Business Loans: Compare Your Financing Options

Best for Spanish speakers

Upfunding Capital

Upfunding is a small business lending company by Latinos for Latinos. Upfund understands the complexities of entrepreneurship in the face of language barriers and systemic obstacles. It specializes in industries such as transportation, construction, food services and more which many lenders may consider high risk. Borrowers can access loans up to $5,000, and may see funding in 24 business hours.

It offers a simple application and loan process and everything can be completed in Spanish. Plus, merchants can be funded with an ITIN only or Social Security number.

Loan amount	$5,000 – $50,000
APR	Varies by lender
Min. Credit Score	580

• Why we like it

  Upfunding is a small business lending company by Latinos for Latinos. Upfund understands the complexities of entrepreneurship in the face of language barriers and systemic obstacles. It specializes in industries such as transportation, construction, food services and more which many lenders may consider high risk. Borrowers can access loans up to $5,000, and may see funding in 24 business hours.

  It offers a simple application and loan process and everything can be completed in Spanish. Plus, merchants can be funded with an ITIN only or Social Security number.

• Pros and cons

  Pros

  • Support for spanish speakers
  • Funding in 24 business hours
  • No daily repayment requirements
  • Social Security number not required for funding

  Cons

  • No monthly repayment options
  • Only been in business since 2022

• More details

  Loan amount	$5,000 – $50,000
  APR	Varies by lender
  Min. Credit Score	580
  Loan term	4 to 12 months
  Requirements	Business checking account, 12+ months in business, 580 FICO score, $120,000 annual revenue

Loan amount	$5,000 – $50,000
APR	Varies by lender
Min. Credit Score	580

Best small business loan marketplace

Lendio business loans

9.6 Excellent

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Lendio can be a good place to start if you want to save time searching for a lender. Just complete an online form with your information to compare potential lenders that offer a wide range of short- and long-term loans, including term and SBA loans, lines of credit and merchant cash advances. Lendio's network includes more than 75 lenders that cater to a range of credit scores. For credit lines, you might even qualify with a credit score around 600. But you may receive marketing calls and emails from lenders, even after you take out a loan.

Loan amount	$1,000 – $5,000,000
APR	Varies by lender
Min. Credit Score	580

• Why we like it

  Lendio can be a good place to start if you want to save time searching for a lender. Just complete an online form with your information to compare potential lenders that offer a wide range of short- and long-term loans, including term and SBA loans, lines of credit and merchant cash advances. Lendio's network includes more than 75 lenders that cater to a range of credit scores. For credit lines, you might even qualify with a credit score around 600. But you may receive marketing calls and emails from lenders, even after you take out a loan.

• Pros and cons

  Pros

  • No fee to the borrower
  • Wide range of financing options
  • Options for poor credit
  • Phone support available

  Cons

  • Partners may continue to market to you
  • Weekly payments may be required on some loans
  • APRs can run high on some short-term loans

• More details

  Loan amount	$1,000 – $5,000,000
  APR	Varies by lender
  Min. Credit Score	580
  Loan term	3 months to 25 years
  Requirements	Operate business in US for 6 months or more, have a business bank account, minimum 580 personal credit score, at least $8,000 in monthly revenue.

Loan amount	$1,000 – $5,000,000
APR	Varies by lender
Min. Credit Score	580

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Best microloan

Kiva business loans

7.4 Great

Go to site on Businessloans.com's secure site

Kiva's interest-free microloans are ideal for entrepreneurs looking to turn an idea into reality. It doesn't have any time-in-business requirements, and you can borrow up to $15,000 without paying interest or fees. Borrowers are also granted a six-month grace period before payments are due. But know that Kiva is a nonprofit crowdfunding platform — so if you don't have a large social network willing to contribute, you may not get anything. Loans that aren't fully funded aren't dispersed.

Loan amount	$1,000 – $15,000
APR	0%

• Why we like it

  Kiva's interest-free microloans are ideal for entrepreneurs looking to turn an idea into reality. It doesn't have any time-in-business requirements, and you can borrow up to $15,000 without paying interest or fees. Borrowers are also granted a six-month grace period before payments are due. But know that Kiva is a nonprofit crowdfunding platform — so if you don't have a large social network willing to contribute, you may not get anything. Loans that aren't fully funded aren't dispersed.

• Pros and cons

  Pros

  • No interest or fees
  • No credit or residency requirements
  • Loans as low as $1,000

  Cons

  • No loans over $15,000
  • Relies on crowdfunding

• More details

  Loan amount	$1,000 – $15,000
  APR	0%
  Loan term	6 months to 3 years
  Requirements	Have at least ten friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens, not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities

Loan amount	$1,000 – $15,000
APR	0%

Go to site on Businessloans.com's secure site

Your options for borrowing money for your business go beyond a traditional term loan to include lines of credit, merchant cash advances and other types of business loans. The business financing you choose should depend on your business and why you need the money.

What is a business loan?

A business loan is any type of financing that’s used to fund business expenses — from paying staff wages and purchasing inventory to expanding your business or improving cash flow to investing in marketing or covering unexpected emergencies.

Startups and entrepreneurs can look to traditional lenders like banks and credit unions as well as online lenders, crowdfunding sites and the Small Business Administration for business funding. Requirements, rates and terms depend on the lender and your business.

Your business typically needs to be at least six months old and bring in over $50,000 a year in revenue to qualify. Other factors like your personal credit score and relationship with the lender also play a role.

Depending on the type of financing, you can find unsecured options that don’t require collateral or secured loans backed by your business assets or the item you’re purchasing. Interest rates can be fixed or variable, with repayment terms lasting anywhere from six months to 25 years.

What is the debt service coverage ratio?

The debt service coverage ratio — more commonly called the DSCR — is an industry measure of the cash income a business has left over at month’s end that can be used to service its debt. It includes principal, interest and lease payments.

The DSCR is a main benchmark used to determine your ability to repay a loan. When you apply for a loan at a bank or credit union, the lender uses your DSCR to decide whether your business can manage its repayments. If your business isn’t generating the income it needs to pay its operating costs and make repayments, then a lender will likely pass on your application.

How to calculate your business’s DSCR

Calculate your DSCR by dividing your annual business operating income by your total annual debt service level — the amount of principal and interest you must repay in a given year. The total annual debt service level will include your current debt and the loan you’re applying for.

A lender may use a different figure when assessing your operating income. Some use the earnings metric called EBITDA — or earnings before interest, taxes, depreciation and amortization — while others add net operating income to depreciation and any other noncash charges.

As a result, the DSCR figure won’t be the same across lenders, which can make a direct comparison among them difficult. Some also express the DSCR as a percentage rather than as a ratio.

Approval rate by loan type

A closer look:

The type of loan you get and the lender you work with are the biggest factors that determine how much you can borrow with a business loan. And you might find easier approval with a business loan backed by a form of collateral — be it a car, a tractor or your business’s future sales. A secured loan is less risky for the lender, who can sell your collateral to soften the financial hit if your business defaults.

Can I get a business loan as a sole proprietor?

In a sole proprietor, a single person owns and runs an unincorporated business. While a sole proprietor can have employees, they are the only ones paying income tax on profits earned.

Because sole proprietors have little separation between business and personal finances, banks and other financial institutions often view them as risky investments. If a sole proprietor loses out on an important contract, gets sick or cannot continue their business for any reason, the lender has wasted money on a loan that will likely go unpaid.

This risk makes it difficult for sole proprietors to secure a business loan, but it’s not impossible. With the right documentation and a good business plan in place, there are lenders willing to offer loans to sole proprietors.

5 best loans for sole proprietors

Financing for high-risk industries

Even if you’ve been in business for years, have excellent credit and are turning a profit, your business still might struggle to qualify for a loan if it’s part of a high-risk industry.

Lenders generally consider industries high risk if they are more likely to fail. For example, industries like alcohol and gambling might be considered high risk because they’re subject to regulations that frequently change. However, other industries like restaurant and retail might be seen as risky because revenue isn’t always guaranteed.

Examples of high-risk industries include:

If you own a high-risk industry and can’t get approval from traditional lenders, you can find other types of financing, though they tend to be expensive.

• Invoice factoring. This financing not only charges up to 15% of your invoice value in fees, but your business might also be required to sign up for several months or years of factoring, which can make it difficult to qualify for other less-expensive types of financing in the future.
• Merchant cash advances. If your business relies on credit card sales, MCAs give you quicker access to your money but can charge up to three times the amount you were advanced.
• Vehicle and equipment loans. These loans are secured using the purchased vehicle or equipment and can have better terms and fees. But you risk losing your collateral if you default on your loan for whatever reason.
• Short-term loans. If you need money quickly and can pay it back just as quickly, a short-term loan may be right for your business. But keep in mind that you’ll have to repay the loan within 12-18 months, and your interest rate may be higher than more traditional options.
• SBA loans. The Small Business Association can offer the best rates, but qualifying for their loans can be difficult. The process is also long, so this isn’t a good option if you need money fast.

Using your business loan for marketing

If you’re looking to expand your business through advertising, you can use a business loan to fund a marketing campaign in some cases. It helps to nail down your marketing strategy before you apply for financing.

Here are some common ways marketing loans can be used.

• Paid digital marketing. Digital marketing often involves setting up a paid advertising campaign that targets specific customers on search engine results, websites, social media platforms and even e-commerce sites like Amazon.
• Sponsored content. Sponsored content, also known as native advertising, involves paying a publication to write an article or create other content that mentions your product. Financing a sponsored content campaign allows you to reach a new audience and can be a more cost-efficient way to increase sales than digital marketing.
• Social media campaigns. Social media campaigns focus on reaching a new audience through X (formerlyTwitter), Instagram, Facebook and other platforms. You can use a business loan to buy ads, hire a team to reach customers by posting on social media through your brand’s accounts or sponsor an influencer to gain access to their followers.
• Email campaigns. Email marketing involves sending out newsletters and promotions to current customers and people who might be interested in your products or services. It’s one of the cheapest ways to advertise — in some cases, you might only need capital to buy a client management software system.

How do online business loans compare to bank loans?

It may seem like every online lender offers the same thing, but that doesn’t make it true. Like any loan option, compare the features of the loan and the rules set by the lender to get the best online business loan that offers the most for your money. The brands listed below have some features in common, giving you a solid way to kick off the comparison process.

• Higher approval rates than banks. Online lenders look at real-time business health rather than analyzing a few data points from your credit report. This is a more accurate way of calculating risk, allowing them to approve more loans.
• Quick processing time. Many lenders offer fast approval by looking directly at your business data and bank information. Rather than filling out forms or answering a lot of questions, you connect your business accounting data. The lender can use the information it needs.
• Reduced fees and transparent fee structures. Bank loans tend to come with an early repayment penalty, but the majority of alternative lenders waive this fee. As they’re smaller institutions that use technology to approve loans, this translates into less overhead costs and lower fees for you.
• Varied products. Whether you’re after a short-term business loan, a line of credit, a larger long-term loan or any other financing options, online and technology-based lenders have products available.

What’s a no-credit-check business loan?

A no-credit-check business loan is a type of business financing where the lender doesn’t consider your credit score during the application process. It’s typically short-term financing and can cost more than other options.

Often, no-credit-check business loans don’t work like a typical unsecured term loan. Most require some kind of collateral or a personal guarantee. Others might consider different risk factors, like your clients’ credit scores.

Can I get a no-credit-check loan for my startup?

It’s possible but not likely. Most startup-friendly loans tend to rely on the business owner’s credit to make up for the fact that your business doesn’t have a long record of revenue.

Unless you have enough money in a retirement plan to fund a new business with a ROBS, you might have difficulty finding a legitimate lender willing to forego a credit check completely. Here’s how startup funding works by credit score:

• Very good credit: 740–850. You’ll likely qualify for startup loans based on your credit score alone, or consider taking out a personal loan to fund your business. You don’t need to worry about passing a credit check because you’ll pass with flying colors.
• Good credit: 670–739. With good credit, you still have a wide range of options and will likely get approved for most startup and personal loans.
• Fair credit: 580–669. Your options are generally limited to alternative lenders and no-credit-check financing like crowdfunding and ROBS. However, you’ll still make the cut for a handful of lenders specializing in startup loans, like Diamond Business Loans.
• Poor credit: 300–579. You might have better luck pitching to investors than getting a business loan. You could qualify for some short-term loans, but they’ll likely come with high rates and fees. You can also look for a local nonprofit willing to offer financing to someone with a low credit rating.

Should I get a business loan or a credit card?

It depends on what you need to finance. Business loans are designed to cover a large one-time expense and you’ll have low-interest business loan options to choose from depending on youor credit, while credit cards are designed to cover smaller expenses that are hard to predict over a long period.

It also depends on your cash flow. If you have the cash flow to pay off your credit card balance each month, you won’t have to pay any interest.

Some credit cards come with a 0% APR promotional period, which can last as long as 12 months. If you pay off the balance before the period is up, you won’t have to pay interest.

Which is right for my business?

How to get a small business loan

Most small businesses can get a business loan by determining how much funding the business needs and comparing lenders. Qualifications generally include:

• More than three years in business
• A credit score over 670
• More than $100,000 in revenue

If you don’t meet qualifications, you may be able to find financing from an SBA loan provider or an alternative lender if bank loans aren’t an option. Alternative lenders include microlenders, online business loan providers and factoring companies. They might not offer competitive rates compared to a bank, but they can help your business get to a place where it’s eligible for a bank loan.

How long does it take to get a business loan?

The turnaround time for a business loan largely depends on the lender you work with and the type of financing you’re interested in. It can take a bank or credit union one to two weeks to process a business loan application and disburse your funds.

Alternatively, online lenders may be able to offer you an instant approval decision and fund your loan within a few business days, while others may be able to offer loans with same-day funding. And with SBA loans, the entire process can take several months.

How to compare lenders

Before you start comparing lenders, calculate how much you need to borrow, assess the state of your business’s finances, check your personal credit report and choose the type of financing you need.

Once you have a better idea of what you need, look for lenders offering the loan amount and type of financing you need — with basic requirements that your business meets.

Then, compare the rates, fees, terms and turnaround time for each product. You might want to weigh other factors that are important to you, like no paperwork requirements or lower rates for repeat borrowers. If you’re applying online, you may also want to consider the steps lenders take to protect applicants’ information.

Using a lending marketplace like businessloans.com or Lendio may also offer a way for you to quickly compare multiple loan offers from top lenders with just one form.