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Small Business

PayPal Working Capital Business Loans Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Many small business owners who rely on PayPal to accept and make payments could also turn to the platform when in need of financing.

PayPal offers working capital loans to qualified business owners who use the service. The loan is based on PayPal sales and doesn’t require a credit check. The application process is simple and approved loans can be funded almost immediately.

If you already use PayPal, applying for a working capital loan could provide a quick, convenient solution to meet your funding needs. We’ll break down what you need to know about PayPal’s loan program before you start your application.

PayPal Working Capital loan details

PayPal offers two types of business loans: PayPal Business Loans and PayPal Working Capital loans. While the business loans program is similar to a traditional business loan with set payments and a credit check, PayPal’s working capital loans require no credit check and payments are drafted from your sales. Here, we’ll take a closer look at PayPal’s working capital offering.

Business owners can borrow up to 35% of their annual PayPal sales for a working capital loan. The maximum amount for your first PayPal loan is $125,000. The exact amount you receive in your PayPal account is dependent on how much in sales you collect through PayPal.

To pay back the loan, PayPal takes a percentage of your future sales. You would choose that percentage when you apply, and PayPal would make automatic deductions until the debt is paid off. You would make higher payments on days when your sales are higher, and you wouldn’t pay anything on days when you don’t have any PayPal sales.

However, PayPal would require you to pay at least 5% or 10% of your debt every 90 days to remain in good standing. You would also have the option to pay the loan in full without early repayment fees.

How much does it cost? PayPal charges a fixed fee that is based on the amount of your loan, your PayPal sales history and the repayment percentage that you selected. There are no additional fees or periodic interest. The higher the repayment percentage, the lower your overall cost of borrowing. See this sample repayment plan:

Example: A business with $100,000 in annual PayPal sales is seeking a $10,000 loan.

Portion of sales repaid to PayPalPercentage you keepOne-time fixed feeTotal loan

















Unlike a traditional bank loan or a credit card, PayPal Working Capital does not require a personal credit check or a personal guarantee. Applying for PayPal Working Capital is faster than applying for a bank loan, and you would see the money in your PayPal account in a shorter amount of time.

What businesses are eligible for PayPal Working Capital?

To be eligible for PayPal Working Capital, you must have a PayPal Business or Premier account for at least three months. To qualify for a Business account, you must process between $15,000 and $20 million in annual PayPal sales. You must process between $20,000 and $20 million in annual sales to qualify for a Premier account.

Premier and Business accounts are both best for sellers who get paid online and make online purchases. Premier is suited for casual sellers who receive payments through PayPal. Business accounts are recommended for merchants with an established company name. A Business account also allows up to 200 employees to have limited access to the account and comes with a customer service email address to handle customer issues.

Because PayPal does not approve borrowers based on business or personal credit scores, business owners with poor credit may be able to secure financing. If you’ve had trouble getting approved for a bank loan because of your credit, PayPal may be a solution.

The pros and cons of PayPal Working Capital


Fast time to funding. Once PayPal approves your application and you agree to all terms and conditions, your loan is automatically transferred into your PayPal account in a few minutes.

Credit score not deciding factor. PayPal determines your eligibility from your PayPal sales history rather than your personal or business credit. PayPal does not check your credit, so applying for a loan would not impact your score.

No penalty for paying early. Although PayPal automatically collects payments, you can make additional payments to clear your debt early without facing a fee. PayPal also won’t charge you a fee for paying back the loan in full.


Your fee isn’t set until you apply. You can use PayPal’s sample fee calculator to get an example of the fee you might owe with your loan. However, your actual fixed fee would depend on the information in your application. It may be difficult to compare PayPal Working Capital with other loan options without knowing your exact fee.

You still have to pay transaction fees. PayPal collects fees to process credit card transactions, which you would owe on top of your loan repayments. Online transactions through PayPal cost 2.9% of the transaction amount plus 30 cents, while in-store transactions cost 2.7% of the amount.

Paying early won’t save you money. The fixed loan fee that you owe won’t go down if you pay your loan off early.

Application process and requirements

To apply for PayPal Working Capital, you’ll need to provide basic information about your business and yourself, since you will be the authorized representative of the account. Your PayPal sales history is the most crucial piece of information to provide, as your loan amount is dependent on your transactions.

Some business owners may have to provide additional details, such as the contact information, birth dates and Social Security numbers of primary business owners and managers. PayPal won’t use the data to run a credit check, and those people would not have access to your account unless you authorize them.

When you apply, you will choose the percentage of each sale that PayPal will take as repayment. You cannot change your percentage once it goes into effect, so you should carefully consider how much you can afford to take out each payment.

The fine print

A lower repayment percentage means a higher loan fee. If you choose a lower percentage for PayPal to take out of each sale to repay the loan, the fixed fee on your loan will be higher. If you want to pay a lower fee, PayPal will take more out of each transaction as repayment. Paying a higher fee would allow you to keep more of your PayPal sales for your business, which would help you keep cash flow stable.

Payments start almost immediately. PayPal begins collecting automatic repayments 72 hours after you receive your loan, giving you three days to prepare for the regular deductions. PayPal takes its percentage as soon as a sale occurs.

You can’t add funds to your loan. If you need more funding, you would have to apply for another loan. You would not be able to add money to your existing PayPal Working Capital loan. PayPal issues loans one at a time, so you wouldn’t be eligible for another one until you paid off your existing balance.

There’s a minimum payment requirement. Even though PayPal doesn’t take a payment on days when you don’t make PayPal sales, you must pay 5% to 10% of your total loan amount every 90 days. If you don’t meet the minimum requirement, your loan could go into default and your entire balance could become due. Limits could also be placed on your PayPal account if you default.

Alternatives to PayPal Working Capital

If you don’t want to mix your PayPal sales with borrowing — or you’re a small business owner who doesn’t use PayPal — there are other ways to obtain a loan for your company.


ForwardLine offers short-term and medium-term loans for small business owners. Terms range from six months to five years and you could borrow up to $500,000 to fund your working capital needs. Applying for a ForwardLine loan doesn’t impact your credit score and you could receive an approval decision instantly. If approved, you could see the money in your business bank account as soon as the next business day. ForwardLine requires just one year in business and annual sales over $100,000.


RapidAdvance provides working capital loans, equipment loans and professional practice loans to small business owners. RapidAdvance’s online application process is simple and you could get approved in a few hours and receive funding in one day. You could borrow $20,000 to $500,000 and you would make scheduled daily payments to pay back the loan. RapidAdvance requires two years in business and monthly revenue of at least $5,000.

The bottom line

For business owners who rely on PayPal when making sales, PayPal Working Capital could be a useful option to obtain financing. Your volume of PayPal transactions would determine how much you could borrow. PayPal would automatically take a percentage of your future sales as repayment, so you wouldn’t have to worry about late or missed payments. However, you would have to keep enough money in your PayPal account to cover the payments. PayPal doesn’t consider personal or business credit when approving loans, making PayPal Working Capital an attractive financing option for business owners with less than perfect credit.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at


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Small Business

SBA Startup Loans – Your Top Options in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SBA startup loan

If you are looking for funding for your new business, you may have considered a U.S. Small Business Administration startup loan. There are many funding options to choose from, so you want to make sure that you do your research to find the option that works best for your business. Here are some tips, guidelines and things to consider in your research for an SBA startup loan.

The cost of starting a business

Determining how much money you need to start your business can take time. It will depend on your business model and what industry your business is in. Here are some things to consider so you can plan for how much startup financing you might need.

Initial fees

One of your first expenses will likely entail creating a legal structure for your business, and you may also need to pay to file articles of incorporation with your state. Even if you don’t plan on incorporating your business, you may require federal or state licensing and permits, which aren’t free, either.

Office space

Whether you need an entire store to set up shop or a single office, you’ll need to add the cost of renting or buying space to operate your business. If possible, consider starting the business from your home to reduce your overhead in the beginning, just make sure you’re following any community or neighborhood rules. You can read more about how to run a business from home without breaking any rules on LendingTree. MagnifyMoney is a subsidiary of LendingTree.

Equipment and inventory

Every business needs startup equipment, even if you’re a one-person operation. Needs vary by industry and may include vehicles, computers, machines or furniture. The costs of inventory are all across the board, too. If you’re opening a business in retail, wholesale or distribution, you’ll need to calculate inventory costs upfront.


You won’t get many customers if no one knows you exist, so it’s pretty important to add marketing and advertising costs to your business budget. You may want signs, banners or business cards to promote your business, along with a well-designed website. With more than half of small businesses reportedly operating without a website, having one will give you an instant advantage.

For other startup costs, you could use the SBA’s startup costs worksheet to provide a better understanding of how much capital you’ll need for your startup financing.

How to secure an SBA startup loan

Not only does the SBA offer tools to help you plan your startup costs, it also offers training programs and education to grow your business, too. As you navigate the seemingly endless list of expenses you’ll need to cover to get your business off the ground, the SBA can help.

Jessica Mayle, district public affairs specialist at the SBA’s Illinois office, said, “Before seeking a loan, a small business owner should make sure he or she has a solid business plan, financial projections, collateral and other necessary materials. Working with a counselor from a Small Business Development Center or SCORE can help increase your chances of success.”

Though definite requirements vary by type of small business loan, here are a few general guidelines your business must meet:

  • You’ve exhausted all other private financing options.
  • You’re considered a small business.
  • You’ve been in operation more than two years.
  • You have a good personal credit score.
  • You have had no bankruptcies or foreclosures in the past three years.
  • You’re prepared to use personal assets as collateral to guarantee your loan.

Additionally, if you don’t already have a solid business plan in place, now is the time to create one. A detailed business plan that includes financial forecasts and statements is a requirement for any startup financing, including SBA loans.

The best SBA startup loans for 2019

SBA loans can be helpful for any business looking for startup financing. Through its partnerships with lending institutions like banks, microlenders and community organizations, the SBA can connect you with its best lenders for your small business.

Depending on what you want to use your SBA loan for and how much startup financing you need, there are a few options to consider.

SBA 7(a) Loans

As the most common type of SBA loan, these go up to $5 million and are used for almost any business purpose. SBA 7(a) loans add anywhere from 2.2 to 4.75% to a lender’s base rate and loans can be repaid from 10 to 25 years, depending on the purpose of the loan.

Minimum requirements:

  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business

Used for:

  • Funding startup costs
  • Purchasing equipment
  • Purchasing new land (including construction costs)
  • Repairing existing capital
  • Purchasing or expanding an existing business
  • Refinancing existing debt
  • Purchasing machinery, furniture, fixtures, supplies or materials

Two popular loans frequently accessed as part of the 7(a) loan program are the SBA Express Loan and the SBA Advantage Loan. With the Express Loan Program, your borrowing is capped at $350,000 but processing time is expedited for a quicker approval.

Advantage Loans are geared toward businesses that might not qualify for the standard 7(a) loan because of low revenues or other reasons. Though it does offer the same expedited service, the Advantage Loan limits lending to $250,000.

SBA 504 Loans

With a specific focus on small businesses looking to buy or build commercial real estate, the SBA 504 loans provide up to $5.5 million in financing. The SBA also facilitates the partnering of banks with a community development corporation (CDC) to cover the cost of funding the loan.


  • Alternative Size Standard: For-profit businesses that do not exceed $15 million in tangible net worth
  • Cannot have an average of two full fiscal years’ net income over $5 million
  • Owner-occupied 51% for existing or 60% for new construction

Used for:

  • Purchasing machinery and equipment
  • Fixtures, leasehold improvements
  • Working capital

This loan cannot be used to repay existing debt.


If your business needs help with recurring payments or an unexpected expense, the CAPLines Program has five line-of-credit products designed for different goals and provides up to $5 million in financing.

The repayment term can be from five to 10 years.


  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business.

Used for:

  • Financing seasonal and/or short-term working capital needs
  • Cost to perform
  • Construction costs
  • Advances against existing inventory and receivables
  • Consolidation of short-term debts

Not sure which of the five programs are right for you?

Here’s a quick overview:

  1. Seasonal Line of Credit: Covers seasonal increases in inventory needs, labor costs or accounts receivable.
  2. Contract Line of Credit: Used for materials and labor needed for assignable contracts.
  3. Builders Line of Credit: Designed for contractors that build or renovate residential or commercial buildings.
  4. Standard Asset-Based Line of Credit: Allows small businesses to convert short-term assets, such as outstanding invoices, to cash.
  5. Small Asset Based CAPLines: Revolving Line of Credit to finance short-term working capital needs of the borrower.

SBA Export Loans

For global-business seekers, the SBA Export Loan provides funding to expand exports, participate in international transactions and enter new foreign markets. Repayment terms extend up to 25 years.


  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business
  • Engaged in or preparing to engage in international trade
  • Adversely affected by competition from imports

Used for:

  • Permanent working capital
  • Equipment
  • Facilities
  • Land and buildings
  • Debt refinance related to international trade

If you’re seeking a quicker funding opportunity, the SBA Export Express Loan is another option, though you’re limited to $500,000 in financing. There’s also the SBA Export Working Capital Loan that allows up to $5 million to help cover the costs associated with entering a new export marketing or expand in an existing one.

SBA Microloans

While most loans are geared toward for-profit businesses, SBA Microloans are specifically designed to provide loans to nonprofit intermediaries who then lend amounts of less than $50,000 to for-profit small businesses and nonprofit child care centers. You’ll have up to six years to repay a microloan .


  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business

SBA Disaster Loans

When natural or human-made disasters strike, small businesses can suffer immensely. The SBA Disaster Loans offer financial help for businesses to recover from a declared disaster.

Depending on the type of emergency, there are three types of loans to choose from:

  • Physical Disaster Loans
  • Economic Injury Disaster Loans
  • Military Reservists Economic Injury Loans

Borrowing through this program gives you access to as much as $2 million, with a repayment period of up to 30 years. The interest rates of 4 to 8 percent are quite reasonable, too.


  • Business must have suffered damage from a physical or economic disaster
  • Military Reservist loans are offered when essential employees are called to active duty

Used for repairs/replacement of:

  • Real property
  • Machinery
  • Equipment
  • Fixtures
  • Inventory
  • Leasehold improvements

Finding the right SBA loan for your small business

Determining how much funding you need and what type of SBA loan you should apply for is a tedious and time-consuming task.

Your local SBA District Office can help with personalized one-on-one guidance to calculate your startup financing needs and to select the right loan program. Finding the right SBA loan will push you through the difficult first few years to grow into a well-established and successful small business.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here


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Small Business

Quick Business Loans: 5 of the Best for When You Need Money Fast

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

quick business loans

Whether an important piece of equipment breaks down or you need to stock up on seasonal inventory, a fast business loan may be the way to go. Every day you wait to receive the necessary funds to successfully operate your business, your company can lose money.

Fortunately, there are online lenders that understand that time equals money, and, as a result, will expedite their applications. Funds are then released in a timely manner, sometimes even within 24 hours.

What kind of loan meets your needs?

The first step in your search for a quick business loan is to determine which type of loan is best. Many online lenders offer the following types:

  • Short-term loans. Short-term loans typically have repayment terms of up to 12 months. This is a good option if you’re looking for a lump sum with a reliable repayment schedule. With a short-term loan, you can increase your marketing efforts, update your computer systems and even purchase additional inventory.
  • Short-term lines of credit. Also commonly referred to as an open-end credit, a short-term line of credit gives the borrower access to a set amount of funds that are pre-determined by the lender. The borrower may then withdraw cash from the line of credit as needed, instead of simply taking out one lump sum, as with a short-term loan. This type of funding works well for companies that need to make payroll or cover their quarterly taxes, but don’t have the immediate operating income on hand to meet the expense.
  • Equipment financing. Equipment financing allows you to free up your working capital by providing the funds needed to purchase or lease equipment that is essential to the running of your business. Almost any type of equipment is included in this type of loan, whether it’s used or brand-new.
  • Invoice factoring. Invoice factoring allows you to sell your invoices to a lender in exchange for immediate cash. This is an excellent option if your business is made up of customers who pay invoices at a later date, such as the clothing industry. The lender will look at the customer’s ability to repay, since they are the ones responsible for paying the bill. This is the opposite of more traditional loans, which would require your company to have a good credit history in order to qualify for funds.
  • Merchant cash advance. A merchant cash advance gives business owners the opportunity to obtain an advance on their future earnings, typically their credit card sales. You pay the money back through a percentage of all new sales. You may want to consider this option if you need to replace inventory that is in high demand, or you want some short-term capital to renovate your storefront. Be warned: These types of “loans” can be very expensive.

How to qualify for the loan of your choice

Once you know which loan works best for your business, you need to make sure you qualify before you submit an application. Each lender has its own requirements, but here are a few of the common qualifications:

  • Credit score. Companies like OnDeck Capital list a minimum credit score of 500 as part of their qualifications, while BlueVine requires a personal credit score of 530 for invoice factoring and 600 for a business line of credit. Others, such as Kabbage and National Funding, don’t have a specific minimum credit score.
  • How long you’ve been in business. Expect lenders to take a look at how long you’ve been in business. The required length of time ranges from six months to two years, with one year being the most common.
  • Amount of annual sales. In order to determine if your company can pay back a business loan, the lender will need to review your annual sales. OnDeck Capital and National Funding both have a $100,000 annual sales requirement, while Kabbage only requires half that amount. RapidAdvance breaks down its qualifications to $5,000 in sales per month, which comes to $60,000 a year.
  • Bank statements. Bank statements are another commonly requested item. Make sure you gather your company’s three most recent bank statements before you begin your application.
  • Additional documents. While not as common, some organizations, like RapidAdvance, require applicants to present additional documents. These include a government-issued photo ID, a voided check from your bank account and your last three credit card processing statements (for merchant cash advances).
  • Industries served. Although companies like OnDeck Capital serve more than 700 industries, you can’t get a quick business loan if your industry isn’t on the list of industries served. Typically excluded industries include religious organizations, adult entertainment industries, boarding houses, fortune telling businesses, firearm vendors and drug dispensaries.

5 of the best business vendors offering quick loans


BlueVine offers both invoice factoring and lines of credit, and provides quick approvals with funds being disbursed to applicants within hours. Those who opt for a bank wire at a fee of $15 will receive their money the same day, while ACH transfers are available the next day for free.

The company funds between $5,000 and $100,000 to businesses that meet its qualification standards. It will look at your personal and business credit history and your company’s current cash flow, and also consider how likely your customers are to pay their bills. Businesses can also receive a higher credit limit if they are willing to connect their accounting software with their BlueVine account.



on BlueVine’s secure website


Kabbage cares more about your business performance than it does your credit score. Its main qualifications include being in business at least a year with $4,200 in monthly sales. Applicants can apply for as little as $500 or as much as $250,000 in short-term loans or invoice factoring. Instead of an APR, Kabbage charges companies a monthly fee of one-sixth of the total loan amount on six-month loans, one-twelfth of the loan amount on 12-month loans, as well as an additional undisclosed monthly fee.

The best part about using Kabbage is how quickly it makes funds available after approval. Customers who use their PayPal accounts will receive their money within minutes, while borrowers who wish to have their money deposited into a checking account will get the cash within three business days. If you take advantage of the Kabbage Card to access the funds in your line of credit, you can also use the card to make purchases anywhere Visa is accepted.



on Kabbage’s secure website

OnDeck Capital

OnDeck Capital offers two loan types: short-term loans and lines of credit. With the short-term loans, borrowers can apply for as much as $500,000 at a simple interest rate as low as 9% with an origination fee between 2.50% - 4.00% for a first loan, 1.25 to 3% for a second loan and 0 to 3% on a third loan. Terms range from three to 12 months.

Should you prefer a line of credit, you’ll have the option of borrowing up to $100,000 at an APR as low as 13.99%. There’s a $20 monthly maintenance fee and repayments are automatically deducted from your business bank account on a weekly basis. To qualify, you’ll need to have been in business at least one year with annual sales of $100,000. You’ll also need to be a majority owner with a personal credit score of 600 or higher. Once you’re approved, you can get your funds in as little as one business day.



on OnDeck’s secure website

National Funding

National Funding allows customers to apply by phone or online and receive a decision within minutes. Funding is then made available within 24 hours. The company offers both small business loans of $5,000 to $1,000,000 for those who wish to grow their businesses, as well as equipment financing and leasing of up to $150,000 for those who need new equipment to keep business running smoothly.

Merchant cash advances of up to $250,000 are also an option. This type of financing doesn’t require any collateral or have any hidden fees or costs. National Funding even approves merchant cash advances on the same day you apply. Although the company has an astounding 60 percent approval rate, you’ll still need to meet its qualifications. These include being in business for one year, providing three months of bank statements and showing annual sales of $100,000 or more.

National Funding


on National Funding’s secure website

Fora Financial

Fora Financial keeps things simple with a one-page application that only requires uploading a few bank statements. Approvals are made within 24 hours with funds being transferred just 72 hours after that. Borrowers can choose between a small business loan or the merchant cash advance, both of which are available in amounts up to $500,000.

As an added incentive to make additional payments on your loan, the company offers a prepayment discount of up to 10 cents on the dollar. Fora Financial also offers the following financial products to meet the needs of your company: businesses lines of credit, SBA loans, equipment loans, inventory loans and bridge financing.

Fora Financial


on Fora Financial’s secure website

The bottom line

If your business needs money fast, you’ll still want to take the time to research each lender and their available offers to get the best deal. Consider the length of time to funding, the APR and the daily, weekly or monthly repayment amount. If you can afford the loan, it might be exactly what you need to take your business to the next level.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alicia Bodine
Alicia Bodine |

Alicia Bodine is a writer at MagnifyMoney. You can email Alicia here


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Small Business

How Does a Business Loan Work? Here’s What to Know

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Small business loans

Most new businesses need an influx of funding to get going, and for many founders, using personal savings is not going to be enough. The modern landscape offers a range of financing options like venture capital from investors and crowdfunding. But when you need to fund a fledgling business and you want to keep total control, it’s time for a small business loan. Let’s take a look at a how business loan works.

Types of business loans

To apply for any of the following loan types, you’ll need to provide the following basics: your driver’s license, a voided business check, and bank statements. The descriptions will tell you what else you need to apply, as well as factors like minimum annual revenues and loan amount ranges.

Long-term loans

A term loan allows businesses to borrow funds for a specified term — usually one to five years — for uses like real estate or equipment. And it can be a significant amount, five figures up to $500,000. These are typically only an option for established businesses with very good credit and a large down payment. Long-term loans usually have the best rates, like 10% APR or less, but are the most difficult to get approved for. You’ll need to show a balance sheet, profit and loss statements, a credit score, and both business and personal tax returns.

Short-term loans

For businesses that need cash fast, these loans can provide it (from $2,500 to $250,000), but must be repaid within three to 18 months. They’re easy: very little paperwork, and even bad credit will work. However, the associated costs are higher than with long-term loans. There are times when short-term loans might make sense, like if you need extra funds to fill a big order and can then pay it off right away. You will have to supply the lender with proof of ownership, a credit score and personal tax returns.

Equipment financing

Also called heavy equipment financing, this type of financing is used when a business needs to make a major equipment purchase, such as for construction vehicles. To apply you will need your credit score, business tax returns and a quote for the equipment you wish to buy.

Invoice financing

Also called accounts receivable financing, this involves financing companies advancing cash with your outstanding invoices as collateral. This is another option that often costs more than traditional financing. When applying for invoice financing, you will need your credit score and those unpaid invoices.

SBA loans

If you don’t have luck getting a traditional business loan, options still abound in the form of Small Business Administration-guaranteed loans. The banks extend these loans because they’re less risky, as they are guaranteed by the SBA. Applicants will need to show a balance sheet, profit and loss statements, business tax returns, personal tax returns, a business plan and a business debt schedule.

Business lines of credit

A business line of credit works similar to the credit card model: it offers a business funds to borrow up to a certain amount, but they only pay interest on the amount that is borrowed. You will need to be in business a minimum of six months with a minimum of $25,000 in annual revenue to qualify. The loans are usually from $5,000 to $150,000. To apply, you’ll need to supply a balance sheet, profit and loss statements, business tax returns and personal tax returns.

Merchant cash advances

Proceed with great caution when it comes to merchant cash advances. The MCA is an unsecured offer of cash in exchange for either a percentage of future sales, or else you repay it with daily or weekly bank account debits. It’s available to companies that have been in business for at least five months, with more than $75,000 in annual revenue. You will need to supply your credit score, but it’s probably not going to be an issue, as scores of 400 and up are accepted, as well as business tax returns and credit card processing statements. The steep fees associated with this can be crippling to a small business — think triple-digit APRs, or paying $70,000 for a $50,000 MCA over three to 12 months. There are numerous downsides to the MCA, so be sure to do your research if you’re considering it, and to investigate all options open to your business.

How the business loan application process works

To ensure you’re asking to borrow the right amount, and to present the best case to your lender, you’re going to need to prepare some paperwork, sometimes including:

  • a business plan, which usually come in the form of traditional, more longer form plan, or lean startup, which may be only a page long
  • an expense sheet, where you show your startup costs including things like office space, insurance, employee salaries and inventory
  • five years’ worth of financial projections

Once these documents are gathered, the SBA recommends contacting multiple banks and credit unions so you can make an informed decision and get the best terms.

Austin Schlenker is an international and export sales strategy expert who started out in business at a young age, so he didn’t have a track record or significant credit history. What worked in his case was putting up securities to open a small business line of credit.

While his initial experience won’t necessarily mirror that of other small business owners, his overall takeaway can be widely applied: “Build a relationship [with your bank], go into a branch and introduce yourself and your business. Allow the bank to see the value in working with you.”

Consider the types of loans you will qualify for

Factors like your business’ creditworthiness, amount of time in business, and annual revenue are going to determine both the types of loans you will qualify for and the rates you are offered.

If you’re choosing an option with a factor rate, be sure you understand what it works out to in APR.

The bottom line

There are many choices for small businesses that need funds, both from traditional banks and online lenders to infuse funds to a small business. This means that there are many different ways to the question, “how does a business loan work?” Knowing the ins and outs of your options will help you narrow down those choices and apply only to the ones that are a good fit for your situation.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Colleen Kane
Colleen Kane |

Colleen Kane is a writer at MagnifyMoney. You can email Colleen here


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Small Business

Best Equipment Financing Companies: Where to Find Them in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

heavy equipment financing

You may have the best team in place to run your small business, but you won’t get far without the equipment you need to operate. Whether it’s office furniture, software or heavy machinery, these pieces can be essential to your success.

If you don’t have enough cash on hand to purchase equipment outright, you can turn to equipment financing to help with the transaction. Small business owners can find equipment financing options at their local bank and equipment financing companies, many of which operate online.

When shopping for equipment financing, LendingTree can be a useful starting point. You can compare leases and loans from several equipment financing companies to help you figure out which is best for you. (LendingTree is the parent company of MagnifyMoney.) Before you get started, we’ll help you understand why you might need equipment financing and what funding options are available to you.

What is equipment financing?

Whether buying something new or replacing an outdated piece of equipment, small business owners typically do not have money on hand to cover the purchase, said Michael Aversa, partner and head of the Private Business Services Group at advisory firm EisnerAmper. To finance equipment, you would need to obtain a lease or a loan from a traditional bank or an equipment finance company. No matter which one you choose, the equipment itself usually serves as collateral. If you fall behind on payments, the lender would take the equipment. With any type of business loan, collateral or a personal guarantee is typically required, reducing the risk to the lender.

Where can you find equipment financing?

Finance companies often specialize in certain types of equipment and they may be more willing to lend to you than a bank, said Mike Toglia, CEO and executive director of the National Equipment Finance Association. Financing companies usually have different eligibility criteria than banks and they’re often less strict.

“They’re willing to advance more money against the collateral because they’re more comfortable with the collateral,” Toglia said.

Financing through the equipment vendor. Most small business owners have the piece of equipment picked out before they go to their bank or a finance company to seek funding, Toglia said. The equipment vendor may offer a financing package, just like a car dealership would offer financing when you purchase a new car. However, you’re free to obtain financing from any institution or company of your choice, Toglia said.

“A small business owner should look around and see what else they can get,” Toglia said. “They should be shopping for expertise and competitive rates.”

Equipment loan vs. lease

Do you want to own a particular piece of equipment or would you be better off leasing it instead? Here’s how to understand the difference.

Equipment loan

A loan typically requires a down payment, usually 10 to 20% of the total cost of the equipment. You would finance the remaining balance and pay your debt with interest for a specific period of time.

Because equipment is used as collateral, equipment loans tend to have relatively low interest rates and manageable payments. Terms typically range from six months to 10 years, making a loan a good option if you will be using your equipment for a long time. But if the equipment quickly becomes obsolete or needs to be replaced, you would still have to pay the loan in full.

To qualify for an equipment loan, you need to have good personal credit. In addition to a down payment, you may have to pay an origination fee, application fee or appraisal fee, depending on your loan agreement. The fees would depend on the loan offering from a bank or online lender.

Equipment lease

An equipment lease from a financing company may be a good option if you need assets that don’t have a long shelf life. An equipment lease typically does not require a down payment, plus monthly payments are usually lower than those of an equipment loan. You may have the option to purchase your equipment at the end of the lease term for residual value or trade out equipment for a newer version in the middle of your contract.

The interest rate would be built into the total lease amount, and high rates tend to make leases more expensive overall than term loans, Aversa said. However, you wouldn’t have to meet high credit requirements to qualify for a lease like you would if you were seeking a loan and you wouldn’t be stuck with a potentially obsolete piece of equipment.

“There are a lot of companies that don’t have bank financing and the lease is the only way to go because their credit isn’t good enough,” Aversa said.

Two types of equipment leases

One of the main differences between the leases is how you record them in your books, Aversa said. A capital lease would appear as an asset on your balance sheet, while an operating lease would not appear on your balance sheet.

  1. Operating lease: These are generally used for short-term leasing. They don’t involve transfer of ownership at the end of the lease term, making them similar to renting, which is why they would be treated as an operating expense, not a loan, on your balance sheet.
  2. Capital leases: These are typically used to lease longer-term assets, and ownership can be transferred to the lessee at the end of the term. A capital lease could also present the option for the lessee to purchase the equipment at the end of the term for a discounted price. Because a capital lease involves the transfer of ownership, it is considered a loan on your balance sheet and you would have to record interest expenses.

However, rules from the Financial Accounting Standards Board that go into effect in 2020 will require all leases to be recorded on balance sheets. The change could lessen the appeal of equipment leases compared with loans, Aversa said. “That could have a dramatic impact on a lease versus buy scenario.”

Best equipment financing companies

Celtic Commercial Finance

Celtic Commercial Finance offers equipment leases ranging from $100,000 to $10,000,000. Leases spanning 24 to 120 months are available to finance a variety of equipment, including machinery, software and computers. Celtic Commercial Finance issues operating leases and capital leases, as well as several specialized leases and purchase/leasebacks. Celtic works with businesses that have $20 million to $250 million in annual revenue and at least three years in business. No down payment is required but Celtic does ask for one month’s payment upfront, as well as a documentation fee. You can submit an application online.

Celtic Commercial Finance


on Celtic Commercial Finance’s secure website

Crest Capital

Crest Capital offers several equipment loans and leases. Many Crest Capital leases come with purchase options to give you full ownership of your equipment at the end of the lease term. Crest Capital also offers flexible payment plans. Crest Capital provides 100% financing for transactions between $5,000 and $500,000. Applying for a Crest Capital loan or lease won’t impact your personal credit and you could be approved in a matter of hours.

Crest Capital


on Crest Capital’s secure website

National Funding

National Funding offers up to $150,000 in equipment leasing for new and pre-owned assets. National Funding requires just six months in business and a personal credit score of 620, as well as a quote from your equipment vendor. Businesses owners could obtain a lease for a range of items, from construction equipment, fitness equipment, office equipment and commercial vehicles. For customers who pay off their balance early, National Funding takes 6% off their total remaining balance.

National Funding


on National Funding’s secure website

Reliant Funding

Reliant Funding helps business owners lease new or used equipment, including software, work vehicles, office furniture and other fixtures. Borrowers can apply online and could be approved within one month. After approval, it takes three to five days to receive funding. Reliant Funding considers the type of equipment and your credit rating when determining the cost of your lease. Reliant Funding finances between $5,000 and $250,000 and works with businesses in a range of industries, including construction, restaurants, health care and transportation.

Reliant Funding


on Reliant Funding’s secure website

CIT Equipment Finance

CIT Equipment Finance funds small-ticket transactions up to $500,000, as well as larger deals ranging from $3 million to $100,000 million. CIT offers equipment financing for small businesses, equipment manufacturers, franchisers and commercial entities. CIT’s core markets are technology, office imaging, health care, industrial and franchise finance. The company’s loan programs include capital leases, operating leases and loans, and are tailored to the specific borrower and their industry.

CIT Bank


on CIT Bank’s secure website

What you need to apply

When shopping for equipment financing, it’s important to do your due diligence to make sure you’re choosing a trustworthy finance company if you’re not borrowing from a bank. After you submit an application, the company will also make sure you can be trusted as a borrower during the underwriting process, Aversa said.

“Depending on how your company has done and is doing, it can a be a very straightforward or very difficult,” he said.

In addition to your application, the finance company will likely want to see a few documents:

  • Business license, Employer Identification Number or statement of incorporation to prove ownership
  • Profit and loss statements
  • Recent tax returns
  • Business plan
  • Personal or business credit report

Business owners should think about the future when applying for equipment financing, Toglia said. You’ll likely need additional equipment in the future, and if you maintain a good relationship with the finance company, you would have a better chance of being approved again next time, he said.

“Look for a finance company that can help with your equipment needs today and tomorrow,” Toglia said.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at


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Small Business

Understanding the Income Statement

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

What is an income statement?

Also called a profit and loss statement (P&L), an income statement is a picture of your business’ revenues and expenses — and the resulting net profit and loss — over a certain period of time (usually a year).

The income statement is one of the three essential financial documents — along with a balance sheet and cash flow statement — that a public company must report on an annual basis. The income statement is also the only financial statement that the IRS requires, which the taxing agency uses to assess taxes on profits earned.

What is an income statement?

There is no standard format for an income statement, but most will include rows for items like revenue, tax expenses, profit or loss, and comprehensive income. An income statement is primarily meant to inform the reader about the ins and outs of the company’s financials, so the format you choose should clearly identify your expenses. You should have a distinct row for every separate cost, so this chart could get large if you are splitting up your expenses into many categories. You can categorize expenses by type, function or by some other system.

Income statements are useful in many ways. They can help you easily visualize your company’s year-over-year (YOY) and quarter-over-quarter (QOQ) performance. Two or three years of data is often included to enable comparison. Income statements can also be used to calculate various financial ratios, such as:

  • Return on equity (ROE)
  • Return on assets (ROA)
  • Gross profit
  • Operating profit
  • Earnings before interest and taxes (EBIT)
  • Earnings before interest taxes and amortization (EBITDA)

An income statement helps you understand which way your business is headed, which is useful for informed and strategic course correction.

Income statement vs. balance sheet: what’s the difference?

The income statement is the only financial document that provides an overview of your company’s net profit and loss over a period of time. A balance sheet, meanwhile, is a snapshot of a company’s assets, liabilities, and shareholders’ equity at a particular point in time. It basically tells you what your company owns and what your company owes, including the amount of money that shareholders have invested in your company.

While an income statement allows you to understand the dynamics of the money flowing into and out of your business, a balance sheet gives you information to compute rates of return and evaluate your capital structure, which is the manner in which your company is financing its operations and growth.

An income statement is useful because it illustrates a company’s financial trajectory. A balance sheet, on the other hand, is useful because it shows how effectively a company is managing its resources.

Common terms to know

There are a variety of confusing terms you may find on an income statement. Here are some common terms to know:

  • Revenue: Also called sales on an income statement, revenue is the amount of money the company brings in during a certain period or time. This figure incorporates discounts and returns, and indicates gross income from which costs are deducted to figure net income.
  • Expense: An expense is anything a company spends money on in the course of doing business. Business expenses cover a broad range of categories and commonly include things like payments to suppliers, employee pay, subscriptions for business software, leases on facilities, and equipment depreciation. The IRS allows companies to claim some of these expenses as deductions on tax returns, but maintains strict rules as to which expenses quality for tax relief.
  • Net profit/loss: Net profit or net loss is a summation of a company’s financial situation in a given period of time. Expenses and debt are deducted from revenue for a certain period, which determines whether a company brought in more money than it spent (with debt included) or the other way around.
  • Gross profit/loss: Gross profit is the amount of money a company makes in a certain time period after subtracting the amount spent in that same period on making and selling its products (cost of goods sold, or COGS), or on providing its services. Gross loss is the amount of money a company spends to operate in a certain time period. For example, in a given month, if a company makes $10,000 in sales and spends a total of $2,500 on all of its expenses, it has a gross profit of $7,500 and a gross loss of $2,500.
  • Depreciation: Depreciation is the concept that a tangible asset like a piece of equipment loses in value over time. Properly deducting a tangible asset from taxes requires accounting methods that takes into account depreciation over the asset’s lifetime.
  • Amortization: Amortization refers to paying off debt via a fixed schedule of regular installments over a set period. For a business loan with a set interest rate, amortization joins the principal and interest into one total figure that can be payed off over a predetermined number of months or years.
  • Operating income/expenses: Operating income is the money a company earned in a given period due to regular operations, less all operating expenses for that period. Operating expenses are all of the things a company must pay to maintain operations, such as wages, rent payments, utilities, depreciation, supplies, and COGS.
  • Non-operating income/expenses: Non-operating income is business income that comes from sources other than day-to-day operations. Non-operating income sources include things like dividends, investments, foreign exchange and asset write-downs. Similarly, non-operating expenses are costs that don’t arise from a business’s core activities, such as interest, derivatives, settlements, obsolete inventory, and restructuring.

4 free income statement templates for business owners

There is no single correct format for an income statement, so each business owner can choose one that best fits their needs. However, it can be much easier to start with a template that will allow you to plug in your information and create an attractive statement with ease. Here are four free income statement templates:

  • Microsoft Office Template 1: This attractive 12-month Excel template incorporates separate tabs for revenue and expenses, as well as a line graph for easy visualization. It also gives you the option to edit in your browser window.
  • Microsoft Office Template 2: A bit simpler than Template 1, this Excel template allows you to set the time period and gives you blank boxes in which to insert your data.
  • QuickBooks Template: This Excel template is entirely customizable regarding time period and types of revenues and expenses, plus it comes with a completed example.
  • SBA Template: This simple Excel template is a one-page statement for a year-long period, with suggested expense categories included.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Katherine Gustafson |

Katherine Gustafson is a writer at MagnifyMoney. You can email Katherine here


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Small Business

10 Must-Read Email Newsletters for Business Professionals

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.


When business is your life, you’ve got to keep up with the changes. That can be challenging, to say the least, given the fast pace of news and the demands of your career. Emailed newsletters can help you stay on top of the biggest and latest business news.

Going through your email is anything but a drag when you’re subscribed to any of the following must-read business newsletters. They will help you quickly catch up on the news you need to know about finance, technology, business, politics, culture and the economy. And, you might have some fun reading them.

The Hustle

The Hustle is a daily newsletter covering the latest news in business, technology and culture. The briefing conveys what you need to know for the day in clear, relatable and often hilarious prose. On weekdays, The Hustle is packed with information about and analysis of three to five business-related topics you can bring up at the watercooler, and it ends with a Spotify link to the song of the day. The weekend edition takes a deep dive into a single news topic or entrepreneurial story.

Morning Brew

Morning Brew is an easy-to-read daily briefing designed to help young professionals begin the day informed about the most important business news. The lighthearted newsletter recaps the previous day’s stock market performance before summarizing a handful of the day’s most important business and financial news. Each email ends with a brain teaser to help prime you for the workday. Each Monday, Morning Brew reminds readers about important events coming up during the week, like U.S. economic reports, national holidays and must-read company earnings. Pay attention — there’s a quiz on the week’s news every Friday.

Wall Street Breakfast by Seeking Alpha

Wall Street Breakfast is a Seeking Alpha’s daily, rapid-fire summary of important business news. The newsletter summarizes what’s happening in the economy and touches on everything from the financial markets to how governments and other factors contribute to the international financial climate. Wall Street Breakfast is a newsletter investment bankers and fund managers would appreciate. It’s a quick and easy read, but if you’re on the go and can’t look at your phone for a solid five minutes or less, the editors include a link to the daily Wall Street Breakfast podcast, so that you can listen instead.

Market Snacks

Market Snacks is a daily briefing that summarizes Wall Street’s biggest news into fun, snackable content you can digest in about four minutes. Market Snacks gives an overview of the previous day’s market performance, then provides a clear and concise analysis of about four business-related topics. The editors are careful to include a link to the day’s 15-minute Market Snacks podcast, too. Each briefing includes a subscriber-submitted fun fact and concludes with a few bulleted reminders of important events and earnings to watch for throughout the week.

The Plug

The Plug tells the stories of undercovered tech entrepreneurs of color and their companies. The daily newsletter provides coverage of founders and innovators of color from all over the globe who you’re not likely to see mentioned elsewhere. According to its editor, the newsletter aims to “set a standard for the expansion and depth of diverse and inclusive entrepreneurship, start-up environments and technological progress.” If you’re tired of hearing about the same few companies over and over, The Plug may be a welcome change of pace.

She Spends

She Spends is a weekly summary of current events related to women and finance, plus business and personal finance tips. Its mission is to increase financial literacy among women and to inspire more women to invest and shoot for company leadership positions. The Friday morning newsletter offers spotlights on impactful women in business, anonymous money diaries contributed by subscribers and tips for making your money work for you. It’s great material for end-of-week conversations at the office or catching up over brunch with friends.

Benedict’s Newsletter

Benedict Evans, a partner of Silicon Valley venture capital firm Andreessen Horowitz, sends a weekly (mostly) newsletter commenting on the tech news he found interesting during the week. Aside from some industry jargon sprinkled throughout, Benedict’s newsletter is a simple, straightforward and compelling read for those interested in the world’s largest tech companies. Evans follows his analysis with links to a number of interesting reads, tech industry commentary, news about cool new tech stuff and occasionally a statistical piece or two.


Broadsheet is a daily newsletter from Fortune about “the world’s most powerful women.” The curated newsletter shares its analysis of notable stories about women in business, government and technology from all over the world. The articles it shares address topics like the glass ceiling, the #MeToo movement, government policies, deals and acquisitions of women-led companies and business news involving women in company leadership, among others.

Lean Luxe

If you’re curious about upstart luxury brands like Cuyana, Ledbury and MM. LaFleur, Lean Luxe might be the newsletter for you. The newsletter aims to give readers an insight into the affairs of key players in the luxury sector and how the brands are affecting consumer behavior around the globe. Each Lean Luxe briefing — delivered two to three times a week — kicks off with a brief analysis of need-to-know industry news. It then dives into a shorter analysis of about four to five curated articles, then ends each issue with a link to the Lean Luxe Office Radio playlist, curated by a different luxury brand founder each week.


Femstreet delivers a weekly roundup of news concerning women in technology, entrepreneurship and venture capital. The Monday morning newsletter emphasizes on diversity in business and touches on topics like news and insight about women-led start-ups, engineering, technology research and others. Its curators give brief commentary on each piece and provide a link for you to explore further. Femstreet’s Built by Women interview series on its blog shares successes, secrets and stories of failure from women founders and their businesses.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at


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Small Business

How to Use a Working Capital Loan for Your Business

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.


It takes money to make money, but sometimes it’s difficult to obtain the capital you need to run a profitable business.

Despite business owners’ best efforts to plan monthly expenses around anticipated revenue, unexpected costs can throw off the entire plan. For those struggling to fund their daily operations, working capital loans could provide a quick solution.

What is working capital?

Working capital is the money available to fund a business’ day-to-day operations. To determine working capital, business owners subtract their current liabilities from their current assets. The formula defines whether a company has enough cash on hand to pay its immediate expenses.

A business owner’s personal savings or a loan could supply working capital, which fills the gap between expenses and the amount of income the business is generating, Joel Youngs, regional director of the Eastern Iowa Small Business Development Center, told MagnifyMoney.

“There’s an ebb and flow in the expenses a business owner has to pay in a given month versus the money that’s coming in,” Youngs said. “When life throws a curve at you, you access that money to pay the bills.”

Business owners increasingly need help making ends meet on a short-term basis. Working capital was the main reason 66 percent of U.S. business owners sought financing in the second quarter of 2017, up from 54 percent during the same period in 2016.

“If you’re generating enough cash internally where you don’t have to borrow money, that’s great. That’s the ideal situation,” Leonard Briskman, team leader of advisory services for SCORE’s Washington, D.C., chapter, told MagnifyMoney. “But I would think most businesses would have to borrow money.”

Working capital can be both positive and negative. Positive working capital means a business has enough funds to pay short-term bills and finance their growth. Negative working capital shows a business isn’t using its assets effectively and may not be able to cover unexpected liabilities. This could lead to additional borrowing, late payments and a lower credit rating.

Understanding working capital loans

A working capital loan could fall under the broad umbrella of term loans — lump-sum loans paid back over a fixed amount of time (the term), generally with fixed interest rates and fixed payments. A working capital loan could also come in the form of a line of credit or a merchant cash advance, which both allow you to access capital quickly and pay the lender back at a later time.


  • A working capital loan could be used to cover any business expense for an owner in any industry. You could receive the money in as little as three weeks if your financial details are in order, Youngs said.


  • While working capital loans could quickly cover unexpected expenses, the loans could also get too big, too fast, Youngs said. If you took out a loan to cover six months’ of additional work and that work turned out to last seven or eight months, you would have to borrow more money on a short-term basis. That means you would go into more debt, which could lead to higher interest rates and, ultimately, profit loss.

When to consider a working capital loan

You should apply for a working capital loan long before you plan to use it, Youngs said. You should get an early start on the application with a bank or other loan provider, as it could be a few weeks to several months before you have access to the money.

The following situations indicate you may soon need a working capital loan:

An increase in hiring. If you’ve hired more employees to expand the business, a working capital loan could cover those employees’ salaries until the business becomes profitable enough to sustain the new paychecks.

An upcoming slow season. Some businesses perform better during certain months of the year. A working capital loan could cover expenses to keep the doors open until the busy season rolls around again.

An increase in orders. Oftentimes customers will place orders for products or services before paying, creating a lag between expenses and income. For example, a carpenter could be contracted to build a room extension in a house but would not receive a check until the work is completed in two or three months. A working capital loan would help the carpenter bridge the gap between starting the work and receiving payment from the customer.

Is working capital financing right for you?

Business owners who experience frequent ups and downs in revenue would benefit most from working capital loans, Youngs said. Any business owner could use this type of financing to hold them over until payday, and it isn’t limited to a specific industry or type of business.

“The more time your business has between getting the work done and getting it paid for, the more you should consider a working capital loan,” he said.

If you have the option to tap into personal money to support working capital, then you could avoid getting into debt with a loan, Youngs said.

Business owners should avoid a working capital loan if they’re not generating enough money to stick to a repayment schedule, Briskman said. Typically, a lender would be able to tell if you’re not equipped to handle debt and would not offer financing.

“After a while, if the company starts falling back on the payments, it creates all types of problems,” Briskman said.

Shopping for working capital financing

Business owners can apply for working capital financing from traditional banks and non-bank commercial lenders, many of which operate online. These institutions tend to lend to people who have an established business and a good credit rating, Briskman said. There are several different forms of working capital financing for owners looking for an infusion:

Short-term loans

Short-term business loans allow you to quickly borrow a small amount of money. The funding could be available in as little as 24 hours. However, you must pay off the debt within three to 36 months, and some loans carry a high APR.

Short-term loans could be a good solution for a temporary cash bind, like covering seasonal costs or an expensive project, Briskman said. He recommends keeping these loans within a 12-month repayment period to maintain low debt. Shorter loans do come with more frequent bills, and you could be required to make a daily payment. Short-term loans tend to be capped at $500,000, so you may have to turn to a different form of financing if you need more than that.

Business lines of credit

Rather than borrowing a large amount all at once, you can access money as you need it with a business line of credit. You only pay interest on the amount you borrowed, but interest rates are generally higher for lines of credit than for short-terms loans.

This type of financing would be best for covering an immediate, unexpected expense, Briskman said, and you only have to borrow the exact amount you need. Like a short-term loan, a line of credit should be paid back within 12 months because of high interest rates, he said. Once you’ve paid off the amount you withdrew, the full loan would be available again for future expenses.

Merchant cash advances

A merchant cash advance provides capital in exchange for a percentage of your future debit or credit card payments. This type of lending is available from non-bank lenders, many of which are online, and the repayment schedule is based on your business’ revenue trend. The more card transactions you process, the faster you pay off the debt. This option could be expensive, as you could pay back between 20 percent and 40 percent more than your original advance.

Merchant cash advances are commonly used to finance new equipment purchases, building expansions, remodels and seasonal merchandise. Businesses are required to make a minimum amount in or certain percentage of card transactions each month to secure a merchant cash advance. Repayments are integrated into your business’ credit card processing system, so the lender gets a cut of each transaction before you see any of the money. Some lenders may require you to move to an approved processing system before issuing the advance.

Unlike loans, merchant cash advances are practically unregulated and most are issued without disclosing APR or expected monthly payments. Lenders often target business owners with poor credit who are unlikely to be approved for a loan, but high interest rates and large, frequent repayments make merchant cash advances a risky choice.

SBA loans

An SBA loan is provided through a bank that is backed by the Small Business Administration. These loans typically have competitive terms and require low down payments. But SBA loans have strict eligibility requirements and they don’t allow you to borrow from another lender once you’ve been approved for an SBA loan. That means if the SBA doesn’t loan you as much as you’d hoped, you cannot go to another lender for additional funds.

Banks could charge between 7 percent and 9 percent in interest on SBA loans, Briskman said. SBA loans require a large amount of financial documentation and detailed business projections, and businesses have a better chance of securing this type of financing the longer they’ve been in existence, he said.

Applying for a working capital loan

When reviewing applications for any type of business loan, Youngs said banks look at five factors — the business’ cash flow, creditworthiness, collateral, capacity to repay the loan and the character of the owner. Lenders prefer to work with people who are trustworthy and have enough cash flow to cover the debt.

Applying for a working capital loan could take weeks or months, depending if the business owner has their financial documents ready to go. Small business loan providers need profit and loss statements, current cash flow for established businesses or projected cash flow for new businesses, and a balance sheet.

The application requirements vary by type of financing you’re looking for, as well.

Short-term loans

A traditional bank or a non-bank commercial lender would look at your credit score and cash flow projections before approving you for a short-term loan. Lenders usually prefer borrowers with an average credit score and consistent monthly revenue. They would also expect to review your business plan, balance sheet, tax returns, active accounts and proof of licenses related to your industry. If your documents are in order, you could be approved in as little as one day.

Business lines of credit

Lenders would check your personal credit score, generally preferring a score of 600 or higher. They would also take into consideration how long you’ve been in business, requiring anywhere from six months to two years of operation. Lenders’ revenue requirements would depend on how much money you’re looking to borrow through a business line of credit, but they would also look into your accounts receivables to determine what physical assets your business possesses. Like a short-term loan, you could receive a business line of credit at either a traditional bank or non-bank lender.

Merchant cash advances

You could also find a merchant cash advance through a non-bank lender. You would be required to provide several months’ worth of credit card payment processing data, as well as bank statements, your Social Security number and business tax ID. The lender may require you to switch to a new credit card processor before approving the advance. Once you’re approved, which could be in as little as 24 hours, the payments could start as soon as the next day.

SBA loans

The SBA backs hundreds of banks across the country. Check out this list of the most-active lenders of 7(a) loans, the SBA’s primary loan for small businesses, to find a bank in your area. To apply for a 7(a) loan, you would need to follow a multi-item checklist, which includes submitting business financial statements, the business’ existing debt schedule and documents supporting collateral, such as real estate appraisals or lease agreements. The application process for an SBA loan could take between two and five months.

Businesses become less risky to lenders the longer they’ve been around, so older businesses would be able to apply for larger loans to cover working capital expenses.

But whatever the reason behind your need for working capital or the amount you’re looking for, the best strategy to quickly obtain capital is maintaining a reputation as a trustworthy business owner, according to Youngs. “Not all lenders may want to approve your loan,” he said. “It’s important to get a good banking relationship with your lender so when you come up with some quirky idea they don’t think you’re nuts.”

How to improve your chances of getting a working capital loan

It could take months or years for new businesses to generate positive cash flow, Briskman said. These startups are the most likely to need working capital loans, but they have the lowest likelihood of being approved for traditional financing.

The majority of people starting a business have to rely on their own funds, money from friends and family or alternative solutions like crowdfunding to get the business going, Briskman said. They’ll have a better chance of being approved for working capital financing once they can show the business has made progress.

“They don’t necessarily have to be profitable, but they have to be close to profitable and showing that every month is better than the previous month,” Briskman said.

Financial institutions may also look for a business plan from new entrepreneurs showing how they plan to grow the business and make money in the future, as well as how much they expect operations to cost.

“They want to see projections,” Briskman said. “A business plan really gets you to focus on where you see your business going.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
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Small Business

18 Options for Small Business Loans in 2018

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Historically, business lending involved a massive time commitment, high costs and a high risk that a business wouldn’t get all the funding it needs. Online lenders have completely changed the business lending landscape, making it possible to get funding in as little as a few days in some cases. That being said, borrowing from one of these newer online lenders means working with a company you may not be familiar with, which may pose some challenges.

If you’re a small business owner looking for a loan, this guide can help you decide which type of loan best suits your needs. It will also help you compare some of the best lenders and small business loan marketplaces, so you can apply with confidence.

5 ways to use a business loan

Business financing tends to be more complex than consumer finance, so it pays to understand how business lending works.

Businesses typically look for financing during start-up or expansion phases, but businesses may need financing for more mundane reasons. These are a few common reasons businesses seek financing.

Starting a business: More than half of all start-ups use personal savings to start their business, but in many cases personal savings alone aren’t enough to pay for start-up costs. That means many companies need to consider taking out a start-up loan (or finding other means of finance). Antara Dutta, a volunteer mentor and former president of the Delaware chapter of SCORE (the nation’s largest network of volunteer expert business mentors), explained, “Start-up companies need enough money to cover at least twelve months of expenses. It usually takes at least twelve months to get to break even, and we usually say about 18 months to get to the point of earning a profit.”

Managing cash flow: Seasonal businesses may need to seek financing to pay for inventory and materials to complete a project or to stock a store. Other businesses experience a gap between when they pay their bills and when customers pay them. Business owners who cannot cover cash flow needs from personal or business savings may require financing. Invoice factoring or a line of credit may provide the right financing solution for businesses that need to pay bills.

Expanding operations: Businesses looking to expand often need a loan to cover certain costs. Although profitable businesses should consider using business savings, a loan can help a business achieve faster growth. Dutta recommended, “When you’re expanding operations you may be in a good position to refinance any existing debts. Combining debts can allow you to get better terms on all your debts.”

Refinance existing debt: A business that has debt may be able to refinance to cut back on interest or reduce monthly payments. This will strengthen their financial position, and allow for more growth, more profitability or better cash flow.

What to know before you borrow

When it comes to finding the right loan for your business, you’ll have to weigh multiple priorities to find the right loan for your business. These are a few areas business owners should consider when applying for a loan:

Know exactly how much you need to borrow: Whether you’re starting a new business or you’re expanding current operations, you need to explain how much money your business needs, how the business will use the proceeds and how the business will pay back the loan.

Understand the cost of capital: The cost of capital is how much it costs to borrow money. The most common measure for this is APR, although you may see other terms being used. Business owners may struggle to maintain profitability when the cost of capital is too high.

Ask about repayment terms: Unlike most consumer loans, business loans can have a variety of repayment schedules. You may have to make daily, weekly or monthly payments. Be sure you understand how the repayment schedule will affect your cash flow and ability to make timely payments during the repayment period.

Collateral requirements: Business loans may require you to put up certain assets as collateral against the loan. Collateral reduces the lender’s risk because the lender can automatically seize the collateral to recoup their losses. A bank’s collateral requirements aren’t limited to just business assets. Oftentimes, business owners have to use personal assets (like home equity) to guarantee the loan.

“Banks need to know that you’re going to pay them back,” Dutta told MagnifyMoney. “So they might need some collateral, especially for start-ups or high-risk businesses. A lot of times, you’ll have to take out a second mortgage to cover your collateral.”

How much funding you’ll receive: Most start-up companies (69%) who apply for a loan experience a financing shortfall, according to a 2017 small business survey by the Federal Reserve Board of New York. This means the business is approved for a smaller loan than what the company needed. When applying for a loan, it’s important to understand that you may struggle to get enough financing.

How long it will take to get the funds: According to one Harvard Business School working paper, time to funding for business loans ranged from an average of less than five days for short-term lines of credit to more than 45 days for SBA-guaranteed loans. Most online lenders focus on high speed lending, but business owners may have to make sacrifices in other areas (such as cost or repayment terms) to find fast underwriting.

Are pricing and terms transparent? Small business owners often have a tough time comparing prices and payback terms on products from nontraditional (online) lenders. To be sure you’re getting a fair deal, look for clear pricing and terms, including an estimated monthly payment, an APR calculation and whether you face prepayment penalties. If a lender has adopted the SMART Box pricing approach, you can find all this information in your schedule of fees.

18 options for online small business lenders

LendingTree is an online marketplace for business loans. It has one of the largest networks of lenders in the U.S. Business owners can submit one simple form for business financing, and LendingTree will match the owner with real offers from several lenders. This gives business owners the power to pick the best deal for their business.

  • Financing options include: Term loans, SBA loans, working capital loans, equipment financing, business lines of credit, accounts receivable financing and business credit cards.

*LendingTree is MagnifyMoney’s parent company.

National Funding
National Funding is a non-traditional lender that’s been in business since 1999. The company specializes in lending smaller dollar loans (less than $100,000) to businesses that are underserved by banks. National Funding often takes less than a day to underwrite loans. Loans from National Funding are fixed-interest loans, but the company offers discounts of up to 7% to customers that pay off their loans early.

  • Financing options: Short-term loans, equipment financing, merchant cash advances
  • Short-term loans:
    • Four to 24 months
    • daily or weekly payments
    • $5,000-$500,000
  • Equipment financing:
    • Two to five years
    • Monthly payments
    • Up to $150,000
  • Funding in under 24 hours

RapidAdvance is an alternative business lender that’s been issuing loans for more than a decade. The company has an A+ rating with the Better Business Bureau, and most customers appreciate the company’s quick and thorough customer service. RapidAdvance helps business owners get funding fast, but its loans tend to carry very high-interest rates.

  • Financing options: Short-term loans, unsecured lines of credit
  • Must be in business two years, with at least $5,000 per month in revenue
  • $5,000-$500,000 (lines of credit up to $500,000)
  • Loan terms up to 18 months
  • Interest rates starting from 11.00%` APR (fixed simple interest rates)
  • Funding in three days or less

OnDeck is an online business lender and a leader in transparent pricing. It is a member of the Innovative Lending Platform Association, which is an industry coalition that has adopted the SMART Box™ to increase transparency in pricing. OnDeck offers both term loans and lines of credit. Most OnDeck customers will have fair or better personal credit scores (above 600 FICO scores).

  • Financing options: Short-term loans, unsecured Business lines of credit
  • Short-term loans:
    • Three to 12 months
    • Fixed simple interest (you pay all the interest, even if you pay off the loan early)
    • Daily or weekly payments
  • Longer term loans
    • 15 to 36 months
    • Compounding interest rate (you pay less when you pay off the loan early)
    • Daily or weekly payments
  • Lines of credit:
    • Up to $100,000
    • Fixed weekly payments
    • Only pay interest on what you draw
  • Funding in under 24 hours

Started in 2010, Credibly (originally RetailCapital) is a small business lender with a focus on using technology and customer service to make business underwriting easier and better. Credibly focuses on short-term lending, and it differentiates itself by having reasonable interest rates (9.99%-36%*) on 18- and 24-month loans.

  • Financing options: Working capital loans and “business expansion loans” (short-term loans with weekly repayment options)
  • Working capital loans
    • Six to 17 months
    • $5,000-$250,000
    • Interest expressed as interest rates (not expressed as an APR*)
    • Daily repayments
  • Business expansion loans
    • 18 or 24 months
    • $5,000-$250,000
    • 9.99%-36% annualized interest rate.
    • Interest rates set as a factor fee. Paying off the loan early will not reduce interest payments.
    • Weekly repayments
  • Funding in 48 hours on average

Finance Factory
The Finance Factory is a one-stop shop for all things related to business financing. It is an online lending marketplace that matches small business lenders to small business borrowers. Because it is a network, it offers a huge range of business loan products including start-up loans, SBA loans, lines of credit, unsecured business loans and more. Some of the products have very low-interest rate loans (however, the underwriting times aren’t as fast as other lenders).

  • Financing options: Start-up funding, SBA loans, business express loans, revenue-based loans, equipment financing, franchise financing
  • Most loans range from $5,000-$500,000 (revenue-based advances from $10,000 to $1 million)
  • Interest rates vary by product from 0%+ on start-up loans, to 6%-8% SBA loans and other rates based on credit and business history
  • Up to 25 years
  • Funding time varies based on loan type. Some loans can be funded in less than 48 hours, but other loans, like SBA loans, may take a month or two.

Seek Capital
Seek Business Capital is a business lending broker that helps business owners navigate the complex business funding world. Seek Capital will use information that you provide to create a funding estimate which is a range of funding amounts, rates, and payback terms that a business owner can expect to procure. Business owners who are happy with the estimate can apply for loans, and Seek Capital will have the loans funded in one to three business weeks. Seek Capital does charge broker fees, so businesses should be careful to compare Seek’s offers and fees with other competitors.

  • Unsecured business loans
  • $5,000-$500,000
  • Same-day loan estimates, three weeks to funding

The Business Backer
Despite major innovations in the world of online business lending, The Business Backer believes that financing is still all about relationships. To help businesses qualify for better interest rates, The Business Backer gives business owners the opportunity to share the story of their business and the circumstances leading them to apply for a loan.

The Business Backer funds some of its own loans, but they also have a network of lending partners. The network means that borrowers can use a single application to apply for multiple types of financing.

  • Financing options include: SBA loans, business line of credit, long-term loans, short-term loans, equipment financing, commercial real estate loans, start-up loans
  • Start-up loans
    • Up to $150,000
    • 8%-20% APR
  • Short-term loans
    • Up to $200,000
    • 14%-51% Annualized Interest Rate
    • Four to 18 months
    • Daily, weekly or monthly payback
    • Fixed interest with early payment discounts available
  • Business line of credit
    • $5,000-$150,000
    • 1- to 3-year terms
    • 18%+ interest rate
  • Funding in as little as 48 hours (though this can vary by loan type)

LoanMe is a business lender that specializes in lending to businesses that don’t qualify for loans from banks, and businesses with urgent cash needs. Interest rates on loans from LoanMe are higher than those from traditional banks, but terms range from two to ten years. Also, unlike many other lenders, LoanMe uses traditional interest formulas. That means the faster you pay off the loan, the less interest you’ll pay.

  • Funding options: Term loans
  • $3,500 – $250,000
  • Loans from 6 to 120 months with monthly repayments
  • Interest rates from 19.37% – 168.00%
  • Same-day funding available

Elevation Capital
Elevation Capital is a lender that offers alternative loan products (especially unsecured short-term loans) to business with as little as three months of revenue history. Elevation’s unique underwriting style means that business owners with poor credit may be able to qualify for a loan.

  • Financing options: Not available
  • Payback terms: Not available
  • Interest Terms: Not available
  • Up to $500,000 in loans
  • Funding in as little as 24 hours.

Reliant Funding
Reliant Funding was founded in 2008, in the midst of the financial crisis. It boasts of over $1 billion in lending to small businesses, and an A+ rating with the Better Business Bureau. Reliant focuses on speed of funding, and underwrites using current business performance rather than personal or business credit history.

  • Term loans ranging from six to 18 months
  • Loans up to $250,000
  • Fixed simple interest rates- (you’ll pay the same amount of interest, no matter how quickly you pay off the loan)
  • Daily payment schedules
  • Same day loan approvals and funding

smartbiz is an online marketplace for SBA-guaranteed loans. SBA-guaranteed loans are known for slow turnaround times (with an average of 45 days to funding), but SmartBiz streamlines the process. Their computer algorithm can help determine whether you’re SBA loan-eligible before you complete the complex application. Businesses that qualify can complete their application through the SmartBiz website and may receive funding within seven days of completing their loan application.

  • Funding options: Commercial real estate loans, SBA-guaranteed working capital loans
  • Commercial real estate loans
    • $500,000 – $350,000
    • Terms up to 25 years
    • Interest rates ranging from 6.75%–9.99%
  • Debt refinance and working capital loans
    • $30,000 to $350,000
    • Terms up to 60 months
    • Interest rates ranging from 6.75% – 9.99%
  • Funding as fast as seven days after application is complete (but it may take longer)

Funding Circle
FundingCircle is one of the nation’s first peer-to-peer (P2P) business lending companies. It specializes in low interest-rate term loans for established businesses. Applications for the loans can take as little as 10 minutes if you have all the required financial documentation ready. Funding Circle is a signatory of the Small Business Borrowers’ Bill of Rights which means that business owners can expect clear and transparent terms from Funding Circle.

  • Funding options: Term business loans
  • Loans from $25,000 – $500,000
  • Terms ranging from 6 to 60 months
  • Interest rates from 4.99%–27.79%
  • No prepayment penalties
  • Funding in five days or less

Fora Financial
If your business grosses at least $12,000 per month, and you need cash fast, Fora Financial could provide a viable loan solution for you. The company provides unsecured short-term loans with funding in as little as 72 hours. Business owners who are looking into these loans should read the fine print carefully. Fora offers partial discounts for early repayment. Early repayment discounts are not equivalent to the interest savings you would receive if you paid off a traditional loan early. This means that loans from Fora may be substantially more expensive than traditional loans if you pay the loan early.

  • Financing options: Unsecured short-term loans
  • $5,000-$500,000
  • Terms up to 15 months
  • Fixed simple interest with partial discounts for early repayment.
  • Funding in as little as 72 hours

Lending Club is a P2P lender that specializes in affordable term business loans for business owners that have fair credit (or better). Businesses must have been in business at least 12 months and have revenue in excess of $50,000 annually.

  • Financing options: unsecured term loans, secured term loans
  • Loans above $100,00 require a blanket lien on all business assets
  • Loans from $5,000–$300,000
  • Payback terms from 12 to 60 months
  • Interest rates ranging from 9.77% – 35.71%
  • Funding takes an average of 7 days

Headway Capital
Headway Capital is a lender that specializes in small business lines of credit with fixed simple interest rates. This means that Headway charges interest as soon as the funds are drawn, and businesses pay the funds back through weekly or monthly payments.

The Headway Line of Credit may be a good solution for businesses that cannot qualify for traditional credit lines, but need the flexibility that a line offers. To qualify for a Headway line of credit your business must have been operating for at least 12 months with at least $50,000 in annual revenue.

  • Financing options: Line of credit
  • Credit limits: Up to $50,000
  • Repayment periods: 12 to 24 months
  • Fixed simple interest (interest charged when you withdraw and does not compound over time).
  • Weekly or monthly repayments

BlueVine Capital
BlueVine Capital is a company that’s creating innovative working capital solutions for small businesses. They currently offer business lines of credit and invoice factoring options that allow businesses to only pay for financing when they need it. Business owners need a 600 credit score to qualify for a business line of credit and a 530 credit score to qualify for an invoice factoring option. Businesses also need at least $10,000 in monthly revenue to qualify for either option.

  • Financing options: Line of credit, invoice factoring
  • Line of credit
    • Weekly payments
    • $5,000-$5 million
    • Interest rates from 6.9%
  • Invoice factoring
    • $20,000- $5 million
    • Invoice due date must be less than 13 weeks
    • 85%-90% advance rates
  • Funding within 24 hours for first advance, and faster afterward

StreetShares is a newcomer in the P2P lending space. It specializes in moderate interest rates and fast lending. Military members and veterans are especially valued customers, and StreetShares makes sure to give veterans special treatment.

  • Financing options: Term loans, lines of credit, invoice factoring
  • Term loans
    • Three to 36 months
    • $2,000- $100,000 limits
    • Weekly repayments
    • No prepayment penalties
  • Line of Credit
    • $5,000- $100,000
    • Weekly repayments
    • Three to 36-month paybacks
    • No prepayment penalties
  • Invoice factoring (contract factoring)
    • Advance rates up to 90%
    • Monthly factor fees as low as 1%
  • Funding in as little as a few days

LEARN MORE: Types of small business loans

Small businesses operate in every industry, with revenues ranging from less than $100,000 per year to over $100 million per year. On top of that, business have varying levels of profitability and business credit quality. With such diverse business circumstances, it’s not surprising that there are dozens of business loan options.

These are the most common loans for businesses.

#1 Term loans aka short-term, unsecured, secured and equipment loans

Term loans are an umbrella category of business loans comprised of several different types of loans. In general, a term loan is repaid over a fixed period of time, usually by making even payments on a fixed schedule.

Here are the main types of term loans available to small business owners:

Short-term loans

What they are:Short-term business loans have payback periods ranging from three months to two years. Business owners make fixed payments on the loans until they are paid off.

How they work: After approving a loan, lenders deposit funds directly in a business’s bank account. Then, business owners make regular payments to pay off the loan.

General terms offered: Short-term loans often require daily or weekly payments. Many short-term loans have fixed simple interest rates. This means that you will pay the same amount of interest and fees whether you pay off the loan early or on time. The interest rates on short-term loans can be very high.

Most of the time, short-term loans are not secured by any collateral. However, there are important exceptions to this rule. For example, invoice financing (where invoices serve as collateral) can be set up as a short-term loan arrangement.

Speed: Online lenders specialize in short-term lending, and most can fund loans within 72 hours.

Who should use them: Business owners should be careful when taking out short-term loans. The daily payment schedules may make it difficult to maintain positive cash flow while the loan is being repaid. Short-term loans offer funding fast, but they aren’t a sustainable way to fund a business.

Unsecured term loans:

What they are: Unsecured term business loans are loans that are not backed by any underlying asset like your home. Unsecured business loans may require a personal guarantee, which is a promise to repay the loan regardless of business performance.

How they work: When funding on an unsecured term loan, a lender gives a business owner a lump sum of cash to be used for the business. The lender generally doesn’t restrict how the business uses the loan. In exchange for the upfront cash, the business commits to ongoing payments until the loan is repaid.

General terms offered: Unsecured business loans range from short-term loans (such as the loans explained above), to loans lasting up to several years. They may require business owners to make fixed daily, weekly or monthly payments. Except in the case of short-term loans, business owners will generally save money by paying off unsecured term loans early.

Speed: The time it takes to receive funds depends on the type of lender you work with. Online lenders offer funding in as little as three days, but larger lenders may take a week or more.

Who they are best for: Unsecured loans offer excellent protections for borrowers and are ideal to fund riskier ventures. If the business defaults on payments, the lender will have to go through proper collection channels before collecting any assets from the business owner. However, this protection comes at the cost of higher interest rates.

Secured term business loans

What they are:Secured term business loans are term loans that are directly secured by some collateral. That means if the business fails to pay its loan, the lender can immediately seize the underlying asset. Two in five (42%) business loans are secured by business assets (such as equipment, inventory, buildings or land), but an almost equal number (39%) are secured by personal assets, such as a personal vehicle, cash reserves or home equity, according to the Federal Reserve small business credit survey.

How they work: When business owners take on a secured loan, they receive an upfront sum of cash. The lender may limit how the business can use the cash (for example to purchase equipment). The business will make fixed monthly payments until the loan is paid off.

General terms offered: Most of the time, secured business loans have terms longer than two years. The interest rates on secured loans tend to be lower than rates on unsecured loans.

Speed: Like unsecured term loans, midterm loans tend to take several weeks to fund, but the time for funding will vary by lender.

Who should use them: Secured term loans are riskier for business owners since defaulting could lead to the loss of personal assets. However, they are a good choice for a stable business that has the cash flow to support the new loans.

Equipment loans

What they are: An equipment loan is a loan that’s backed by the equipment you purchase for the business. Business equipment would generally include heavy machinery, vehicles, computer servers, farm equipment and more.

How they work: In general, business owners put 10%-20% down on an equipment purchase, and finance the rest using the equipment loan. The business owner will make monthly payments on the loan (in most cases). If the business defaults on the loan, the lender may repossess the equipment and sell it to recoup its losses.

General terms offered: Down payment requirements generally range from 10% (on an SBA 504 loan) to 20% or more. Payback periods usually range from five to 10 years).

Speed: Business owners who complete an equipment loan application should expect to receive funding in under one week.

Who should use them: Businesses with good credit history are approved for equipment financing more than 90% of the time. If your company needs new equipment, an equipment loan is likely the best way to finance it.

#2 SBA-guaranteed business loans:

What they are:SBA-guaranteed business loans are loans that are partially guaranteed by the Small Business Administration. In most cases, the SBA will reimburse banks up to 85% of the loan value if a business owner defaults on the loan. The SBA limits the interest rate that can be charged on these loans, so SBA loans tend to have low-interest rates relative to other forms of business financing.

How they work: To qualify for an SBA loan, business owners must put up personal or business assets as collateral for the loan. In general, the collateral must cover at least 20%-25% of the loan value.

General terms offered: SBA loans are term loans with monthly payments. The interest rates on SBA loans vary by product, but SBA 7a loans (with terms less than seven years) have maximum interest rates ranging from 7%-9% depending on loan size.

Equipment and inventory loans have terms ranging from seven to ten years. Real estate loans may have terms up to 25 years.

Speed: Compared with other loans, SBA loans tend to have slow funding times. The fastest turnaround time is likely from SmartBiz, which claims it can fund loans as fast as seven days after the application is complete. However, the average time to funding for SBA loans tends to be much longer. Industry experts estimate that most SBA loans take at least a month to fund, and could be much longer.

Who should use them: With great interest rates and limited collateral requirements, an SBA loan makes a great choice for any business owner who has the time to wait for funding. These can be especially helpful for starting or expanding a business.

#3 Business lines of credit

Business lines of credit allow business owners to draw from a predetermined credit limit to meet business needs. After drawing down on the line of credit, business owners will make regular payments to pay it off. Business owners only pay for money they borrow, which makes lines of credit a cost-effective financing option for seasonal businesses.

These are a few lines of credit your business might consider:

Unsecured lines of credit

What they are: Unsecured lines of credit are business lines of credit that don’t require any specific form of collateral.

How they work: An unsecured line of credit allows business owners to draw on a line of credit to meet business needs. The business can continue to draw up to the credit limit. When the business repays the line, the credit limit is replenished.

General terms offered: Unsecured lines of credit have a drawdown period (where the business owner can draw from the credit limit). The drawdown period is usually a year long. After that, businesses must renew their line of credit or begin repayment. Generally, the business owner has to make minimum monthly payments during the drawdown period. The interest rates on unsecured lines of credit can be as low as 6.25%, but can be far higher.

Speed: Time to access funding will vary by lender. Large lenders may be able to approve your loan within a week and have funding to your business shortly thereafter.

Who should use them: Unsecured lines of credit are a low-cost, short-term financing solution for mature businesses. Business owners must have a plan to repay the credit line, or they may end up defaulting.

Asset-based lines of credit:

What they are: An asset-based line of credit is a line of credit that’s backed by an asset. The assets are usually outstanding invoices and equipment or real estate.

How they work: Some businesses have a long gap between when they produce work and when they receive payment for it. These businesses may need access to cash to bridge the gap between the time they spend money and when they receive payments. An asset-based line of credit allows businesses to draw on a line of credit that is secured by outstanding receivables and equipment. The business is free to draw on the line up to the credit limit. Once the business repays the loan, the credit limit is restored.

General terms offered: Most lenders will extend asset-based lines of credit for short terms (under a year). Having short terms on the line of credit gives the lender repeated opportunities to evaluate the strength of the line of credit. To qualify for an asset-based line of credit, you generally have to work in the B2B space, and have large receivables.

Speed: Establishing an asset-based line of credit generally takes a week or more.

Who should use them: Asset-based lines of credit are ideal for businesses with long collection cycles such as custom manufacturers and other businesses that sell on terms.

#4 CAPLines

What they are: CAPLines are SBA-guaranteed lines of credit designed to meet cyclical or short-term working capital needs. Businesses may need to show the expected costs of their projects or contracts to qualify for a CAPline.

How they work: Businesses apply for a CAPLine based on the projected costs of an expansion or larger product. When approved, a business can draw on the line up to the credit limit. When the business repays the credit line, the credit limit is restored.

General terms offered: Maturities on these lines of credit top out at 10 years. Currently CAPLines have interest rates ranging from 7%-9% APR.

Speed: Speed will vary by lender.

Who should use them: CAPLines are an appealing option for established businesses with short-term or seasonal borrowing needs.

Frequently asked questions

Lenders consider a variety of factors when underwriting business loans. More than nine in 10 start-ups (92%) rely on the owner’s personal credit score to obtain business financing, according to the Federal Reserve.

On top of business and personal credit, lenders also need to evaluate your business’s financial prospects during underwriting. Banks lean heavily on the information in your last two years of tax returns. “Banks need to see that you have revenue in excess of your expenses, or you’re not likely to be approved,” Dutta told MagnifyMoney. “Some business owners show losses year after year to minimize their taxes, but that means they won’t be able to get a loan when they need it.”

Start-up companies may need to submit a business plan and a detailed sales model to show how they will earn the revenues to pay back a loan. The plan will show the bank that you have a plan to fix problems should they arise.

The application process for business loans varies by lender.

Most online lenders have simple applications that take just minutes to complete. You’ll provide basic information about yourself and your company. On top of that, you’ll upload documentation to show the financial state of your company (for example, three months of bank statements or two years of tax returns).

Local banks, some of the biggest providers of loans to small business owners may have a more complicated lending process. It’s common for banks to require a detailed business plan with an application. Dutta recommended, “Before taking out a loan, you’ll want to get help from an industry-specific accountant who can help you make a business plan. Don’t be afraid to spend a little money if you’re taking on a big amount of debt. If you can’t afford [an industry-specific accountant], of course, get free help from SCORE. Just be sure to customize any templates you use to meet your needs.”

Following the 2008 financial crisis, small business lending took a dive, and it hasn’t fully recovered. Finding business funding remains a challenge for many business owners.

Small businesses tend to have the hardest time getting financing. In 2015, just 54% of businesses with less than $100,000 in annual revenue were approved for loans. By comparison, businesses earning between $1 million – $10 million in annual revenue saw an approval rate of 81%.

Approval rates for business funding also depend on your firm’s credit quality and where you apply. Firms with good credit (low credit risk) that applied at small banks were approved for business loans 78% of the time in 2016. Firms with medium or high credit risks had the best odds of being approved by an online lender. However, even with online lenders, just 45% of high-risk businesses managed to gain approval.

As of 2014, the average business owner who needed a loan, spent 33 hours looking for financing options, but the actual time to get a funding depends on the loan you’re considering. For example, SBA-guaranteed loans take up to several months to underwrite. On the other hand, online lenders in the business space can often underwrite and fund loans in a matter of days.

The cost of a loan varies based on the type of loan, the collateral required and who issued the loan. For example, loans from prominent online lender OnDeck had an average interest rate of 42.5% annualized, but borrowers often faced even worse interest rates when they took on financing from online lenders.

On the other hand, some forms of business financing can be very cost effective. Interest rates on most SBA loans are under 10% APR, and some lenders boast rates as low as 4.99% on fixed-term loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here


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Small Business

Where to Look for Start-Up Business Loans in 2018

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

There are many ways to obtain funding for your small business, and they come in many forms — from business loans, personal loans and credit cards, to grants and crowdfunding. The key is to find what’s right for you and your business.

According to the Small Business Association (SBA), 73% of small firms used financing in some form in the past year. These funds could come from loans, other sources or even personal savings.

In reality, most small business owners are going to one primary source to get their business off the ground: their personal wealth.

In the same survey of business owners, the SBA found that more than half (57%) of small business owners used their personal savings as a source of capital.

“There are numerous sources of capital available yet too often we see start-ups, especially those run by women, tapping into their person credit for funding and financing,” said Kathy Warnick, National Association of Women Business Owners National board chair. “Not only is this potentially personally detrimental, but it can also make it difficult to receive funding from an outside source as your business grows.”

In this guide, we’ll explain all the different ways you can fund your start-up — and help you determine which strategy is best for you.

Choosing the best funding source for your business

One of the first steps in looking for funding is asking yourself some questions. Here are a few to figure out what you need and what the best options are for you.

  • What do I need this money for?
  • How much money do I need?
  • What’s my credit score like?
  • Does my product have enough social drive to power a crowdsourcing effort?
  • If I get a loan, how long do I think it will take me to pay it back?
  • How quickly do I need these funds?

Everyone has different needs and their own unique situations, which is why it’s important to take some time to think about them. If you need a smaller amount of money and your personal credit score is in good shape, a credit card for your business might seem like the right choice.

In fact, according to the SBA, more than one-third (39.5%) of non-employer firms needed $5,000 or less in capital. Even among firms with employees, one in five said they needed $5,000 or less.

Finding the right start-up business loan

After answering the questions above, perhaps you think a business loan is the right way to obtain the funds you need. The next step is to figure out which type of start-up business loan is best for you and fits your needs.

Here, we’ll take you through the advantages and disadvantages of certain types of start-up business loans.

SBA Loans

Best for: If you need more money for larger purchases and investments, an SBA loan might be a better option for you, but you’ll have to contend with strict eligibility requirements and more paperwork.

An SBA loan is a loan lended by the Small Business Administration, a government organization that was founded as part of the Small Business Act of 1953. The Small Business Act created the SBA with the purpose of aiding, counseling and protecting the interests of small business concerns. The SBA helps all sorts of businesses and now specializes women, minorities and armed forces veterans.

How SBA loans work: Although it might sound like an SBA loan is receiving money from the SBA, that is not actually the case. The SBA doesn’t lend money. The money is loaned from a bank and that loan is backed by the SBA.

The process for acquiring an SBA loan varies from person to person and business to business. This timeline can be longer or shorter depending on how prepared you are. The SBA offers a guide to help you through this process called the Build Your Business Plan tool. If you already have a business plan, this puts you a step ahead and can accelerate the process for you. According to the SBA’s application timeline, the loan amount you are requesting can also affect the time period. They suggest expecting to wait at least two to five months from start to finish.

The repayment period also varies and depends on several factors, which include the type of loan, the amount of down payment and the amount requested. For example, according to the SBA, an SBA microloan would have a maximum loan term of six years. An SBA microloan of more than $10,000 could not be charged more than 7.75% interest, while a microloan of $10,000 or less could not be charged more than 8.50%.


SBA loans have several advantages:

  • They typically have competitive terms with rates and fees similar to non-guaranteed loans.
  • SBA loans also offer counseling and educational opportunities to help you as you take the first steps (or the next steps) in starting your own business.
  • SBA loans generally require lower down payments, which is a huge bonus if you don’t already have a lot of cash at hand.
  • Requirements for overhead (expenses such as run, repairs, utilities) are flexible, and, in some cases, no collateral is required.
  • Depending on several factors, including your needs, you could receive anywhere from $500 to $5.5 million in funding for your business.


  • Strict eligibility requirements (see below)
  • They can require a lot of paperwork. See the SBA Loan Submission checklist.
  • You won’t be allowed to receive funds from another lender.

Let’s expand on some of the “catches” that come with SBA loans that could be a disadvantage for you, starting with those eligibility requirements.

According to, “eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates.”

Here are some of the requirements for an SBA loan:

  • Your business must be for-profit and operate legally in the U.S.
  • You (as the business owner or loan applicant) must have invested equity which can come in the form of time or money.
  • They can require a lot of paperwork. See the SBA Loan Submission checklist.
  • But perhaps the biggest disadvantage is that you will not be allowed to receive funds from another financial lender. Meaning, if you were hoping to get an SBA loan for $50,000, you can’t go get another loan for the bank for $20,000.

Another disadvantage is having to wait. Depending on your business needs, you might not be able to wait 60 to 90 days. “Be aware and prepared,” Warnick told LendingTree. “Waiting for funding to kick in can be a challenge and requires patience.”

If you are eligible, then an SBA loan is certainly something to consider. Although they might be hard to qualify for, if you do qualify, the advantages are aplenty.


Best for: If you’re not seeking a whole lot of funds for your business, just enough to get your started — or keep you going — a microloan could be the best option for you. But it is important to consider factors, such as your credit score, your needs and of course, other options before making a final decision.

If the amount of capital you’re seeking is, well, micro in nature, a microloan might be your best option. Microloans are loans for small amounts and are given to small businesses with either one or few employees.

Microloans can come from several sources, including but not limited to the SBA lenders; Accion, a global nonprofit organization; Kiva, a nonprofit lender; and others.

These are some pros and cons of microloans:


  • Good for people who don’t have a good business credit score.
  • Microloans may help your business establish credit.
  • Microlenders can assist you through the process.
  • Because the amounts are smaller, you have less to lose in the event that things don’t pan out the way you expected.
  • The interest rates can be low or even nothing. For example, Kiva offers some microloans with zero percent interest.


  • The amount of funds received might not be as much as you would have hoped for. According to the SBA, “Intermediary lenders must use the funds loaned to them by SBA to capitalize a revolving loan fund from which they must make loans to small businesses in need of $50,000 or less.”
  • Depending from which microlender you are borrowing, you might not get the funding at all. On Kiva, for example, your loan might not be crowdfunded by enough lenders.

Start-up equipment financing

Best for: If you have good credit, and are in need of equipment for your business this might be the best option for you. But it’s always best to consider all of your choices before making your final decision.

One reason it’s important to ask yourself what exactly you need your funds for is because it can help you decide what kind of loan to get. For example, if you plan to open your own restaurant, and you need funds to secure equipment for your kitchen, then start-up equipment financing might be the best option for you. Start-up equipment financing is a loan which uses the equipment you buy as collateral, and it can be obtained through various lenders.

Here are some pros and and cons of start-up equipment financing.


  • You can pay off the equipment while making revenue at the same time. Ernie Quilantan, president of the Greater Dallas Restaurant Association, says this is a huge benefit because you’re not stuck waiting. “If you’re a restaurant owner, you can’t do much if you’re saving to buy a fryer and other kitchen equipment,” Quilantan said. “But when you finance your equipment, you can get started and pay it off as you go.”
  • The depreciation of the equipment could be used as a tax benefit in the future.


  • You’ll need a solid credit score. (This is only a con if you have a low credit score.) If your credit score is low, Warnick advises you not to get discouraged. “Don’t take ‘no’ personally or let that stop you from pursuing another financing option,” she said. “We believe that by increasing awareness of the financing resources available and being better prepared to demonstrate a pattern of responsible borrowing, start-ups can be better positioned to grow and scale their businesses.”
  • By the time you have paid off your equipment, it might be outdated. “This is a problem because it creates a cycle,” Quilantan said. “On the upside, you’ve improved your credit. On the downside, you’re stuck with old equipment. Then it becomes tempting to your improved credit to finance newer equipment. It can be hard to get out of this cycle, especially if you’re not bringing in enough profit.”

Personal loans for business

A personal loan is simply an agreement to receive a certain amount of funds to be paid off in a certain about of time with a fixed interest rate. These funds come directly to you, deposited straight into your bank account. Unlike start-up equipment financing where the funds must be used for equipment, these funds can typically be used for anything. So you can use this money for equipment, marketing, consulting or whatever else you might need.

These are some of benefits and disadvantages of personal loans.


  • There has been a rise in online lenders over the past few years, which has made the application process much easier.
  • Depending on the lender, the terms of personal loans can range from 24 to 84 months, like financing a car, which means you would pay it off faster.
  • So long as you make on-time payments, you can improve your credit score.


  • Most fees are non-refundable.
  • If you have poor credit, your interest rates could be pretty high.
  • You will be required to provide verification of your income. If you are in the beginning stages of building your business, this could be a challenge.
Best for: If your credit score is in good shape, this could be a good option for you. What is probably most appealing about personal loans is the benefit of being able to do what you want with the funds. But make sure you weigh the pros and cons of this and other options first.

Pro tip: Develop a relationship with a lender early.

“Perhaps the most important tip for start-up businesses is to develop a relationship with a lender early,” Warnick said. “It is important if at all possible to develop a relationship with your lender early so they can grow into the business with you and the funding you need can more easily increase as you scale.”

Other sources of funding

Sometimes loans aren’t the best moves for your business. If that’s the case, consider three other options to obtain the funds you need for your business. While this guide focuses on start-up business loans, here are a few quick tips about three options that might be more suitable for you.

Credit cards: The pro and cons depend on your credit score (read: interest rates). If this is the option you choose, an advantage is that you can use the money for any business needs once you have it. When it comes to credit cards, Warnick says it’s important to get one early, regardless of whether you need it. “Once you need it you won’t be able to get one — even a small one,” she said. “Use it and pay it down to zero at least once a year. Show a pattern of responsible borrowing. It will go a long way as you grow and will make it easier for the bank to increase the borrowing limit.”

Check out thebest small business credit cards here.

Grants: Grants can come from many shapes and sizes such as, the SBA Women’s Business Center, the Economic Development Administration, the National Association for the Self-Employed and many more. The hard part is determining your eligibility, but if you qualify, grants are great because usually you don’t have to pay them back.

Crowdfunding: As mentioned at the beginning of this guide, crowdfunding is a great option because it combines marketing and funding. This usually works best for a new product, so it might not be your best option if you’re a restaurant owner. But you never know. Places like Kickstarter are great places to begin if it’s something you want to consider.

Next steps: How to use start-up business loans

So you made your decision on which start-up loan to get or where to get your funds from. Now what? Take some time to re-evaluate what your needs are and be sure to prioritize them. Your priorities will differ. You might prioritize in order of more expensive needs to least, or in terms of what you need first.

Here are some things to consider:

How much do I need to borrow?

It might be less than you think. The amount of capital differs for everyone based on your needs, which can be difficult to estimate when you’re just starting out.

According to the SBA, 39.5% of non-employer firms needed less than $5,000 in capital. For firms with employees, 22.5% of those firms also needed less than $5,000, while 7.3% of firms with employees needed anywhere from $250,000 to $999,999.

Where will I work?
Do you plan to work from home or rent an office? Think about whether a co-working office space would make sense for your business. If you plan to open up a brick-and-mortar shop, will you be building a new location entirely or renting a space? How much will that cost?

What do I need?
Then think about all of the equipment you will need for this location, from computers to furniture and everything else. Will you need a warehouse to store merchandise?

How will this grow?
What steps do you plan to take to ensure the growth and success of your business? Will you advertise? And what kind of marketing efforts should you make?

While these questions may seem overwhelming, it’s important to remember that you’re not racing anyone. Take your time to make the best decision for your business. You can’t sprint a marathon!

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jesus Jiminez
Jesus Jiminez |

Jesus Jiminez is a writer at MagnifyMoney. You can email Jesus here