Tariff policy continues to evolve — some levies are in place, others are paused and more may be announced in the future. This economic uncertainty has created a difficult landscape for small business owners, many of whom have already felt the impact of rising costs and supply chain disruptions.
Given this uncertainty, it may be a good time to review your budget and financial strategy. It can be useful to work with a financial advisor or accountant, as these professionals can help you develop a plan tailored to your unique needs and challenges.
What is a small business loan?
Business loans can be used to cover startup costs, purchase inventory or equipment, manage cash flow and expand your operations, among other uses. You can get a small-business loan from traditional banks, online lenders and community lending institutions.
The best business loan for you depends on why you need funding, how fast you need capital and your business’s qualifications.
Types of small business loans
Small business loan options can include SBA loans, term loans, business lines of credit and equipment financing.
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SBA loans |
SBA loans are partially guaranteed by the U.S. Small Business Administration, and issued by participating lenders, such as banks and credit unions. SBA loans offer low interest rates and long repayment terms. |
650. |
14 to 90 days. |
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A business term loan is a lump sum of capital that’s repaid over a specific period of time, with interest. Short-term loans’ repayment periods range from three to 24 months, while repayment for long-term loans can extend up to 10 years (or longer). |
570. |
Same day to 30 days. |
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Business lines of credit |
A business line of credit provides access to flexible cash. Similar to a credit card, lenders give you access to a specific amount of credit (say, $100,000), but you don’t make payments or get charged interest until you tap into the funds. |
600. |
Same day to 30 days. |
|
Equipment financing |
Equipment financing is a form of asset-based financing where the equipment itself serves as collateral for the loan. You can get an equipment loan equal to up to 100% of the value of the equipment you’re looking to purchase — depending on the lender and your business’s qualifications — which you then pay back over time, with interest. |
550. |
Same day to 30 days. |
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Microloans |
Microloans are small-dollar loans that typically offer up to $50,000 in business funding. These loans are designed for traditionally underserved entrepreneurs, such as startup founders, people with limited credit histories, minority groups and those located in low-income communities. |
No specific minimum. |
Seven to 30 days. |
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Commercial real estate loans are for the purchase or renovation of commercial properties, such as offices, storefronts or residential buildings. These loans typically function like traditional term loans that you repay over a set period of time, with interest. Commercial real estate loans are self-collateralizing — the property that you’re purchasing or renovating serves as collateral on the loan. |
660. |
Two to 30 days. |
Business loan requirements
Personal credit scoreBusiness lenders use your personal credit score to assess your ability to manage and pay your debts. You can get your credit score online or check your credit score on NerdWallet for free. In general, the higher your personal credit score, the more likely you are to qualify for business funding. A strong personal credit score can also help you qualify for lower interest rates and longer repayment terms.
Time in businessLenders use your time in business as a quick measure of success. The longer you’ve been operating, the more likely you are to have money to repay your debts. Most traditional lenders will want you to have at least two years in business. Online lenders, on the other hand, may only require a minimum of six months in operation.
Cash flowLenders want to see evidence of stable cash flow to ensure that you can repay a loan. When applying for a loan, you’ll likely need to provide business bank statements, tax returns and financial statements. If you haven’t been operating for very long, it can be helpful to provide sales forecasts that illustrate the potential revenue your business will generate.
CollateralBusiness loans can be secured or unsecured. A secured business loan requires collateral, such as property or equipment, that the lender can seize if you fail to repay the loan. Putting up collateral is risky, but it can increase the amount lenders let you borrow and get you a lower interest rate. Keep in mind, however, that although you may be able to get a loan without physical collateral, lenders might still take out a UCC filing on your business assets. This official document allows a lender to claim your assets in the case of default.
What to decide before applying for a business loan
Figure out what loan option is right for your needs. If you want to finance a large purchase or business expansion, for example, you might consider a traditional term loan, whereas if you need funds for day-to-day expenses, you might prefer a business line of credit.
Estimate what payments you can afford. Look carefully at your business’s financials — especially cash flow — and evaluate how much you can afford to apply toward loan repayments each month. Your total income should be at least 1.25 times your total expenses, including your new repayment amount.
Compare small-business lenders. The best loan for your small business is typically the one that offers you the best terms. But other factors, like funding speed or customer service, may matter to your business and different financing sources may be better in certain instances than others.
How to compare small business loans
When choosing the best business loan for your needs, you’ll want to consider factors such as:
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Interest rates. Determine whether a lender offers fixed or variable rates. Banks tend to offer more competitive rates compared with online lenders. If a lender charges interest as a factor rate or weekly fee, calculating it into an annual percentage rate can help you better understand the total cost of the loan.
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Additional fees. Make sure you understand any additional fees (such as origination fees, closing costs or prepayment penalties) a lender charges and ask questions if the fees are unclear.
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Term length. Longer term lengths may mean smaller payments, whereas a shorter term could mean that you pay less in interest.
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Repayment schedule. Small business loans may have daily, weekly or monthly repayments. Consider your budget and cash flow to determine the type of repayment you can afford.
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Funding speed. If you need a business loan quickly, you may be able to get it from an online lender in just a few days. Although traditional lenders may take anywhere from days to weeks to provide funding, you’ll likely get a lower interest rate with these options.
Getting a business bank loan
To qualify for a bank loan, you’ll need to meet strict eligibility criteria. You’ll likely need multiple years in business, good credit and strong revenue. You may also need to provide collateral.
Some banks, however, especially local or community institutions, may be more flexible with their requirements if you have an existing relationship. You might start your loan search with the bank that administers your business checking account or one that has issued you other financial services in the past.
Business loan application checklist
The documentation that you need to provide for your loan application can vary from lender to lender. Banks and SBA lenders often require more paperwork compared to online lenders. In any case, you may need to submit:
Personal and business bank statements.
Personal and business income tax returns.
Business financial documents, such as profit and loss statements, balance sheets and cash flow statements.
A photo of your driver’s license (or other official identification).
Business licenses.
Legal business formation document (e.g. articles of incorporation, articles of organization).
Description of collateral.
Legal contracts and agreements.
As you complete your application, double check all requirements and ensure everything is accurate. Providing incorrect or outdated information can slow down the underwriting process. It may be helpful, therefore, to have a business advisor or mentor review your application before submitting.
Additional business funding options
If you don’t think you can qualify for a traditional loan — or simply want to explore all of your options — you might consider one of these products to finance your business.
Frequently asked questions about small business loans
How do small business loans work?
What credit score is needed for a small business loan?
How much income do you need to get a business loan?
Can I get a business loan for my startup?
Can I get a small business loan with bad credit?
Am I personally liable for a small business loan?
What can I do if my business loan application is denied?
Annual percentage rates (APRs), loan term and monthly payments are estimated based on analysis of information provided by lenders and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers’ credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term and credit history. All loans are subject to credit review and approval.
Last updated on July 10, 2025
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