Guide to Finding the Best Small Business Loans for Your Business

When you need to grow your small business, it can be hard to come up with the capital you need on your own. Small business loans can be a great resource for growing businesses and start-ups that need a little extra cash to fund their next project. 

Whether you’re trying to increase your inventory, purchase a new building, or hire a few more employees, you need to know how to get a small business loan.

There are plenty of varieties out there, especially when it comes to Small Business Administration loans. AdvisoryHQ wants you know what the best small business loans are and how to get them. No matter what your reason is for needing a business loan, we want to help you receive the small business start-up loans you need.

If you’re ready to take the first steps toward qualifying for the best small business loans, let’s get started.

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Do You Need a Business Loan?

It might seem like common sense to properly identify whether or not you even need business loans at this point in time. However, it might not be as common sense as you would think. Many people naturally assume that SBA loans could benefit their business without first pinpointing the exact purpose of the loan.

Lenders will naturally want to know what purpose the money will be serving. You should be able to specifically share with them exactly what you will be using any loans for small businesses to accomplish.

Receiving any of the best small business loans should give you the funds you need for a very specific purpose. If you’re not sure what that purpose is, you probably need to rethink whether this is the best time to apply for Small Business Administration loans.

Not only should you know what the money will be used for, but you should also know exactly how you hope for that purpose to benefit your company. For example, receiving small business start-up loans to purchase a nicer storefront could increase traffic to your store and boost sales overall. The addition of a company vehicle could make your store more time-efficient and cost-effective, as well as increasing your advertising.

All SBA small business loans must be used for what they consider “sound business purposes,” meaning that it cannot include any of the following purposes:

  • Speculating
  • Passive investments
  • Pyramid sales
  • Gambling

It doesn’t have to be complicated to receive some of the best small business loans that lenders have to offer. However, you should know the ins and outs of your business well enough to answer the logical questions any lender is certain to pose before issuing you any business loans.

How to Get a Small Business Loan

When you go to apply for the best small business loans or any type of SBA small business loans, what do you really need in order to receive them? Besides a clear idea of what the funds will be used for and how it will benefit your business, the Small Business Administration recommends having these criteria in order before applying:

  • Personal History: First and foremost, lenders want to see that you (and your partner, if it applies) have a good character and experience in the field for which you are looking for the best small business loans. In other words, they’re interested in your personal history and how it applies or benefits your present circumstances.
  • Credit history: As the primary borrower(s), the Small Business Administration loans require you to have a solid personal or business credit history. If your business is relatively new, they may rely more heavily on your personal creditworthiness in determining your eligibility for the best small business loans they can offer.
  • Repayment ability: Small business start-up loans are risky for lenders to offer, which is why they want to see a clear path toward your ability to repay those funds. Reasonable collateral should be a requirement (both personal and business assets can be used). Additionally, the owners of the business should have some personal equity devoted toward this investment.

If you already have these criteria accomplished, then it’s time to move on to the types of small business loans available for your company. This will help you to better determine the best small business loans for your needs.

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Types of Loans for Small Businesses

Financing your business is full of subtle nuances in the different types of loans for small businesses available. Before you begin to talk with a lender, you should know what type of business loan you can benefit from the most. This will be determined in part by the reason that you believe one of the best small business loans could be beneficial for your company. Take a look at these types of small business loans to determine what’s best for you.

Line of Credit: A line of credit for a small business is great for companies that need a safety cushion or need help managing everyday expenses. This type of business loan is different than a Small Business Administration loan. It functions more like a credit card, allowing you to borrow only what you need. In doing so, you have significantly more control over how much you spend and ultimately how much you will pay in interest.

Commercial Loans: If your business has been around for a while, and you already own some property, a commercial loan allows you to borrow funds based on the equity in your property. It functions very similarly to a home equity loan. You receive your money up front. According to Wells Fargo, this could give you access to a greater source of borrowing power.

SBA small business loans

Image Source: U.S. Small Business Administration

Equipment loans: Need to purchase a new piece of equipment to keep your business running smoothly or make it more productive? Some lenders will offer equipment loans among their selection of the best small business loans available. These typically feature fixed-interest business loan rates and regular payments over a fixed period of time.

Business loans: This is one of the best small business loans for companies that are in need of their cash in one lump sum initially. Great for making big purchases or stocking inventory quickly, term business loans feature fixed interest rates based on business loan rates and a set monthly repayment schedule. In this same category, you will find several different types of Small Business Administration loans as well.

Because these SBA small business loans are secured and backed by a federal agency, the lenders who allow them can offer lower business loan rates and more flexible terms. SBA loans are the best small business loans because of these attributes, allowing you to grow your business without tremendous amounts of interest and debt. However, they can also be significantly harder to obtain.

Applying for Small Business Administration Loans

SBA small business loans are highly sought after, but knowing how to apply for them can be tricky. First of all, you should know that you can’t apply for SBA loans directly through the Small Business Administration. Instead, they partner with participating lenders, which are generally banks and some other financial institutions. In some situations, such as for their microloans, they may be intermediaries that are non-profit community based organizations.

At this point, you must now qualify according to both your lender’s criteria for small business start-up loans or other types of SBA small business loans as well as the Small Business Administration’s criteria. The Small Business Administration issues a checklist of criteria including which documents you will need for consideration. This includes your credit history, personal and business financial statements and projections, detailed business plans, and cash flow projections. However, the requirements are very stringent.

Approval is determined on a case-by-case basis, but experts say that struggling businesses aren’t likely to receive any of these specific small business loans. Companies with the best shot at receiving some of the best small business loans are those that have been in business for two years or more, are profitable, and have cash flow to sustain repayment.

Is it worth it to track down lenders that offer SBA loans? You may qualify for some of the best small business loans through the Small Business Administration and a lender, but the underwriting process can drag on forever. Funding for these types of loans can take weeks or months to finally come through. If you have time to wait it out, these are some of the best small business loans available because of the lower business loan rates and the longer repayment terms (making your monthly payment as low as possible).

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Best Small Business Loans from the SBA

Small Business Administration loans come in a variety of shapes and sizes. We’re going to review a few of the criteria and types of SBA loans here to give you a crash course of the best small business loans they have to offer. That isn’t to say that you can’t find great small business loans through other lenders and avenues. However, the Small Business Administration helps to provide companies with many of the best small business loans available today.

7(a) Business Loans

This is the most popular type of loan program that the Small Business Administration has to offer. It can be used for any number of purposes, including owner-occupied real estate, business acquisition, equipment, or working capital. What makes it one of the best small business loans is its low business loan rates and the significantly lengthier repayment terms when compared to traditional business loans issued by financial institutions.

Eligibility requirements are fairly strict. They involve a lengthy list of businesses that are ineligible, including private clubs, consumer and marketing cooperatives, businesses that focus on political or lobbying activities, and more. To find out exactly what the eligibility requirements are, take a look at the list on their page.

You can borrow a maximum of $5 million with no minimum amount set in place. Last year, the average 7(a) loan amount was $371,628. The fees associated with the loan will range from zero percent to 3.5 percent depending on the amount of the loan issued. SBA loans of this variety will only guarantee a set percentage to lenders (85 percent for loans up to $150,000 and 75 percent on loans exceeding that amount).


Microloans offered through the best small business loans that the SBA has to offer provides businesses with as much as $50,000. The average size of these loans is typically around $13,000. These are especially attractive as small business start-up loans, able to be used for capital, inventory, supplies, furniture, fixtures, or equipment. The primary exclusions are the repayment of prior debt or real estate transactions. Repayment has a maximum loan term of six years with interest rates usually ranging between 8 and 13 percent.

Microloans are available through intermediary lenders. These lenders are nonprofit, community-based organizations. Intermediaries set their own standards for issuing these SBA loans, but they most often require collateral and the personal guarantee of the owner. You may also be required to attend specific training or planning elements before being issued approval.

CDC/504 Loans

These are some of the best small business loans for companies that need to make major purchases but cannot obtain financing through other avenues. The only eligible purposes for a CDC/504 Small Business Administration loan are to purchase land or make land improvements, construct new facilities, renovate existing facilities, or purchase long-term machinery and equipment.

The maximum amount of funds issued for a CDC/504 business loan are determined according to the purpose for which it will be used. For example, job creation has a maximum debenture of $5 million. Public policy has a maximum debenture of $5 million, and small manufacturing has a maximum debenture of $5.5 million. The assets that are being financed are used as collateral, as well as personal guarantees of the owners.

Expect the repayment to be either a ten-year or twenty-year term with fees totaling approximately three percent of the loan. These can be rolled into your financing as well.

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Knowing and planning for your use of small business loans is the first step in learning how to get a small business loan. Beyond this, you will have to make a determination of which business loan rates and types of business loans will work best for you and your company. These will be different for each individual, and there is no set program that is considered the best when it comes to receiving a business loan.

Locating the best small business loans can be tricky, but many of these programs are available through lenders who partner with the Small Business Administration. They offer several of the best small business loans, but they’re hard to receive. The requirements have a tendency to be more stringent on the best small business loans available.

If you believe that you’re well on your way to applying for a Small Business Administration loan, begin to get your paperwork in order. Gather up your company’s financial records and projections, your business plans, and any other information you don’t have readily available. Think ahead and be prepared for any and every question a lender may have, so they know you’re ready to receive one of the best small business loans they have to offer.

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