners to project cash flow and view other financial metrics when given access to the company’s banking information.
Types of Loans: The company is known for its line of credit and a term loan is currently in beta, so it isn’t available for every applicant yet.
Size of Loans: Lines of credit go up to $150,000.
Repayment Terms: 12 or 24 weeks.
Additional Notes: Your company will need to be based in the U.S. On top of that, you’ll need to have a personal FICO score of 600 or greater, six months or more in business, and at least $100,000 in annual revenue.
Kabbage is owned and operated by American Express, which gives the company a significant boost in its ability to offer additional resources beyond simply lending. While its funding options are limited to a line of credit, Kabbage allows business to also host their checking accounts and payment processing.
Types of Loans: Kabbage only offers a business line of credit.
Size of Loans: From $2,000 to $250,000.
Repayment Terms: There are options for six, 12, or 18-month repayment terms depending on the size of the line of credit and the creditworthiness of the borrower.
Additional Notes: You’ll need to have been in business for a year, have a credit score of at least 640, and monthly revenue of more than $3,000.
Lendio isn’t an online borrower in and of itself. Instead, Lendio is a lending marketplace. You’ll fill out one application, and Lendio will connect you with dozens of possible lenders of all stripes. They can connect you with a $3 million SBA loan or a $25,000 line of credit. They’ve helped fund $12 billion in small business lending since their inception and can be a great one-stop shop for a business owner who isn’t sure what they’re looking for in a loan.
Types of Loans: Not offered by Lendio itself. Lendio can connect borrowers to providers of term loans, SBA loans, equipment loans, MCAs, mortgages, and more.
Size of Loans: From a $1,000 line of credit to a $5 million SBA loan, depending on needs and credit.
Repayment Terms: Vary based on the loans Lendio connects you with.
Additional Notes: The types of financing you’ll connect with through Lendio will depend on your credentials as a borrower. There are no specific minimums, as Lendio will try its best to connect applying businesses to funding no matter their credentials.
iCapital makes funding available to small business owners whether they’ve got stellar credit or not. The application process is incredibly fast and simple, and you can receive funds within 24 hours.
Types of Financing: Merchant cash advances, term loans, lines of credit, and invoice factoring.
Size of Loans: Up to a million dollars.
Repayment Terms: Depends on which type of financing you’re looking for: lines of credit have repayment terms that go for anywhere from six months to two years, while term loans can last up to 10 years.
Additional Notes: iCapital uses a number of factors even outside your credit score to make decisions throughout the application process. You’ll still need to have a score above 500, about a year in business, and monthly revenue above $2,500.