The Best Small Business Loans

The Best Small Business Loans Blog Post | ClariFI Business Solutions

Have you had a month or maybe more when your cash flow is just not flowing fast enough? Is your business income unpredictable for long stretches of time? Instead of reaching for those credit cards, you may want to consider a small business loan.

If you find those lean months are turning into lean quarters, a loan could be the deciding factor that makes or breaks your business. So, choosing the right small business loan for your company is crucial.

Your first step in considering lending is identifying the type of funding you need. Do you need a line of credit that helps you deal with variations in cash flow or a long-term loan to help you purchase real estate or equipment, fund your startup or purchase a business? Business owners should not avoid debt, the right loan can help your business blossom to the next level and may provide a good return on your investment (ROI).

What Loan Types Are Available for Small Business Owners?

There are four main types of small business loans and funding options to choose from:

  1. Small Business Administration (SBA) loans
  2. Bank business loans
  3. Online loans
  4. Crowdlending

SBA Loans are often the best option for companies that don’t meet traditional banks stringent lending requirements. Don’t be confused by the term SBA Loan, these loans are still issued by traditional banks but are guaranteed by the Small Business Administration.

Established businesses with solid financials can apply for the SBA 504 loan and the flagship SBA 7(a) loan program. These loans are often best for companies that have significant collateral, such as real estate and manufacturing businesses. It can also be an excellent option for short-term and long-term working capital, refinancing current business debt, and purchasing fixtures, furniture, and supplies.

If your company is still in the startup phase, then an SBA startup loan is a better loan option for you. The SBA startup loans are for new businesses or business owners with poor credit. The SBA also offers Community Advantage loans in smaller amounts, and these smaller loans have more lenient requirements compared to the 7(a) loan and 504 loans.

Bank business loans tend to be lower in cost than SBA loans, but approval requirements can be rigorous. Generally, banks require a business to be established for two or more years, show positive cash flow, and show strong credit histories for both the company and its owners. Don’t expect to get a loan for your business without a personal guarantee unless you have hard collateral like real estate or equipment.

According to Nerdwallet, some of the best banks for small-business loans are name-brand banks like Bank of America, JPMorgan Chase, Citibank, Wells Fargo, PNC, and U.S. Bank. But, don’t overlook your community banks and credit unions, which are often able to provide more flexible terms, take the time to understand your business, and may provide more personal service.

Online loans have increased in popularity over the past decade. They are a good fit for business owners with low credit scores and companies in business for less than two years. Online lending can be fast, convenient, and easier to obtain; however, the borrowing costs may be higher, sometimes as much as 100%. Keep in mind that high borrowing costs can quickly eat into your business’s profitability so high-interest loans should only be considered after exploring other options.

Crowdlending is a viable and fast-growing alternative to bank loans for startups or established businesses trying to launch a new product. Sometimes called peer-to-peer or P2P lending, crowdlending allows individuals to obtain loans directly from other individuals. Peer-to-peer lending platforms, such as Lending Club or Upstart, enable people to lend or borrow money from each other without using a bank to facilitate the process. These sites set the terms and rates and process the transactions. Some of the benefits of peer-to-peer loans are speed and efficiency. The underwriting process is often completed in one or two weeks and once approved, funds are usually disbursed within days.  Crowd lending is not regulated the same as banks so make sure you understand what you are signing up for.

How to Compare Small Business Loans

When you compare small business loans, you should pay particular attention to specific loan features and to lender reviews.

Compare how these features differ among lenders:

  • Available loan amounts
  • Annual Percentage Rates (APRs)
  • Loan repayment periods

Similar to shopping for items on Amazon, look at the reviews and star ratings left by consumers for each loan provider. Some lenders may offer close to the same loans, but a review and rating can help you determine if it is a lender worth borrowing from.

The Process of Getting a Small Business Loan

Most small business loans have a similar step-by-step process for taking you from application to funding. Below is a typical five-step process of finding, applying for, and receiving your small business loan:

  1. Determine the amount of money you need to borrow and how you plan on using it.
  2. Compare the different loan features and which ones best suit your business goals.
  3. Fill out and submit the business loan application and wait to hear back if you prequalify.
  4. Share required documents, like financial statements, tax returns, licenses, photo ID, etc., with the loan lender.
  5. Get approved, sign the contract, and receive your funds.

Before you jump into these five steps, it’s essential to have good financial statements (or financial projections if you are a start-up) that tell the accurate financial story of your business. You also need to look at your business budget to make sure you have optimized your business costs and that you have a plan for how to repay the loan.  Lenders will also want to see that you have a plan for profitability and understand what it takes to create a profitable business.

A financial advisor can also help you evaluate the long-term consequences of taking on debt and as Ruth Porat, Chief Financial Officer at Alphabet, advises, “Stick to your true north―build greatness for the long term.”

Using Loans as a Stepping Stone to Grow Your Small Business

ClariFI Business Solutions can help you navigate the different types of loans for small businesses. We care about the financial success of your company and are enthusiastic about helping you find the right financial solutions for your needs. We have a free business health test that can give you much-needed insights to support the growth of your small business. Please get in touch with me online or email me at with any inquiries.