Business loans help you start your own business or expand your existing ventures. Business loans are essential tools that you can use towards your business expenses when you are not able to pay yourself. Every business needs to grow over a set period of time and sometimes it becomes difficult to grow your business without the help of a loan.
According to the small business administration of the US, before applying for a business loan, it is important for business owners to understand the basics about it like how it works, how to apply, and what is the eligibility to apply for these loans.
How Do Business Loans Works?
There are many business loans that help business owners to meet their goals. You have to choose the right business loan for your business because all the loans are not the same. When you borrow a business loan, you have to repay the principal amount with interest fees. You are required to make regular payments on a fixed schedule. If you fail to pay the monthly repayments, you can be charged with a penalty fee or lose the assets which you have put up as a security for the loan.
You can apply for these loans from banks, online lenders, or other sources. The best place to apply for the loan will be the one with the lowest interest rates. Usually, it takes a lot of time to get these loans, especially those which are backed by the small businesses administration.
What Are The Requirements For Business Loans?
Here are a few business loan requirements you should be aware of before applying:
- Business And Personal Credit Score:
When you apply for a business loan, the lender will review your personal and business credit score. If you have a bad credit score, then there are fewer chances to get a loan. However, with a good credit score, you can easily apply for it with high chances of approval and a lower interest rate.
The minimum credit score requirements are different, like some online lenders may approve your application with a score as low as 500. Some traditional lenders e.g. a bank might require a minimum score as high as 680 or even more than that.
- Annual Profit:
Many lenders may ask you to provide your profit and loss statements to check whether you have enough cash flow to afford the loan. Make sure that you have accurate bank statements before applying for it.
- Total Time in Business:
There are great chances of loan approval if your business has been in operation for more than 2 years. Minimum time requirements are different depending on the nature of the source like a traditional lender requires applicants to be in business for at least 2 years but online lenders require six months to one year.
- Solid Business Plan:
Some online lenders might ask you to share your business plan, especially if you are just starting your business. You have to give a detailed outline of your business idea and your financial goals.
What Are The Best Online Business Loans?
Business owners most rely on business loans to invest in new supplies or to manage cash flow. Before applying for a business loan, find out which one is best for you. To help everyone, who is unable to choose the best business loan, we have listed some best online business loans.
Number one: Kabbage
Kabbage is an online platform, which offers small business loans for those who want fast funding and flexible repayment options. You’ll get this loan if you are in business for at least one year and your monthly revenue is $4,200. Kabbage’s line of credit is best for those who are unable to apply elsewhere due to their personal credit score. To avail of this loan, firstly you need to have a minimum 640 credit score. Secondly, you will need to have a relationship with American Express or Kabbage.
Depending on your needs, Kabbage offers up to $150,000 with repayment terms of 6 or 12 months. Another perk of this business loan is that there is no application fee or any prepayment penalties. The application process is quite simple and minimum documents are required.
However, the Kabbage business loan is not suitable for all businesses because it offers small business loans, in the form of lines of credit.
Number Two: Fundbox
Fundbox is an online business loan platform that offers small business loans. This loan is suitable for those who want to fill their cash flow gap quickly. Although, Fundbox loans can be expensive with short repayment terms, but is best for those who are searching for loans that are easy to qualify and fast to fund. It offers a line of credit without any hard inquiry on your personal credit score.
We suggest Fundbox because it offers the best line of credit and gives access to funds as soon as possible. It offers up to $150,000 with repayment terms of 12-24 weeks. You can apply for this loan online simply by providing basic information about your business and connecting your business account with the Fundbox account.
Number Three: BlueVine
BlueVine is an online business loan platform that is best for startups and businesses having bad credit scores. It is a good option for short-term financing, but the interest rate is a little higher as compared to other online lenders. Through BlueVine, you can get cash within 12 to 24 hours. If your credit score is not good, you are still eligible to apply for this loan. It is very difficult to get a business loan for those who are not in business for one year, but BlueVine accepts borrowers who are in business for 6 months.
BlueVines offers lines of credit up to $250,000 which is a good option for small businesses. It has a simple application process in which you have to just connect your business checking account with the BlueVine account.
We recommend BlueVine for those who are looking for loans with lenient qualification requirements and have a bad credit score.
Number Four: National Funding
National Funding offers loans to small businesses which are having a tough time getting loans from traditional platforms. If you have a fair to average credit score and you need fast funding for your business you can apply for this loan. It is perfectly good for those who have a profitable business and need short-term emergency funding.
The best thing about National Funding is that it rewards those borrowers who pay off the loan early. National Funding also offers equipment financing which is a good option for those borrowers who have seasonal cash flow. If your personal credit score is 575, you can easily qualify for equipment financing.
Number Five: PayPal business Loan
PayPal offers business loans for those who use PayPal. It is best for those business owners who need fast cash and is unable to qualify for a bank loan. PayPal business loans starts from $5,000 to $500,000. This loan has a fixed fee and weekly repayments. PayPal withdraws weekly repayments from your business bank account instead of your PayPal account.
To get a PayPal business loan, you need to have a PayPal business account. Your credit score should be 550 and 6 months in business. You need to sign a personal guarantee which gives PayPal the right to go after your assets if you fail to repay the loan within a fixed time.
Also Read: 5 Best Construction Loans You Can Easily Qualify For In 2022
