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Business Loan In USA and Application Guide



Best Banks for business loan in usa, A decade ago, banks were the first place you’d go to if you wanted a business loan. But after the 2008 recession, things changed. Banks started tightening access to credit and adding stricter qualification criteria for loans. As a result, very few small business owners were able to get the funding they needed from banks.

Fortunately, there’s been a resurgence in bank lending to small businesses. Large banks now approve a quarter of small business loan applications, and regional and community banks approve nearly one half of small business loan applications.

Read on as we rank the best banks for business loans and tell you what you need to qualify and apply. If a bank loan isn’t a viable option for your business, we’ll help you find alternative options.

See What You Qualify For

What Types of Loans Do Banks Offer?

If you can get a bank loan to fund your business, you should probably take it. Both national banks and community banks offer low interest rates and long terms on loans, compared to anything you’re likely to find online through non-traditional lenders.

Interest rates from even the best banks for business loans increase when the economy is doing well. But in general, you can expect an interest rate around 4% to 10% on bank loan products. Terms also vary, but banks tend to provide long-term financing with manageable monthly payments.

Here is a brief look at the main types of business loans available through banks.

Term Loans

Business term loans are the most basic type of business loan. These loans provide a fixed amount of capital that you pay back monthly over a set number of years. For this reason, term loans make a lot of sense when you need capital to make an investment that you know will be profitable for your business. Term loans can either be secured with business assets or unsecured. More often than not, terms loans come with some sort of personal guarantee.

SBA Loans

More than 3,000 banks nationwide offer loans guaranteed by the Small Business Administration (SBA). The guarantee on SBA loans make financing available to startups and small businesses that otherwise wouldn’t be able to get loans. SBA loans can be used for business expansion, real estate and equipment financing, working capital, and various other purposes.

Business Lines of Credit

With a business line of credit, a lender approves you for a pool of funds, which is called your credit line. You can draw from the line whenever you want or need to, and you pay interest only on the money you draw. Business lines of credit are the most flexible kinds of financing available, offering a cushion on your cash flow. Lines of credit can also be secured with business assets or unsecured.

Equipment Loans

Many banks offer vehicle and equipment financing as well, perfect for when you want to buy or lease new or used equipment. Banks can finance 80% to 100% of the cost of your equipment, so you don’t have to put up a big down payment. Equipment financing typically requires no collateral or a personal guarantee, as the equipment itself acts as collateral and security for the lender.

Business Credit Cards

Many banks have added business credit cards to their line of financing products. While not technically a loan, business credit cards give business owners a convenient way to make purchases and cover expenses for the business. Many banks offer rewards points and introductory interest rates as incentives on their credit cards. If you’re looking for a business credit card as a replacement for a loan, look to cards with a 0% introductory APR offer.

As you can see, banks offer a range of business loan products, with cost and terms that are favorable to borrowers. But there are a couple catches: First, these types of financing can be a challenge to qualify for, reserving bank loans for business owners with the best credit. And second, bank loans take a long time to process, making them only an option for business owners who have a couple weeks to even months to wait for loans.

But if you’re willing to overlook these downsides, getting a bank loan can be a huge win for your business and set you up for success. Next up, our rankings of the best banks for business loans.

Compare Your Loan Options

The 5 Best Banks for Conventional Business Loans

If you’ve used a few different banks for your personal finances, or have switched your business checking account from bank to bank, then you know that not all banks are created equal.

Some banks have a national reach with thousands of branches nationwide, while others are smaller, regional or community banks. In addition, banks differ in the types of loans they provide, their application process and timeline, the interest rates and repayments schedules they offer, and their customer service.

In order of decreasing size, here are the best banks for business loans.

Wells Fargo

Wells Fargo calls themselves “America’s leading small business lender.” And if you look at their business lending performance and commitments in the past three years, that moniker just might be true.

In the first quarter of 2015, Wells Fargo lent $34.8 billion in small business loans to companies with less than $20 million in revenue. This marks just a portion of the bank’s progress toward their five-year goal (pledged in 2014) of lending $100 billion to small businesses—along with broader resources, services, and commitments to aid small business owners.

Wells Fargo offers several different types of business loans, but for small business owners, Wells Fargo’s Unsecured Business Loan and Unsecured Business Line of Credit are the best options. Unsecured means you don’t need to supply collateral for the loan, making these Wells Fargo business loans easier to qualify for.

Best Option: Wells Fargo Unsecured Business Loan

The Wells Fargo Unsecured Business Loan is a fixed-rate, medium-term loan providing between $10,000 and $100,000 in capital. The terms range from one to five years, and interest rates range from 7.75% to 22.99%, depending on your eligibility. The interest rates are fixed too, which means your monthly payments stay the same throughout the life of the loan.

This loan is an unsecured business loan—meaning that, unlike most bank loans, you won’t have to put down any collateral to secure the loan.

If you’re like many business owners looking for quick business loans, the Wells Fargo Unsecured Business Loan can meet your expectations: The application is a simple one-pager online, and the bank can approve your application instantly and get the funds in your bank account the next business day.

Best Option: Wells Fargo Unsecured Business Line of Credit

The next product for you to consider is the Wells Fargo Unsecured Business Line of Credit. With this financing product, you get a revolving credit line of $5,000 to $100,000 to use for cash flow problems or covering unexpected expenses. Since the credit line is revolving, the line replenishes every time you pay back the balance in full.

This product might be slightly harder to qualify for compared to the unsecured term loan, but you get lower rates—typically the prime rate plus 1.75%.

This line of credit is also an unsecured financing option. Even better, Wells Fargo offers rewards points when you use your line of credit, almost like a credit card.

Bank of America

Bank of America is another bank that is going to big lengths to gain the loyalty of small business owners. Small business banking generated $4 billion in revenue for the bank, and they’ve loaned over $30 billion to small business owners.

With nearly 5,000 branches and plans to create more, Bank of America is a great option for small business owners throughout the country. Bank of America business loans are a fantastic option for highly qualified borrowers.

Best Option: Bank of America Business Advantage Unsecured Term Loans

Like Wells Fargo, Bank of America also offers unsecured term loans. The loan amounts range from $10,000 to $100,000, and the rates are fixed, starting at 5.50%. These rates beat Wells Fargo’s best rate. These are medium-term loans, with repayment terms ranging from one to five years.

You can apply online, in person at a branch, or over the phone. If approved, you can receive funding is as few as five business days. However, Bank of America publishes the qualification requirements on their website. Eligible businesses are at least 2 years old, and they need to be generating $100,000 or more in annual revenues.

Bank of America has something called relationship rewards, where you can get a lower rate if you maintain high balances across your Bank of America accounts.

Best Option: Bank of America Business Advantage Unsecured Credit Line

Bank of America’s (BOA) unsecured business line of credit, called the Business Advantage Line of Credit, is similar to Wells Fargo’s version.

These lines of credit range from $10,000 to $100,000 in flexible financing, with no collateral required to be approved. The interest rates start as low as 6.25%, just a hair lower than Wells Fargo.

JPMorgan Chase

Next on our list is another large nationwide bank: JPMorgan Chase—better known as just Chase. In the first quarter of 2015, Chase lent $19.1 billion to small business owners. But Chase has even bigger plans, recently announcing that they will increase small business lending by 20% over a three-year timeframe.

Chase business loans makes our list of the best banks for business loans for two reasons. First, Chase is an innovative bank, one of the first to team up with alternative lender OnDeck to get loans into the hands of more small businesses. Second, Chase offers a great lineup of small business credit cards if traditional loans don’t make sense for your business.

Best Option: Chase Business Quick Capital Loan

The Business Quick Capital Loan comes from a partnership between Chase bank and the online lender, OnDeck Capital. Under this program, Chase makes the loans using its own assets, but the application process utilizes the speed and ease of OnDeck’s underwriting and loan processing technology.

The fusion of these two financial power-players makes the Business Quick Capital Loan an ideal financing option for business owners who need affordable financing quickly.

If you’re one of the 4 million small business customers who already has a Chase business checking or savings account, then they can pre-screen and pre-qualify you for the Quick Capital Loan. The most eligible borrowers are then invited to apply for up to $250,000 in financing.

In the end, you won’t really know if you’re eligible for this business loan until Chase tells you that you are. But if you bank with Chase, this could be a great financing option. The process is fast, entirely online, and loans typically have interest rates lower than what you’d get with an online lender.

Best Option: Chase Business Credit Cards

A business credit card isn’t a traditional “business loan,” but you can often use a credit card like a loan. Plus, there are added benefits to business credit cards, such as rewards points, introductory interest rates, and an easier qualification process.

Chase is a leader in credit cards, and they offer one full year as an introductory rate on several of their cards before your variable rate sets in. In addition, Chase offers unlimited cash back on certain cards and sign on bonuses. For more info, read our comparison of the best business credit cards.

Capital One

Although Capital One is better known for their consumer programs, the bank has certainly invested in their small business lending program.

Capital One stands out as a great bank for business loans just based on the wide array business loans they offer their customers. Capital One offers lines of credit, equipment and vehicle financing, commercial real estate loans, business installment loans, and SBA loans (through the SBA 7(a) and 504 program).

Capital One small business loans also come with relationship-based rates for existing customers, and might also tailor a specific loan program to the financing needs of your business. That customizability makes Capital One the best bank for business loans if you already have a relationship with them.

Best Option: Capital One Working Capital Lines of Credit

Many bank loans in general are large, long-term loans that might be pretty inaccessible to most small business owners (or just beyond the amount of capital you really need).

However, Capital One’s working capital lines of credit stand out as a smaller, more flexible type of financing that could be easier to qualify for than, say, a Capital One SBA loan or real estate loan.

These business bank loans start at $10,000, and allow an unlimited number of draws. There’s no specific timeline for the line of credit repayment period, or for how long you can have the line of credit open. Plus, you won’t need to submit financial statements if you’re planning on taking out a line less than $50,000, making the application process really simple.

Capital One calls these loans perfect for business owners who need a flexible financing tool that can help smooth out every day cash flow issues. In order to qualify, you’ll need to have two years in business and have (or open) a Capital One business checking account.

US Bank

U.S. Bank rounds out our list of the best national banks. This bank is one of the biggest lenders for small business loans, but has limited geographic reach. U.S. Bank branches are only in 25 states and are concentrated in the west and midwest.

U.S. Bank business loans range from term loans, lines of credit, equipment finance, to commercial real estate loans. One thing that sets them apart is that they offer “practice financing,” which helps dentists, veterinarians, and eye doctors start a new practice, acquire a practice, or expand.

Best Option: US Bank Quick Loans for Business

One of U.S. Bank’s best products for small business owners is the Quick Loan for Business. This is for business owners who want to purchase new or used equipment or need a source of working capital for business expansion. The loans go up to $250,000, and the repayment term goes up to five years. The loan is called “quick” because the bank provides a simple application process and fast credit approval.

Compared to other banks, U.S. Bank has slightly easier qualification requirements for business loans. They only require you to be in business for six months to be eligible. Although the Quick Loan isn’t an unsecured loan, the loan is self-secured. This means the equipment or business assets that you purchase with the loan serve as collateral. You don’t need to provide additional collateral.

There’s also a Quick Loan for Vehicles if you need to purchase commercial vehicles for your business.

The 5 Best Banks for SBA Loans

When talking about the best banks for business loans, we’d be remiss to not bring up the SBA loans.

SBA loans are an excellent financing option for small business owners. The Small Business Administration doesn’t actually give out these loans themselves. Instead, the SBA guarantees business loans that are issued by traditional banks.

An SBA guarantee (typically up to 85% of the loan value) has two major benefits: First, it mitigates the bank’s risk of lending to you. With the SBA’s guarantee that the bank gets at least most of their money back in case you default on your loan, the lender can be much more comfortable extending credit. Second, the guarantee makes SBA loans easier to qualify for as a business owner.

That’s not to say that qualifying for SBA loans is easy—these are still bank loans, and you need strong finances to qualify. But the added security by an external guarantee certainly incentivizes these banks to lend to small business owners.

Not only are SBA loans slightly easier to qualify for, they also come with equally affordable interest rates as most bank loans do. Interest rates on SBA loans from banking institutions range from about 5% to 9.5%.

Here’s the list of the best banks offering SBA loans.

Live Oak Bank

In 2018, Live Oak Bank took the #1 spot on the SBA’s list of the top SBA lenders in the country, lending a total of $733,247,700 to small businesses via 479 7(a) loans.

This bank, based in Wilmington, NC, has no consumer loan products and no physical branches. Instead, they focus exclusively on small business loans, especially SBA loans. They’ve provided over $2 billion in small business funding since they started operating. Initially, Live Oak Bank made loans only to veterinary practices but now provides financing to a range of industries.

Live Oak Bank has a streamlined, electronic application process for their SBA loans, since they don’t rely on branches. You can upload all loan documentation online and monitor the progress of your loan at any time in your online account. All of this means your loan can get processed more quickly. Live Oak Bank also has a lot of expertise in different industries, so they can help you get a loan that’s perfect for your business.

Wells Fargo

Wells Fargo is the second-most prolific SBA lender in the country, which is why they made our list of best banks for conventional loans and best banks for SBA loans. In 2018, Wells Fargo approved 1,531  SBA 7(a) loans and lent a total of $437,017,700 in 7(a) SBA loans.

Although Wells Fargo lends thousands of 7(a) loans, the bank also offers SBA 504 financing for business owners who want to purchase real estate, equipment, or other fixed assets. Since Wells Fargo is so experienced in providing SBA loans, they can underwrite and process your loan faster than usual. That’s good news because qualifying for an SBA loan is typically a drawn out process that can take several weeks, even months.

Banks have a bad reputation for providing only larger loans that are out of reach for small businesses. But Wells Fargo’s SBA loan average size was $83,799 in 2017, which indicates that they do make smaller loans perfect for small businesses.

Huntington National Bank

Huntington National Bank comes in third in the list of the best banks for SBA loans in 2018. They made nearly 1,751 SBA loans across the country, totaling over $363,164,400 in funding.

Huntington Bank participates in the SBA 7(a) general purpose business loan, SBA 504 loan, and SBA Express loan programs. So, no matter what the stage or needs of your business, you should be able to find something that works for you.

Celtic Bank

Celtic Bank is another excellent bank to consider for small business financing. Like Live Oak Bank, Celtic offers a completely online banking experience. They have a few consumer products, but their specialities are SBA loans and conventional business loans.

In 208, Celtic Bank approved 394 SBA 7(a) loans, lending a total of $245,818,800. That ranked them sixth nationwide in SBA lending, but they were in the top three in several regions of the country. One of the best parts about Celtic Bank is that they have a very simple seven-question online application to get started. Once you complete that, Celtic Bank will predict whether you can get approved for the loan and offer you alternative loan options.

TD Bank

TD Bank business loans rounds out our list of the best banks for business loans. This bank mainly has an east coast presence, so if your business isn’t located there, then you might want to go with another bank.

TD Banks also offers all three types of SBA loans: SBA 7(a) loans, SBA 504 loans, and SBA Express loans. Unfortunately, they don’t offer the convenience of an online application process. You must schedule an appointment with a TD Bank branch to apply. But, they have been able to help many small business owners obtain loans. In 2018, TD Bank made 1,282 SBA 7(a) loans totaling $127,864,500.

Banks Loans for Business: How to Qualify

As we’ve mentioned a few times so far, bank loans aren’t easy to qualify for. These loans have low interest rates, long terms, and manageable monthly payments, but they aren’t open to everyone. To qualify for a bank loan, you must have very strong personal and business finances. The qualifications that top small business loan providers will look to to determine your eligibility will be:

Good Personal Credit

Banks loans for business, surprisingly enough, will require a solid personal credit score. You might be wondering why your personal credit score even matter if you’re looking for a business loan. Business lenders—both business loan companies and banks alike—will look to business owners’ personal credit score to gauge their financial responsibility. After all, you’re the one who is controlling your business’s finances.

As a result, you—or any of your co-owners—will likely need to come to the table with a FICO score of at least 700 to be able to qualify for a business loan from one of these top providers. The top business loan providers might even look for excellent personal credit—think 750 or higher—for you to qualify. This is especially the case for newer or lower-volume small businesses.

Solid Business History

The best banks for business loans will have a minimum requirement for the time your business has been up and running. Generally speaking, most business bank loans will require you to have at least six months in business to even apply. Even then, you’ll need really solid business financial credentials and personal credit to be eligible for a bank loan for business.

At least two years in business will make your application for a small business loan from a bank even stronger. If your business has already lasted at least two years, then lending capital to it will be less risky for any bank you apply with.

High Annual Revenue

The best banks for business loans won’t lend your business any capital if they don’t think you’ll be able to pay it back. As a result, a business loan from a bank will only be available if your business is earning a solid amount of revenue on an annual basis. Most of the top business loan providers will look for at least $100,000 in annual revenue for you to be eligible. The more revenue you earn, the better.

Additionally, the top banks for small business loans will often prefer that your business be profitable. Make sure you meet all every revenue and profitability requirement for a given lender before you take the time to apply.

A Complete Business Loan Application

Along with these credentials, you should have a complete, organized business loan application to give the bank all the information they might need to approve your business loan.

Keep in mind, though, that what you need to prepare for your application to one of these best banks for business loans really depends on the specific bank you’re working with. Some banks might have additional business loan requirements. But in general, you can be confident that you need to prepare some version of the following list of documents:

  • Personal background/résumé for anyone who owns 20% or more of the business
  • Business plan
  • Personal and business tax returns
  • Financial statements
  • Bank statements
  • Use of loan
  • Debt schedule
  • Statement of collateral
  • Legal documents (licenses, registrations, articles of incorporation, etc.)

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