If you’re a small business owner, you know that the only thing keeping your company afloat and growing is positive cash flow and robust working capital. Just because a customer is late on an invoice doesn’t mean that you can be late on payroll. And if you want to expand your business or order more inventory, you’re going to need cash on hand to do it.
As skilled as you may be at forecasting and managing your income and expenses, opportunities can come at you unexpectedly. For example, maybe that big-box store wants to place a large order for your products—that means you have to put in an order first and accept the chain’s long payment terms. Would you be able to afford it?
Fortunately, a number of banks, credit unions, and online lenders offer fixed-term business loans to help your business get the working capital it needs to succeed.
Wondering if a small business term loan is right for you? We’ll tell you everything you need to know.
In this guide:
- 5 Business Term Loan Companies You Should Consider
- Small Business Term Loan Calculator
- What Is a Term Loan?
- What Can Term Loans Be Used For?
- Where Can I Find a Term Loan for My Small Business?
- What are the Eligibility Requirements for Small Business Term Loans?
- How to Get Approved for a Small Business Term Loan?
- How Does the Application Process for Small Business Term Loans Work?
5 Business Term Loan Companies You Should Consider
These are our five top-rated small business term loans offered by banks and online lenders, based on the weighted averages of eight data points.
M&T Bank is headquartered in Buffalo, New York and has more than 800 branches across nine states. M&T Bank offers both unsecured and secured loans with terms up to 60 months. They provide intermediate-term financing for things like renovations and machinery purchases. They also issue SBA loans. The information below is for the Business Secured Term Loan.
- APR Range: Not provided
- Loan Terms: Up to 10 years
- Loan Amounts: As low as $10,000
- Usual Deposit Time: As little as 3 to 4 days for standard loans
- Origination Fee: $0
- Minimum Credit Score: Not provided
LoanBuilder is a PayPal subsidiary and that offers business term loans with single fixed-fee pricing and no origination fees. It lends in all 50 states, but only to companies that have been in business for at least nine months and that make at least $42,000 annually. Loanbuilder works with 500 different industries.
- Fixed Interest Rate: Not provided
- Loan Terms: 13 to 52 weeks
- Loan Amounts: $5,000 to $500,000
- Usual Deposit Time: As soon as the next day
- Origination Fee: None
- Minimum Credit Score: Not provided
Square Capital focuses on funding businesses in search of fast financing. It’s affiliated with the Square payment app that allows small businesses to accept credit card payments via a mobile phone or square tablet. In order to qualify, you have to be a Square customer, as repayment is deducted automatically from your ongoing credit card sales. Square’s loans are generally for shorter terms and in smaller amounts than other online lenders, making them perfect for very small businesses that need quick emergency cash.
- Fixed Fee Range: Not provided
- Loan Terms: Not provided
- Loan Amounts: $500 to $100,000
- Usual Deposit Time: Next business day
- Origination Fee: $0
- Minimum Credit Score: None—it’s based on your historical Square sales
Balboa Capital is an online lender that has provided billions of dollars in loans to small businesses. They offer various forms of financing including merchant cash advances and small business loans. Like Square Capital, Balboa also allows you to obtain financing by factoring a portion of your future credit card transactions, so your repayment term may fluctuate based on your ongoing sales.
- Fixed Fee Range: 6.99% – 42.00%
- Loan Terms: 3 to 18 months
- Loan Amounts: $5,000 to $250,000
- Usual Deposit Time: 1–2 days after approval
- Origination Fee: Not provided
- Minimum Credit Score: None
OnDeck is one of the biggest online lenders targeting small businesses. They offer both term loans and business lines of credit, and they focus on getting money to you quickly so that your business can deal with unexpected expenses. Your company needs to have been in business for at least one year and earning at least $100,000 per year in gross revenue to qualify.
- Interest Rates: As low as 9.99%
- Loan Terms: 3 – 12 months for the short term loan, and 15 – 36 months for the long term loan
- Loan Amounts: Up to $500,000
- Usual Deposit Time: You can get a decision in minutes and your loan in 24 hours
- Origination Fee: 0% to 5%
- Minimum Credit Score: 600
How We Chose the Best Small Business Term Loans
To find the best small business term loans, our Editorial Team analyzed the product’s BBB rating/Trustpilot rating/customer support availability (15%), fees (15%), loan terms (15%), loan amounts (15%), minimum required credit score (10%), minimum required credit score (10%), APRs (10%), and deposit time (10%).
Learn more about our ratings and methodology here.
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What Is a Business Term Loan?
Term loans are fixed-rate loans that you must repay according to a preset schedule (or earlier, if you’re able to and your lender doesn’t impose prepayment penalties). In some ways, they’re similar to mortgages or auto loans. They’re ideal for small businesses that need a lump sum of money to buy inventory, order new equipment, supplement cash flow, or increase staff.
These loans can be for as little as $500 or as much as $5 million or more, and you may need to repay them over a few months or over a 25-year term; it all depends on your business’ needs and the loan you qualify for. Short-term loans are ideal for sudden gaps in funding, such as if you receive a large order and need to purchase new inventory. If you take out a long-term loan, you’ll pay more in total interest, but you’ll enjoy lower monthly payments that help your business operate smoothly.
What Can Business Term Loans Be Used For?
Small business term loans help new businesses obtain cash to fund one-off or short-term expenses, such as renovating a storefront or acquiring new equipment. They can also be crucial if your business encounters a funding gap and can’t keep going without quick access to money.
For example, let’s say you run a small garbage disposal company and one of your trucks unexpectedly dies. If you can’t access the funds to replace the vehicle quickly, you may lose clients to a competitor. At best, that means less revenue for your business, but it could even result in your business’ failure. Term loans are available to help business owners weather these emergencies.
By contrast, a business line of credit would be more useful if your company has an ongoing funding need, such as boosting inventory month-over-month during a stage of aggressive growth.
Where Can I Find a Term Loan for My Small Business?
There are many places to find small business loans. Although each of the types of lenders listed below represents many different individual lenders with different lending criteria, loan practices, and terms, there are some general lending trends you should know about.
Banks are a great place for more established small businesses to go to borrow larger amounts of money (generally from $100,000 into the millions of dollars). Banks prefer to lend to businesses that have been around for several years and have track record of consistent income. They sometimes offer lower interest rates than other types of lenders, especially for their SBA loans. However, the criteria for getting a loan from a bank is strict and not every small business will qualify.
Online lenders tend to lend smaller amounts of money to small businesses and start-ups. They have minimum lending requirements that can be as low as a few thousand dollars and maximum lending amounts that start around $25,000 to $100,000—though some online lenders offer far more. Online lenders tend to have less strict lending criteria than banks and get you the funding faster, making them ideal for newer businesses seeking quick working capital. One downside to online lenders is that many charge higher interest rates compared to banks and credit unions.
Credit unions require you to be a member in order to borrow money. They tend to offer larger loans than online lenders but smaller loans than banks, but their interest rates are often some of the lowest. That’s because most credit unions are non-profits created to serve their members, and lower interest rates are in the interest of their members.
Although you’ll need to join a credit union to receive a term loan, it can sometimes be easier for small businesses than applying at a bank, especially if you don’t have any prior history with a bank.
Small Business Administration
In an effort to make lending more affordable to small businesses, the Small Business Administration works with participating lenders to guarantee 50% to 85% of specific types of loans. This lowers the risk for the lender issuing the loan, so they can offer you more favorable rates.
Not all lenders issue SBA loans, and these loans can be difficult to qualify for since they often have higher standards for income, the age of your business, and your business’ revenue. But if you can qualify for an SBA loan, it will offer you some of the best rates and most flexible terms available.
Deciding Which is Best for You
The type of lender and loan that’s best for you will depend on your needs. For example, if you need the loan to purchase equipment, you might want to look at a company that offers equipment financing with loan terms that mirror the life of the equipment and lower rates if the loan is secured by the equipment being purchased with the proceeds.
If you need a long repayment window, low rates, and you can wait a month or two to receive funding, you could apply for an SBA loan. If you need a very large loan, a bank is likely best, and if you need a very small amount of cash quickly, you should go with an online lender. The size of your business, the length you’ve been operating, and your business credit score will also impact what you qualify for.
In general, it’s best to get quotes from a few lenders to see what options and rates they offer. You don’t want to take on a loan too big or expensive for your business to repay. If you’re unsure if you can carry the monthly payments on a loan, run your desired loan amount and repayment term through our small business term loan calculator to see if it will work with your projected budget.
What are the Eligibility Requirements for Small Business Term Loans?
Small business term loan lenders look at a number of different criteria before deciding whether or not to lend to you. This includes your business credit score, which represents your business’ track record of fulfilling its financial commitments, such as past business term loans and business credit card statements. It also includes things like whether you pay your invoices from vendors who report to the business credit bureau.
Other things that lenders look at include past and projected revenue, the length of time your business has been operating, and how many employees you have. Some lenders will only lend to companies that have been in business for more than two or three years, or they will only lend to businesses that earn at least $100,00 in annual revenue.
These criteria vary from lender to lender, so don’t give up if you don’t qualify to borrow from a certain lender early in your search.
How to Get Approved for a Small Business Term Loan?
If you think you’re going to struggle to get a small business term loan, there are steps you can take to increase your chances of approval.
Build Your Credit
Another way to build credit is to apply for a smaller term loan that’s easier to qualify for and make your payments on time. Finally, always pay vendors who report to the business credit bureau, so that your payments to them will help you build and diversify your credit history.
Create a Business Plan
Another way to increase your chances of getting approved for a term loan is to create a comprehensive business plan that shows your projected future income and growth. This will help assure a lender that you have the capacity to manage your business and repay your loan.
Finally, sometimes the best way to increase your chances of getting a loan is to wait. Since lenders favor companies that have been in business for longer periods of time, you might have to wait to qualify to borrow from certain lenders.
How Does the Application Process for Small Business Term Loans Work?
The application process for a business loan depends on the type of lender you’re requesting money from. If you’re applying for a loan from an online lender, you might just need to fill out a short application and send them a few supporting documents. You should hear back in a few days or a week at most.
But if you’re applying for a term loan from a credit union or bank, the process is likely to be much longer. Although it could be as short as a week, bigger loans might take more than 30 days to process. You’ll also need to fill out additional paperwork, you may have to submit a full business plan, and you will likely need to meet with bank or credit union employees in person.