Small Business Loans – 10 Best Options
- September 1, 2017
- Posted by: Jeff Gitlen
- Category: Small Business Loans
They say that death and taxes are the only two things in life that are certain. But if you own your own business, there is one more thing that you can count on - your need of capital.
Whether you’re starting or growing your small business, money is necessary to buy equipment or stock, pay the salaries of new employees, or just maintain your cash flow.
Easy and affordable access to that cash can help you grow your business more quickly, purchase equipment to get an edge on or keep pace with your competitors, fulfill big orders, or just bridge the gap between when you have to pay your suppliers and when your clients pay you.
According to a recent report by the New York Fed, 2017 has been a good year for small business with many of them growing revenue and adding new employees.
In fact, 60% of companies the Fed surveyed expect to make more in 2017 than they did the year before and 40% have been hiring new employees.
But growth can be expensive since it often requires new investments or leads to issues with cash flow. That's where a small business loan helps.
According to the Small Business and Entrepreneurship Council, up to 97.9% of businesses in the U.S. are considered small businesses. This huge proportion has made the small business loan market very competitive and, at times, hard to navigate.
We created this guide to help clear up the confusion for small business owners. We have researched and analyzed the multitude of small business loan options, as well as the eligibility requirements, application process, and specific loans for certain kinds of owners.
What are Typical Qualification Requirements for Small Business Loans?
The qualification requirements necessary to get a loan depend on the type of lender. When it comes to traditional banks and credit unions, expect your loan application to take longer to fill out than with online lenders and for it to be more difficult to get a loan. One of the benefits of using a traditional bank or credit union is that you’re more likely to have access to Small Business Administration (SBA) loans, but they have higher approval criteria on both their SBA and non-SBA loans.
Most bank and credit unions will expect you to have excellent credit and will only lend to you if your credit is above 600 or 700. Online lenders are far more likely to lend to people who have personal credit scores that are below 600. Even online, most lenders expect you to have a credit score of at least 500.
Many lenders have requirements around how long you have been in business with the lowest cutoff often being 2 years. That excludes many brand-new businesses and start-ups as lenders are wary of lending to companies without a track record.
Other lenders have requirements about how much revenue your company earns annually that can be as low as $100,000 per year or as high as $2 million or more. Traditional banks are more likely to require a full business plan, but many online lenders also require a business plan to get your loan funded. Almost all lenders require that the business owner personally guarantees a loan unless you have a very strong business credit history, but some will require a lien against your business instead or in addition to your personal guarantee. With SBA loans, everyone who owns at least 20% of your company has to provide a personal guarantee.
Number of Employees
Some lenders prefer to lend to companies that have a certain minimum number of employees. While this can be as few as two additional employees, it depends on the lender.
To apply for a loan, you need to have your personal information and your business information at hand. You might need to provide access to your accounting software and other software or applications if you're applying with an online lender like Kabbage.
You may also need to provide a copy of your business license, personal and business bank statements, balance and income statements, personal and business tax returns, a resume of your business experience, financial projections for your company, your drivers license, your business license, and your business plan.
Often with traditional banks you have to fill out a written application, although some allow you to apply online. For some traditional banks and credit unions you’ll also have to go in person and meet with a loan officer.
When you apply with an online lender, the application is often shorter and easier to complete and they require less information, fewer documents, and it takes less time in order to approve your loan. Any documents can be scanned and uploaded. You can often be approved and get the money within a few days rather than the weeks it can take to get approved with a traditional lender.
Improve Your Chances of Approval
There are a lot of things that you can do in order to improve your chances of getting approved for a small business loan. The most important thing is to improve your personal credit score since many lenders use it to decide whether or not to lend to you and they also set your interest rate based on your score.
Building your business credit is another way to improve your chances of approval. You can do this by taking out credit in your business’ name right after you start your business. While you’ll have to co-sign for a business credit card, having one will start the process of establishing your business credit history. You should also start by taking out small loans and building a track record of paying them back.
Create Clear Business Plan
Another way to improve your chances of qualifying for a small business loan is to have a clear business plan and all of your historic and projected financial information available to share with a potential lender. This makes you look professional and allows the lender to better understand your business’ needs and potential.
A good business plan will include things like a description of your company, biographies of the management team, an analysis of your industry, a description of the service or product that you provide, a plan for your operations, your promotional and marketing strategy, and a SWOT analysis of your company’s strengths, weaknesses, opportunities, and threats.
Another way to improve your chances of getting approved is to shop around for different loan options. Just because a traditional bank or credit union might turn you down for a loan, that doesn't mean there are no lenders willing to lend you. While many online lenders are great options, remember that you’ll have to pay a premium in the form of higher interest rates if you have bad credit or if your company is smaller, newer, or for any other reason considered a larger risk.
Small Business Loan Calculator
One of the best ways to figure if a small business loan is right for you is to figure out what your monthly payment will be and how much the loan will cost you over its life. Use the small business loan calculator below to see your monthly payment, total interest paid, and total loan cost.
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Small Business Administration Loans are a Great Option
Small businesses often need money to finance their growth, but the high rates of business failure makes lending to small businesses a risky proposition for banks and other lenders. That often translates into high interest rates and fewer loans. To help make lending easier and more affordable, the Small Business Administration (SBA) started backing loans.
SBA loans are business loans that are partially backed by the SBA in order to help reduce lending costs to businesses. That means that the SBA insures between 50% and 85% of the total loan amount on behalf of lenders that give them out. For that reason, there is less risk to banks and so they're able to provide funds to small businesses at lower interest-rates and with better terms.
Types of SBA Loans
There are three types of SBA loans. If you’re borrowing for working capital, you will likely apply for a SBA 7(a) loan and if you’re borrowing to finance the purchase of a fixed asset like real estate or machinery, you will likely apply for an SBA 504 loan. There also an option for a faster SBA loan which is called SBA Express. This loan was designed to help businesses who need money fast. Lenders try to respond to SBA Express loan applications within 36 hours. The maximum that you can borrow is $350,000 and the SBA will only guarantee 50% of that amount so lenders are more rigorous with approving these loans.
Qualifying for SBA Loans
The one challenge small businesses often have with these loans is that they can be very difficult to qualify for since they have higher qualification standards than other small business loans and they can take longer to get approved for. Despite this, SBA loans are one of the best ways to fund your company's growth since they will offer you quite low rates in comparison to other options.
SBA Loan Details
While the lenders decide on the final interest rate on an SBA loan, they have to stick to the SBA formula which allows banks to charge the prime rate plus an additional markup. If your loan is more than $50,000 with a term of less than seven years, the rate is based on the prime rate with a maximum additional 2.25% markup. If you're borrowing more than $50,000 and your term is seven years or more, the maximum you’ll be charged in addition to the prime rate is 2.75%. This APR has to include all loan fees in addition to the interest rate.
When you are borrowing money to use as working capital, you get up to seven years to pay it back, if you buy new equipment with the funds, you have up to 10 years to repay them, and if you buy real estate you have up to 25 years for your repayment. SBA loans require personal guarantees from every person who is an owner in the business that has a 20% stake or more.
Where Should You Look for an SBA Loan?
SBA loans tend to be offered by larger institutions like traditional banks as they can afford to lend money at lower interest rates. They also are more likely to have the infrastructure necessary to facilitate the more onerous SBA loan application and approval process.
Credit unions are also a great place to go when looking for a SBA loan. One of the benefits of borrowing from a credit union is that they are non-profit organizations. The purpose of credit unions is to provide financial services to their members. For that reason, they are not motivated by making the highest return on investment possible like banks are, so they are more likely to offer lower interest rates on SBA loans, more personalized customer service, and more flexible criteria for approving loans. Another benefit of credit unions is that they also tend to provide a lot of business education programs for small businesses.
There are a few online lenders who also offer SBA loans, but they don’t make the majority of SBA loans and many online lenders don’t have SBA loan options. One popular online option for finding an SBA lender is SmartBiz, but they don’t offer the loans themselves. Instead, they connect applicants with a marketplace of banks who provide SBA loans. The benefit of using their service is that they match you with an SBA lender who is the most likely to approve your SBA loan application.
SBA Loan Application Process
The application is quite exhaustive and asks questions about your experience operating a business. You also have to explain in detail what the money will be used for and you require a detailed business plan. You will be required to submit past tax returns and your credit information. You will likely have to put some kind of collateral down for the loan in order to get a better interest rate such as your home or business assets.
Other Small Business Loan Companies
OnDeck is an online lender that was founded in 2007. They are based in New York City. OnDeck focusses on providing loans to small businesses. Their loans amounts range from $5,000 to $500,000 with loan terms from 3 months to 36 months. OnDeck is a great solution for businesses who need cash quickly as they have a quick online or phone application that takes just 10 minutes to complete and you can often get a funding decision and receive the money in your bank account within 24 hours.
Some benefits of using OnDeck is that they offer both term loans, as well as lines of credit and has looser lending qualifications than a traditional lender or bank. In order to borrow money from OnDeck, you must personally guarantee the loan and your credit has to be at least between 500 and 600 - though most OnDeck borrowers have credit scores above 660. While your business needs to have at least $100,000 in annual revenue, OnDeck tends to lend to larger businesses with revenue of around $450,000 per year which have been in business for over seven years.
One of the biggest drawbacks of OnDeck is that they have high interest rates. They offer fixed interest rates that start at 9% and go up to 99% on their term loans and their lines of credit rates start at 14% and go up to 40%. This includes their origination fee, as well as a $20 monthly maintenance fee on lines of credit.
Another key drawback is that OnDeck has a more frequent repayment schedule than with other loans. They take money either on a daily or weekly basis from your business bank account - which might not be a good fit for your business if you have problems with cash flow. While OnDeck does not have pre-payment fees, their fee scheme means that there is little benefit to borrowers when they repay their loans early.
Kabbage is an alternative online lender that was founded in 2008 and is based in Atlanta, Georgia. They provide quick access to funding for small businesses. After filling out an easy online application that only takes a few minutes to complete, you can get between $2,000 to $150,000 in funding within a few days. Kabbage offers lines of credit rather than term loans and is best for businesses that prefer a short repayment period since Kabbage only offers repayment periods of between 6 and 12 months.
Kabbage is also a great choice for those who don't have perfect credit. They work with borrowers who have credit scores above 500 and use alternative underwriting criteria such as the business’ accounting, banking, and e-commerce information in order to make their lending decisions. In order to apply for their loans, you need to connect your business checking account, payment platform, and bookkeeping software to Kabbage. You can also upload information from accounts like Amazon, Etsy, eBay, QuickBooks, or Square. Kabbage takes into account things like how many years you've been in business and your average monthly revenue.
One of the downsides of Kabbage is that they have relatively high fee structure – they don’t use traditional ‘interest rates.’ Their fixed fees start from 24% and go to 99% APR. Also, Kabbage’s fee structure is quite complicated. Each month you have to pay back a certain percentage of the principal, as well as a portion of the loan fee. You pay the biggest chunk in the first few months after taking out your money from the line of credit which means that, while Kabbage doesn’t have pre-payment fees, there is little incentive to repay your loan quickly.
Another downside of Kabbage is that they do not have longer term loans which means that Kabbage funding is not ideal for longer-term purchases.
LendingClub was founded in 2006 and is based in San Francisco. They are a popular peer-to-peer online lender who is better known for their personal loans than their small business loans. They connect people or businesses who are looking for loans with investors who are willing to fund their loans.
LendingClub offers two financing options for small businesses: a term loan or a line of credit. With their term loans, you can borrow anywhere from $5,000 to $300,000 at a fixed interest rate of anywhere from 5.9% to 35%. Their term lengths are anywhere from 1 to 5 years and you can get your funding within as little as two days. The borrowing amount and interest rate range for their line of credit is the same, but when you take money out of the line of credit it must be repaid in up to 25 months.
LendingClub is a better choice than some of the other online lenders because their interest rates are lower than some other options out there, but they still aren’t as low as you might get from a traditional bank if you have good credit. Their requirements are more flexible than traditional banks with a minimum credit score of 600 and a requirement that you provide collateral on loans only if you borrow over $100,000. When they do require collateral, they put a lien on your business assets instead of your personal assets like some other lenders do. They also don’t charge a pre-payment fee if you repay your loan early. But LendingClub does require that businesses be in operation for 24 months before applying for a loan and that they have at least $75,000 in annual sales.
Some drawbacks of LendingClub is that their rates are relatively high in comparison to banks or SBA loans. They’re also not as fast at funding loans as some other online lenders.
Funding Circle Review
Funding Circle was founded in 2010 and is based in San Francisco. It’s relatively unique among online lenders because it is a peer-to-peer lending platform that focuses on small businesses. They lend money by connecting investors wanting to purchase loans to qualified small businesses.
Funding Circle offers faster funding than you would get from traditional banks and slightly better terms than some other online small business lenders. Their loans take just 10 minutes to apply for online and you can get a decision within 3-5 business days and you usually receive the funding within 10 days. While their fixed interest rates are higher than traditional banks, they are lower than other alternative lenders with a range from 4.99% to 26.99% with an origination fee of 5.99%.
While Funding Circle doesn’t have a minimum annual revenue requirement, each lender on the platform will have different cutoffs. The average credit score of borrowers also tends to be around 700, but you need at least a score of 620 in order to qualify. The average Funding Circle borrower has been in business for around 10 years, has around 10 employees and annual revenues of over $2 million. The average amount that Funding Circle disperses for loans is $120,000 and the average loan is for 36 months. Funding Circle provides loan amounts anywhere from $25,000 to $500,000 with terms of anywhere from 6 months to 5 years. There are also no pre-payment fees and they don't have a complicated fee the structure that penalizes those who repay sooner.
One of the downsides of Funding Circle is that it is more difficult for some small businesses to qualify for their loans since they look for small businesses that have a long track record, high annual revenues and good credit. They also require both a lien against non-titled business assets and a personal guarantee on the loan.
Fundation is an online lender that was founded in 2011 and is based in New York City. Fundation focusses on providing loans and lines of credit to established small businesses who want flexible terms. Fundation requires that you have been in business for at least one year, have at least $100,000 in revenue, and at least two other employees working for your business other than the business owner.
They also have an alternative underwriting scheme where they take a broad look at both the business and borrower before they decide whether or not to lend you money. They're interested in knowing how you intend to use the money and ask detailed questions about your company on the application in order to get a full picture of your company’s potential.
Fundation provides loans of between $20,000 and $500,000 and lines of credit between $20,000 and $100,000, and charges fixed interest rates of between 7.99% and 29.99%. Their loan terms start at 1 year and can go as high as 4 years and it usually takes them 1 to 3 days to fund your loan if you’re approved. When you borrow money from a line of credit, you have 18 months to repay it.
One benefit of Fundation is that after nine months they give you an opportunity to refinance your loan and potentially borrow more. They also offer no pre-payment penalties.
Some of the downsides of Fundation is that they are not a good fit for start-ups without employees or very small businesses. Another downside is that they ask for both a personal guarantee from borrowers and a lien on business collateral. They also require frequent loan repayments. Fundation deducts loan payments from your account twice per month, something which can negatively impact your company if you experience problems with cash flow. Line of credit payments are only deducted once per month.
Wells Fargo Review
Wells Fargo is a traditional bank that was started in 1853 as a parcel and delivery service, but which evolved to provide financial services over the years and became a bank. Wells Fargo is one of the top rated Small Business Administration lenders by both volume, as well as dollar amount. For example, in Q1 of 2016 Wells Fargo made 2,379 small business loans and distributed $436,645,500 worth of SBA loans.
Wells Fargo offers a variety of different loan amounts depending on what type of loans you're applying for. They offer business loans between $10,000 and $100,000 and have terms between 2 and 6 years. There are no prepayment fees and small business loans are unsecured. If you want a loan for a vehicle or a piece of equipment these loans can be drawn down like a line of credit rather than dispersed in in a lump sum and the vehicle or the equipment will be used as security for the loan.
Wells Fargo also offers business lines of credit of between $5,000 and $100,000 and depending on your financial situation, they can be unsecured or secured through a Wells Fargo savings or certificate of deposit account. They also offer real estate financing if you are looking to buy a piece of real estate or develop it.
When making lending decisions, Wells Fargo looks at your personal credit history and credit score, as well as your business collateral, cash flow, and resilience. They require that your business be open for at least three years and have a cash flow to expenses ratio that is at minimum $1.50 to $1.00. They also require that you have no bankruptcies tax liens, judgements or suits against your company.
Their interest rates depend on your personal and business financial and credit situations, but they tend to be much lower than many online lenders – especially their SBA loans for which the interest rates are regulated by the Small Business Administration.
Some drawbacks of Wells Fargo are that it can take a long time to get a response and it can be very difficult to qualify for a loan if you don’t have pristine credit or a long company track record.
Bank of America Review
The Bank of America was originally started as the Bank of Italy in San Francisco in 1904. The bank grew and renamed itself and has become the second largest bank in the United States and one of the top lenders to small businesses.
The Bank of America offers a number of different kinds of financing products for small businesses. They offer business lines of credit which start at $10,000 and go over $100,000. These can be either unsecured or secured via liens on business assets or certificates of deposit depending on your financial situation and credit. Business loans start at a minimum of $25,000, have no stated maximum, and are secured in the same ways. The rates for both types of loans are variable and are connected to the prime rate.
The Bank of America also offers loans for commercial real estate and equipment financing, vehicle loan, and equipment loans. These loans are often secured and start at minimums of $25,000 or $50,000 depending on the type of loan. The maximums also depend on what you’re borrowing for. For example, if you’re borrowing to finance commercial real estate the maximum is $1 million for a line of credit and $2 million for a term loan. The term lengths depend on the type of loan you take out. Commercial real estate loans tend to have longer terms while equipment loans are generally no more than 7 years.
Bank of America is a Small Business Administration preferred lender which means that they provide a significant amount of SBA guaranteed loans. They primarily offer SBA 7(a) or SBA 504 loans, but they also offer a very limited number of SBA Express loans.
In order to qualify for a Bank of America loan, you have to have been in business for two years and have an active Bank of America account. For non-SBA loans, you’ll usually know within a week whether you've been approved. SBA loans tend to take longer. Some of the benefits of going with a traditional bank is that the interest rates will generally be much lower than some online competitors - especially for SBA loans. In addition, you will be able to borrow more than you might otherwise and you will have more options in regards to term lengths.
The downsides are that it could be far more difficult to qualify, and banks tend to require much higher minimum credit scores and a lot more scrutiny of your business.
Chase Bank Review
Chase Bank is one of America's oldest banks. In 2000, Chase Manhattan merge with J.P. Morgan to become J.P. Morgan Chase and it's now one of the 10 largest banks in the world and one of the biggest small business lenders. Chase is one of the top three SBA lenders and has a number of different financing options. One of the benefits of Chase Bank in comparison to other traditional banks is that they have the capacity to make loans quickly.
Chase Bank offers a number of different types of loans including SBA loans where you can get between $10,000 and $5 million in SBA 7(a) loans. Chase also offers SBA Express loans of up to $350,000 and SBA 504 loan program with no stated maximum.
In addition to their SBA loans, they also offer regular loans which are less competitive and are easier to qualify for. Their terms are generally around seven years for a typical loan, 10 years if you're using the money for an equipment purchase, and 25 years if you're using the cash to buy real estate. These loans have both fixed and variable interest rates for you to choose from. The downside of their non-SBA loans is that they tend to have higher interest rates and require a down payment. These loans can be for any amount from $5,000 to $5 million with terms of between 12 to 84 months.
Chase also offers business lines of credit of anywhere from $10,000 to $500,000. They also have lines of credit of over $500,000 for larger businesses, but the terms are shorter – just 12 to 24 months with a renewal option.
One of the benefits of borrowing from Chase is that you can access large amounts of money and you can do so at a relatively quick turnaround for a traditional bank. You can also get SBA-backed loans which generally take longer to administer (unless you’re borrowing an SBA Express loan), but which have better terms and rates.
The drawbacks of Chase’s non-SBA loans are that it can also take longer to qualify and get a decision than you would with an online lender.
Fundera was started in 2013 and is based in New York City. Rather than lending money themselves, Fundera is a matchmaking service that matches you with funders who are willing to lend you. Fundara does not partner with a large number of lenders, but rather chooses a select few that they believe are good partners. Their lenders provide a range of different products including loans, business cash advances, SBA loans, equipment loans, lines of credit, invoice financing, short-term loans, medium-term loans, and other types of lending products.
To be eligible, all you have to do is set up an account and provide some information about your business and then Fundera will help you compare offers from their funders. There are no specific qualifications in order to apply for a loan with Fundera, but each different lender has their own requirements around how much revenue they expect your business to have, your credit score, how long you've been in business, and other criteria.
Fundera is free to use and the Fundera application is relatively simple and takes a short period of time to complete. As soon as your application is submitted, you will be able to see offers from lenders. These are just pre-approvals so you will have to finish your application in order to see the final terms you’ll qualify for with the lender you choose.
There are some great things about Fundera, including that it is easy to use, and you get a number of different offers all in one place. This saves you time and makes it easier to compare different offers.
Some downsides include the fact that they have relatively few partners compared to other business lending matchmakers and that some of their partners have high interest rates with very large fees.
Financing and Business Help for Veterans
If you're a veteran, there are special programs to help you get business financing. Veterans Affairs, for example, runs the Veteran Entrepreneur Portal (VEP). This online portal gives you access resources to help you during your entrepreneurship journey. The VEP provides you with access to federal services, procurement programs, and loan options aimed specifically at veterans. It helps walk you through how to start a business, access funding, grow your business, find opportunities, and do business with government agencies.
The Office of Veteran’s Business Development is another great resource for veterans, service disabled veteran, reservists, active-duty servicemembers, transitioning service members, and their dependants or survivors. They provide help in accessing SBA programs to help veterans grow their business.
There are certain SBA loan programs designed to help veterans. These include the SBA Veterans Advantage program, which guarantees loans that are for businesses that are at least 51% owned by veterans or their spouses. There's also the SBA Veterans Entrepreneurship Act of 2015 which reduced the upfront cost of borrowing SBA Express loans to zero for veterans. Finally, there's the Military Reservist Economic Injury Disaster Loan Program which give out loans of up to $2 million to cover operating costs for those who experience losses when employees are called into active duty in the Reserves or in the National Guard.
Both offices also offer a considerable amount of training for veterans who own businesses and their employees.
Loans for Women Small Business Owners
As of 2015, there were more than 9.4 million businesses owned by women. These companies make over $1.5 trillion each year in sales and make up around 31% of all privately-owned businesses.
But women aren’t able to access loans at the same rate as male entrepreneurs. In fact, women receive only 4.4% of the total amount of loans dispersed for small businesses. They also receive just 16% of conventional loans dispersed and a paltry 17% of SBA loans.
The SBA is working to help promote its loan program to women entrepreneurs and help them qualify for a larger number of loans. They run the Woman-Owned Business Program that helps educate women on how to access grants, funding, and government procurement contracts for companies that are 51% owned by women.
There are also initiatives like Elizabeth Street Capital which was launched by designer Tory Burch and is a partnership with the Bank of America to provide loans to women business owners in amounts between $500 and $50,000. There are also microloan programs offered in certain communities to female business owners like those offered by the Michigan Women’s Foundation whose loans range from $2,500 to $50,000.
Many financial companies also want to support women in business and there are a number of grants that are specifically available for women entrepreneurs. Some credit unions offer programs that provide loans to women business owners. Many of these programs are part of diversity lending programs that focus on making loans to minority entrepreneurs and include women amount the groups they target.
Kabbage is one of the few online lenders that has identified a specific interest in giving loans to women business owners. Kabbage provides loans up to $100,000 to women-owned businesses, but these are essentially the same loans they offer to others. Many other online or traditional lenders actively encourage female applicants.
Getting Funding as a Start-Up
Unfortunately, many start-ups have a difficult time accessing traditional small business loans. One of the key reasons is that they don’t have a track record of earning revenue, and often have little cash flow. That makes lending to them a risk in the eyes of lenders. For that reason, most lenders require a business to have been operating for a specific amount of time or to be bringing in a minimum amount of revenue before they’re willing to fund a loan for the business. These rules exclude most start-ups.
Some lenders also require the owner to co-sign the loan or personally put up collateral in order to approve a loan to a new business since the business doesn’t have a business credit score. But if the business owner has poor credit or a thin credit file, it can be almost impossible to get funding.
Other reasons that start-ups might have difficulty is that they might not have a solid business plan they can share with the loan officers. Even if they do have a plan, it might not be enough to convince risk adverse lenders to take a chance. If start-ups are pre-revenue it can be hard to borrow against ideas that haven’t been proven by the market.
Another thing that works against start-ups when it comes to borrowing money is that they often need to borrow very small amounts. It is not as financially lucrative to disperse loans in small amounts and so traditional banks tend to have high minimums when it comes to lending and shy away from underwriting loans in lower amounts. After all, it costs the same to administer a loan if it is for $5,000 or $5 million. Online lenders and credit unions are better sources for loans to start-ups than traditional banks since they’re more likely to have flexible qualifications and offer smaller loan amounts.