Do banks give loans to small businesses?
Business bank loans offer low interest rates, long repayment terms and can be used for a variety of purposes. The right bank for you should offer the small-business loan you need, as well as fund enough loans to make financing possible.
If approved, your small business is able to borrow up to a certain amount of money from the bank. As you accrue debt, you pay interest only on the amount you've used so far. As long as you stay within the credit limit, this option provides much more flexibility in how the money is used.
What do banks require for a small-business loan? Banks generally require that you have good to excellent credit (score of 690 or higher), strong finances and at least two years in business to qualify for a loan. They'll likely require collateral and a personal guarantee as well.
- Check your credit scores.
- Calculate how much you need.
- Choose a loan type.
- Choose your collateral.
- Compare lenders.
- Prepare your documentation.
- Apply online or make an appointment.
Limited Cash Flow
If your annual revenue doesn't exceed your expenses, you will have difficulty securing a bank loan. Improving your cash flow before you get a loan can feel like a chicken-and-egg scenario. However, unless you can prove you can pay a loan back, it's much harder to secure business financing.
Some industries are high-risk, so some banks won't lend to companies in real estate, sales, or investing. Other common disqualifying industries include gambling, adult entertainment, dispensaries and cryptocurrency.
| Lender | Average small business loan amount |
|---|---|
| SBA loan | $107,000 |
| Online loans | $5,000 to $250,000 |
| Short-term loans | $20,000 |
| Medium-term loans | $110,000 |
The typical business loan from a bank or credit union can take weeks or months to process. Fast business loans, on the other hand, may be funded within a week of submitting an application. Some lenders are able to assess and underwrite loans in a matter of hours and fund them within a day.
| Lender | Average small business loan amount |
|---|---|
| Bank loans (large national bank) | $593,000 |
| Bank loans (small regional bank) | $146,000 |
| SBA loan | $107,000 |
| Online loans | $5,000 to $250,000 |
Business owners should expect to pay an SBA loan down payment of 10% to 30% — the actual amount can vary by the loan type and the borrower's qualifications. Some SBA loan programs require no down payment at all. Learn more about how SBA loan down payments and how they work for different loan programs.
Do banks give loans to first time business owners?
Getting a business loan is more challenging for startups than for established businesses—but it's still possible. New business owners can improve their approval odds by choosing the right type of financing, familiarizing themselves with their credit scores and identifying the most competitive lending options available.
Some of the easiest loans to get approved for include payday loans, no-credit-check loans, and pawnshop loans. Personal loans with essentially no approval requirements typically charge the highest interest rates and loan fees.
Wonga is the convenient, 24/7 solution for fast cash when you have nowhere else to turn when you need to borrow money. We never ask you what the loan is for, we only ask that you use Wonga responsibly and repay your loan on time.
| Term loan | While banks and credit unions typically require a score of 670 or above, online lenders may only require a score of 500 |
|---|---|
| SBA loan | Lenders offering SBA loans require credit scores between 620 and 680 |
Is it Hard to Get $50,000 in Business Loans as a Startup? Getting a startup business loan with a high loan amount can be very difficult. This is especially true with term loans. SBA loans, specifically, have a notoriously tricky application process.
Without cash on hand, you may not be able to get just any business loan. Most lenders want to see a flow of revenue and profit to consider you for a loan. But some types of business loans and alternative financing can help some borrowers get loans that wouldn't normally qualify.
If you've been denied an SBA loan, you are not alone. Less than 50,000 businesses were approved for 7(a) loans in 2022 — and only around 9,000 were approved for 504 loans.
Each lender will have unique documentation requirements, but at the very least, you'll likely need to provide: Business and personal bank statements. Business and personal tax returns. Financial statements, like balance sheets and income statements.
While there are specific cases where you may not have to pay back an SBA loan, in nearly all cases, you do have to pay back the loan, just as with any other traditional small business loan.
According to the 7(a) and 504 Summary Report from the SBA, the average loan amount during the 2022 fiscal year for all types of 7(a) loans was $538,903. The average amount for all types of 504 loans was $995,029.
How hard is it to get a 2 million dollar business loan?
At most institutions, you'll need to have been in business for at least two years, generate $250,000 in annual revenue, and have a 720+ FICO score to reach an approval. Many businesses can't fit their criteria, so they turn to non-bank lenders for a faster and more accessible process.
A business loan is a type of financing used by businesses. Typically, a bank or other lender will lend a business money, which then must be paid back over a defined term with interest. There are many different types of business loans, and they can be used for a wide range of business expenses.
The maximum loan amount for an SBA 7(a) loan is $5 million and the maximum repayment period is 25 years, though most loans carry a repayment term of up to 10 years.
Because they're backed by the U.S. government, they're less risky for banks than issuing their own loans. But SBA loans are usually harder to get than online business loans, which may require less time in business and lend to borrowers with lower credit scores.
Backed by the US Small Business Administration, SBA loans for startups are designed to help business owners grow their companies and cover expenses like equipment. There are several types of SBA loans with maximum amounts ranging from $50,000 to $5 million. SBA loans are backed by the US Small Business Administration.
Required annual revenue: $500k+
Whether you need a long-term loan, a line of credit or a business cash advance, $500,000 loans come in many flavors. But you generally need to be in business for one to two years with a minimum monthly revenue of $350K to qualify.
You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
| Type of Loan | Required Down Payment |
|---|---|
| USDA Business & Industry Loan | 20%-25% |
| Traditional Bank Loan | 20%-30% |
| Online Loan | 10%-30% |
| Construction Loan | 20%-30% |
Despite the prevalence of small business loans, most entrepreneurs and startups bankroll their businesses on their own dimes. Data from the U.S. Census Bureau found that 64% of entrepreneurs use their personal savings and money from their families to start a business, while 16.5% take out a business loan.
The Small Business Administration (SBA) offers various programs and loans to support small businesses, and you can access them through traditional banks. Traditional lenders are less likely to approve you for a loan if you have bad credit, inconsistent revenue, or have been in business for less than two years.
Can I get a loan to open my own business?
Some of these loans may be applied for through the U.S. Small Business Administration (SBA), however, you can also apply for small business loans through commercial banks, community banks, peer-to-peer lenders like Funding Circle, and online lenders like Kabbage. There are also a few different types of business loans.
- Savings. Most start-up founders use their personal savings to fund their businesses, according to the Gallup Small Business Index. ...
- Personal Loans. ...
- Credit Cards. ...
- Bank Loans. ...
- Venture Capital and Angel Investors. ...
- Government Programs. ...
- Corporate Programs. ...
- Crowdfunding and Crowdlending.
How hard is it to get a $30,000 personal loan? This depends on your financial situation. For those with a good credit score — around 670 and up — a $30,000 personal loan may be pretty easy to get. But those new to credit or with a bad score may find it challenging.
Auto Title Loans
You generally don't need good credit and might not even need to have an income to qualify—which can make them one of the few possible options if you're in a real pinch. However, these loans often have high costs and short repayment terms, which can make title loans a bad idea.
| Best For | APR Range | |
|---|---|---|
| Citibank | Best for Citi Relationship Rewards | 10.49% - 19.49% |
| Discover | Best for 30-Day Loan Guarantee | 7.99% - 24.99% |
| Wells Fargo | Best for Wells Fargo Customers | 8.49% - 24.49% |
| USAA | Best for USAA Members | 9.94% - 18.51% |
- Credit card.
- Home equity loan or HELOC.
- Personal line of credit.
- Peer-to-peer loan.
- Life insurance policy loan.
- Retirement plan loan.
- Mortgage refinance.
You can get bad credit loans from various banks, credit unions and online lenders, however, the threshold for what's considered a “creditworthy borrower” varies by institution.
Secured, co-signed and joint loans are the easiest to get with bad credit. A secured loan requires collateral like a car or savings account, which the lender can take if you fail to repay. A co-signed or joint loan requires you to add someone with better income and credit to the application.
If your business is relatively new, the lender may weigh your personal credit history more heavily to determine eligibility. Lenders who offer bad credit business loans typically require a score of 500 or higher. But if you opt for a bad credit business loan, prepare to receive a high-interest rate from your lender.
Will Lenders Always Consider My Personal Credit for A Business Loan? Most lenders will at least look at your personal credit history when determining your eligibility for a business loan. However, some lenders will put less weight in your personal score than others.
Can I get a business loan with a 480 credit score?
And while it's possible to get a business loan with a credit score as low as 500, a lower credit score could make it more challenging to qualify for a business loan. You'll also likely receive less favorable interest rates and loan terms if approved.
- Check your business and personal credit scores. ...
- Calculate how much money you need — and how much you can afford to repay. ...
- Choose a loan type. ...
- For secured loans, choose your collateral. ...
- Compare lenders. ...
- Prepare any documentation you need.
How hard is it to get a $100,000 business loan? Business loans of $100,000 or less are sizable, so lenders will want to see ample proof that you can repay the loan. Minimum requirements for loans this size can vary, but may be relaxed such as requiring low annual revenue of around $100,000.
Some industries are high-risk, so some banks won't lend to companies in real estate, sales, or investing. Other common disqualifying industries include gambling, adult entertainment, dispensaries and cryptocurrency.
Some lenders require borrowers to have a certain amount of money in their business bank accounts before they'll even consider extending a loan. But other lenders are a little more forgiving of cash flow if borrowers have a strong personal credit history or meet other business loan requirements.
Accounts receivable financing lets you use unpaid invoices or future sales to get funding. It lets you use this revenue to repay the financing company. Meanwhile, secured business loans may help you get a loan with no down payment because they're guaranteed by business assets.
- Up to one year of business bank account statements.
- Personal and business tax returns from the most recent three years.
- Most recent and projected balance sheets.
- Income statement and cash flow statement.
- List of current accounts receivable.
- Schedule of business debts.
Startup Loan Amounts
Startup loans typically range from $9,000 to $20,000. You can be funded for as little as $500 or for as much as $750,000 (though you'll need a large personal income for a loan that size). Startup loan decisions are made differently from other forms of business financing.
Business loan collateral requirements
In general, how much you offer as collateral depends on your lender, your credit score, how much money you'd like to borrow and what types of assets you have. Matching 100% of your target loan amount in collateral could boost your application's chances of being accepted, though.
640 to 700: Business loan providers generally consider a credit score that falls somewhere between 640 and 700 to be good but not excellent. Generally, the minimum credit score for SBA and term loans is around 680.
How soon do you have to pay back a business loan?
Long-term loans – Long-term business loans may have repayment terms up to 25 years. Examples include commercial real estate loans, SBA loans, and equipment financing. Short-term loans – Short-term loans typically have repayment periods of 18 months or less.
You may need to get creative with the types of funding at your disposal, but it's possible to get business financing without much money or revenue. Consider whether you can secure work contracts ahead of time or pay back a loan or investors from future sales to open up possibilities.
Also, banks usually require startups to secure loans guaranteed by the Small Business Administration, whose lending guidelines tend to weed out candidates who might have a high risk of defaulting. So yes, banks do make loans to startups – provided they demonstrate the ability to repay them.
| Loan type | Repayment terms | Loan amounts |
|---|---|---|
| SBA loans | Up to 25 years | Up to $5 million |
| Traditional bank loans | Three to 10 years | $250,000 to $1 million |
| Business lines of credit | Six months to five years | $1,000 to $250,000 |
| Microloans | Up to six years for SBA microloans | Up to $50,000 |
