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What is the Best Small Business Loan?

 Small Business Loan minimum requirements

Best Small Business Loan

Are you ready to start your own business? Have you been in business for many years? Are you still confused about which small business loan is best for you?

Do you need a shortterm business loan or are you looking for longterm loans? maybe you are a womenowned business? The summary below details the options for small businesses and the eligibility requirements. Banks will certainly require business plans, financial statements, personal and business tax returns while getting loans directly from alternative lenders usually only require online applications and three months of business checking account statements from your bank account. We will review the many types of business loan programs and give you the top picks and the best financing option for your company.

There are multiple types of loans and an even wider variety of small to mid-sized business lenders. These can range from direct lenders, banks for small businesses, traditional banks, credit unions, lending clubs, and the online lender.

It can be a lot like looking into the abyss without the proper guidance. Sometimes too many choices can make it extremely confusing. It can really drive you nuts when you look at the large number of business lending loan options.

There are lenders that will work with startups and others that work with established businesses only.

Some lenders may ask that you prove on your business tax returns that you are profitable. Others will ask for a high personal credit or FICO score with a strong credit history. Some may offer unsecured business loans with no collateral, security or a traditional personal guarantee. Other options may be to take a personal loan.

Here is a summary to help clear your mind. You almost have to be like Goldilocks and the three bears. The key is to find the best small business loan from the financial institutions that are “just right” and meets your needs and requirements.

lender approves small business loan

What Bank has the Best Small Business Loans

Surprise, surprise, banks may not be the best business finance choice. In fact, they might not even be a viable option.

First of all let’s talk about the lender’s requirements. What will they look for when you approach them and request a small business loan or working capital for your business? Some of the criteria they will ask for are listed below:

  • They may ask you to show you minimum number of years of business; you may need to show them a minimum amount of time since you opened your doors, which can range from 6 months to 3 years or more. There may also be a limit to the types of business they consider for getting approval.
  • Next, they will ask for minimum annual revenue; for some lenders, they want just a few thousand dollars a month (typically your merchant cash advance) while banks will want substantially more and can top out in the millions in annual revenue.
  • Minimum FICO scores; some of lenders may ask you for a good to excellent credit score. 720 is still the magical number although you can find highly competitive rates from alternative or non-bank small business lenders. Then there are those lenders that only partially base your acceptance on your personal credit score and can lend to you with a score of 500 or better. A bad credit score may not impede the application processes or your ability to get funded. Especially if your businesses credit is strong.
  • Profitability; some of the lenders will ask if your business is profitable or not? Do you have positive cash flow? They certainly want to know if you can repay the loan on time.
  • Bankruptcy; Lenders will ask you if you have filed bankruptcy before. Most alternative lenders want at least one year since your Bankruptcy was discharged while others may want to see more time.
  • Credit Card Processing; typically, the merchant cash advance wants to see your monthly credit card and debit card processing volume. It is their way to determine how much you can borrow and it’s from your merchant account that you will pay it back.

Accounts Receivable; A/R financing is a type of asset financing. It works when your company uses its receivables as collateral. These invoices or the money owed by your customers are used as collateral in the financing agreement. Your company receives an amount that is equal to a reduced value of the receivables pledged.

Existing debt; almost all lenders want to know if you have taken loan from another lender. If you have any loans outstanding the small business lenders at that point of time will determine if they want to be the second person to give you another loan despite of the existing debt. Since this one factor can be risky, many lenders refuse to give another loan or take what is known as a second position or a subordinated loan.

Now let’s talk about small business loan options. There are several types including:

  1. Small Business Administration Loan (SBA):

SBA loans, sometimes called SBA 7a loans, are typically small business loans that range from $35,000 to $5M, to those businesses that are unable to get a loan through the traditional banks. These are private sector loans that are guaranteed by the Small Business Administration. This helps small business owners grow and expand. The types of business that qualify is expansive. This is a perfect solution for commercial real estate. The SBA also provides express loans. The differences between the 7a and the express loan is that the express loan is smaller maximum loan amounts, with higher maximum interest rates range. However, the express loan is typically reviewed within 36 hours vs the typical 2 – 3 weeks for the SBA 7a.

Minimum requirements for getting a Small Business Administration Loan

Minimum years of business required More than 2 years
Minimum revenue amount $50,000
Credit Score 640+
Profitability Not a requirement
Bankruptcy report You can apply for the loan after 3 years of filing bankruptcy
Credit card processing? Does not requires a credit card processing
Second lender position allowed? No. SBA does not allow second lender position
Is Account receivable a factor? No
  1. Short Term Loan

This small business loan generally provides quick relief to business owners and helps them in the time when they need easy and immediate solutions for getting money. The loan amount is usually small, maybe $5,000 to $50,000 and one has very less time to repay the money. Terms may be for 3 to 9 months and you may have to pay on daily basis rather than on monthly basis.  These small business loans are based primarily on your businesses annual revenue.

Here are the minimum criteria you will need to fulfill before getting a short-term loan.

Minimum years of business required More than 6 months  
Minimum revenue amount $65,000+
Credit Score 500+
Profitability It is not a requirement
Bankruptcy report You can apply for the loan after 1 year of filling bankruptcy
Credit card processing? In some cases you will need up to $30,000 of credit card processing
Second lender position allowed In some cases it is acceptable
Is Account receivable a factor? No
  1. Medium Term Loan

This is like short-term small business loans. You can expect a higher loan amount anywhere from $25,000 to $250,000 and possible up to one or two million dollars. These can be repaid from 12 months to as much as 5 years. You’ll find a variety of repayment terms from daily to weekly or even monthly. These small business loans are based primarily on your businesses annual revenue.

These are few conditions you need to fulfill before getting the medium term small business loan.

Minimum years of business required More than 1 year
Minimum revenue amount $25,000+ to $150,000+
Credit Score 600+
Profitability It is not a requirement
Bankruptcy report You can apply for the loan after 1 or 2 years of filling bankruptcy
Credit card processing? Does not require credit card processing
Second lender position allowed In some cases it is acceptable
Is Account receivable a factor? No
  1. Equipment loan

When you require purchasing some machinery or equipment for your business, you can try to apply for equipment financing. You’ll need to pay back monthly for a fixed period. Generally, the interest rate of this loan ranges between 8% and 30%.

These are the few criteria you need to qualify before applying for this loan

Minimum years of business required More than 1 year    
Minimum revenue amount $75,000+  
Credit Score 600+  
Profitability It is not a requirement  
Bankruptcy report You can apply for the loan after 2 year of filling bankruptcy  
Credit card processing? Does not require credit card processing  
Second lender position allowed In some cases it is acceptable  
Is Account receivable a factor? No  
  1. Line of credit

Most small business owners’ associate a business line of credit with the bank. Typically, the lending institution will provide you with an “open line” on a pre-determined amount and allows you to access it whenever you need it. The one thing that most owners like about it is some lines of credit allow you to pay interest only on the amount you borrow.

Here are few things you need to check up on your list before applying for the business line of credit

Minimum years of business required More than 1 year    
Minimum revenue amount $200,000+  
Credit Score 600+  
Profitability It is a requirement  
Bankruptcy report You can apply for the loan after 2 year of filling bankruptcy  
Credit card processing? Does not require credit card processing  
Second lender position allowed In some cases it is acceptable  
Is Account receivable a factor? No  
  1. Factoring

This is like your accounts receivable financing. The major difference is you are now actually selling the receivable. So technically it’s not really a small business loan but a sale of a financial asset. Most people use the accounts receivable and factoring terms synonymously. The invoice financing company will typically provide you an advance of 85% of the total invoice value. They will hold the 15% until they are paid by your customer and will keep a smaller percentage for themselves once they receive the payments from your customers. And once invoice is paid you will receive the net difference. This small business loan is based on the credit worthiness of the customer.

Minimum requirements for getting the factoring loan are as follows:

Minimum years of business required More than 6 months    
Minimum revenue amount $50,000+  
Credit Score 500+  
Profitability No, It is not a requirement  
Bankruptcy report You can apply for the loan even after filling bankruptcy  
Credit card processing? Does not requires credit card processing    
Second lender position allowed It is acceptable  
Is Account receivable a factor? Yes  
  1. Merchant Cash Advance

The merchant cash advance is a good way to give your business quick access to capital. It is quick and easy and it requires much less paperwork and you can get the cash into your hand by the second day. The process to repay acts slightly different from rest of the other loans. The business lender will take out certain amount from your credit card sales until the whole sum including the interest is paid.

For this you will be need to have following things:

Minimum years of business required More than 5 months    
Minimum revenue amount $50,000+  
Credit Score 400+  
Profitability No. It is not a requirement  
Bankruptcy report You can apply for the loan after 1 year of filling bankruptcy  
Credit card volume processing? Yes it requires credit card processing of more than $4,500 a month  
Second lender position allowed In some cases it is acceptable  
Is Account receivable a factor? No  
  1. Startup loan

Finally, is the startup loan; it is about the only way to fund a new business. It can be a line of credit or an Restaurant Business Loans or you can combine both of them in some cases if required. With this small business loan you sometimes don’t have to pay interest for 9-15 months, which is good because you get time to get established and flourish without worrying about payments until you get a generous cash flow. Getting this small business loan, you will require a perfect credit score.

Here are the minimum criteria you need to qualify before applying for a startup loan

Minimum years of business required 0 months
Minimum revenue amount $0
Credit Score 700+
Profitability No. It is not a requirement
Bankruptcy report You can apply for the loan after 3 year of filling bankruptcy
Credit card processing? Does not requires a credit card processing
Second lender position allowed It does not allow second lender position
Is Account receivable a factor? No

These are but a few of the details of some of the available small business loan options.

To speak to an underwriter at Sunwise Capital either apply now or call 888.459.9223

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