Small business loans can provide a boost for growth and in this review, our Just Digital team takes a look at the best small business loans available in 2018.

Sometimes it helps to take a small business loan as it can take your business to new heights. A small business loan may make the difference between the success and failure of your business.

When you start a small business or are running a small business, you have to wear multiple hats. Most of the time, you are the owner, manager, sales head, and operations guy/gal. You are the one that your team looks up to and at the end of the day, you are the one on whom the success of your business depends on.

Every small business needs capital to sustain, grow and flourish. Most of the time, this capital is sourced either from your own funds or via small loans from friends, relatives, and well-wishers. Some even start or run their businesses and meet cash flow requirements with their credit cards.

One of the best ways to source money for your small business is going for a small business loan. There are multiple types of small business loans available today depending on your requirement, business strength and credit history.

Here are the most common reasons for getting a small business loan and why it might make sense for you to get one:

01. To grow your business or expand your operations

Ramping up a business can be capital intensive. If you’re looking to invest in marketing, expand to new markets, develop your product, or you need to hire people to keep up with your growth, you’ll need an influx of cash. A small business loan and access to capital can mean the difference between stagnant growth and exponential growth. Venture-backed startups often ramp up quickly and aren’t profitable until they reach “escape velocity”, a concept Paypal Founders Peter Theil and Reid Hoffman use to describe a company that scales quickly.

02. To buy commercial real estate

When you start a business, you can either buy the commercial real estate here you set up your business or you rent it. Buying commercial real estate is a big investment and it makes sense to apply for a loan for it. The interest rates for business loans to businesses to expand their operation or to by real estate is generally low as the lenders get the real estate as collateral. You need to take a long-term business loan if this is the reason for the business loan. There are many SBA business loan schemes available for these loans and SmartBiz, which we have reviewed below, can help you avail the loan.

03. To buy inventory

You may need a lot of money to buy inventory for your small business depending on the business type. Some businesses have a good margin but are seasonal. In this case, you need to buy inventory in bulk just before the season starts e.g. holiday season and gifts. Sometimes, you may need to get a short-term to purchase the inventory so that you can sell it in season. Since it is a short-term loan, speed and ease of getting the money are very important, OnDeck and Kabbage which we have reviewed below are good options when it comes to getting your loan approved quickly.

04. To use for working capital and to bridge cash flow

You need money for the day-to-day operations of your business. Sometimes you have a strong sales book and a hefty profit but since you may give a long line of credit or waiting for client payments, the expenses can exceed the money coming in for certain periods of time. To meet the expenses and continue to run your business, you may need short-term working capital loans. Depending on the duration that you would need the money, you can get a short-term loan or a recurring line of credit.

Top Rated Small Business Loans in 2018

At Just Digital, our main goal is to help businesses succeed, and though we aim to do that through marketing and sales growth, often times we find our clients need other types of funding as well. Keeping the above requirements in mind, our Just Digital Reviews team has come up with the best small business loan providers in 2018. They are:

Ondeck: Best small business loan in terms of speed of loan approval and disbursement.

Kabbage: Best small business loan in terms of the personal credit score of the applicant.

Upstart: Best small business loan for start-ups, credit card refinancing and college graduate entrepreneurs.

LendingClub: Best peer to peer small business loan for working capital

SmartBiz: Best SBA business loan facilitator

Let’s check detailed small business loan reviews of the various loan options.

OnDeck Review – Small Business Loans

OnDeck offers quick and easy lines of credit and short-term loans to business owners. When you compare a small business loan issued by a bank and a loan from OnDeck, you get many benefits like convenience, speed, and lesser criteria for loan approval. However, on the flip side, annual percentage rate is higher.

The biggest advantage of taking a loan from OnDeck is the speed of loan processing and the variety of business types that can avail the loan. On the other side though, the short processing time to funding and the range of business merchants who can avail of the loans increase the interest charged by OnDeck. Their interest rates start from 9.99% and the APRs for the lines of credit that they issue starts from 13.99%.

Who can avail of the OnDeck loan?

Need cash fast: The application process is fast and easy. You can apply via the phone or online and get approved in less than 24 hours.

Low personal credit score: If you have a credit score above 500 you can avail a term loan and if you have a credit score of over 600 you can avail of a line of credit.

Need quick cash for unexpected expenses: If you need a quick loan to tide over payday or pay for some unexpected machinery repairs, then you can avail of a quick loan from OnDeck.

Uneven cash flow: Many businesses are profitable but their cash flow swings from high to low. If you have a business like this, OnDeck has a line of credit that can help you face low cash flow periods.

Advantages of the OnDeck loan

Fast and Easy: You can complete an OnDeck loan application over the phone or online in less than ten minutes. You just need to add basic information like business tax ID, Social Security number, bank statements of three months, and driver’s license number. You can get to know if your loan is approved within minutes and you can get the money in less than a day.

Easy Criteria: You don’t need to offer any collateral like your home, etc. You just need to be in business for over a year. You can apply if you have a personal credit score of 500 for a term loan and 600 for a line of credit.

Benefits to loyal customers: OnDeck charges an origination fee that is one time for new customers which range between 2.5% to 4%. It falls 1.25% to 3% for the second loan and to 0% to 3% for future loans.

Disadvantages of the OnDeck loan

Expensive loans: With APRs ranging from 9% to 100% and rates for the lines of credit from 14% to 48%, the loans are very expensive. Add to it they charge origination fees as mentioned above.

Not suitable for every business: It won’t lend to businesses like pawn shops and funeral services although most small businesses which have revenue from $100,000 to $5 million are eligible.

Frequent Repayments: If you have taken a term loan, then you may have to repay daily or weekly. If you have taken a line of credit, then you have to repay weekly. If you have a business which has an uneven cash flow, consistent repayment schedules may affect your liquidity.

Our Verdict on the OnDeck loan

Since OnDeck lends to merchant businesses whose owners have low personal scores, many businesses avail of the loans until their credit rating increases and they can get loans at better rates. The loan process is easy and fast which is an added incentive. You can also look at the other options mentioned reviewed below and check if you would get a better deal.

To Apply for an OnDeck Loan, Click Here

Kabbage Review

Kabbage started about a decade ago to offer lines of credit to online retailers. Today, it services normal brick-and-mortar businesses too. The biggest advantage of Kabbage is that getting approved for a loan is very easy. You can apply, get a decision about the fees and rates and start drawing out the funds for your business expenses in a matter of days. The rate of interest is high though and the loans are front-loaded i.e. you may a majority in the first few months.

Who can avail of the Kabbage Loan?

Low personal credit scores: Kabbage is a great lending company for people who have low credit scores as they focus less on traditional information like accounting, banking, and e-commerce data. Even if you have a low credit score, you can still apply for a loan. Even so, most of the borrowers have a credit score of at least 500 points.

Quick Cash: If you are in need of quick cash i.e. within a few days, then Kabbage is a good source of funds for you. You can complete the online application minutes, and if you are approved you will get your funds within a few days.

Short repayment period: If it is just cash flow situation and you know you can resolve the issue and repay the loan quickly, you can avail of a Kabbage loan. They offer up to half a million dollars with a six or twelve month repayment period.

Advantages of the Kabbage Loan

Quick Cash: Like OnDeck above, Kabbage is a very good option when it comes to immediate funds. If you are fine with paying a premium on interest rates but need the cash immediately, then you can apply for a Kabbage loan. The paperwork is minimal; you just need to link your bookkeeping software, business checking account, or any other payment platform that you use like PayPal or Payoneer. It also works if you have QuickBooks, Etsy, Xero, eBay, Amazon, or Square.

You can also apply for a Kabbage Card. It is linked to your line of credit and is used every time you make a purchase from the card. It is fast and easy to use.

Bad credit business owners can apply: If you can’t get an approval for a cheaper loan from normal banks, then you can try for Kabbage. Though Kabbage gives loans to very low credit score businessmen, the norm is to have a credit score of around 500 points.

Disadvantages of the Kabbage Loan

High Rates: The rate of interest on Kabbage loans is from 24% to 99% per year. This is very expensive. It is better to use these loans as an emergency, short-term loan rather than to may long-term investments.

No repayment incentives: Since the majority of the loan is repaid in the first two months or half a year depending on the tenure of the loan, you won’t get much benefit if you prepay. Kabbage doesn’t charge a penalty for prepayment so that helps if you want to prepay.

Our Verdict on the Kabbage Loan

There are many benefits of taking a loan from Kabbage. The biggest is its low threshold when it comes to the personal credit score of the owner. Another big advantage is the speed of application processing. You get capital when you need it the most. It is a very transparent process so there are no surprises. Unlike OnDeck where you would need to pay daily or weekly, with Kabbage you can pay monthly which helps mitigate any temporary and sudden cash flow issue. The only drawback is the high rate of interest. However, if getting an easy loan is more important or if your credit score is not high enough, you can go for a Kabbage loan.

To Apply for a Kabbage Loan, Click Here

Upstart Review

Upstart is a very unique lending company in the sense that it offers loans to recent college graduates who have excellent credit ratings but no or low credit history. They don’t look at the credit history, credit scores or income. They look instead at the job history and education of the applicant.

Upstart has its own algorithm which it uses to calculate the possibility of a borrower defaulting. It does not look at metrics like credit history as much as areas of study and grades.

Upstart gives loans at low rates to young adults who have a good future but don’t have a long credit history. If you have college-level education, you can apply for a loan even with less than ten years of credit history. You can get a loan even if you don’t have a job or a job history.

Who can avail of the Upstart Loan?

Young graduates with a good academic track record: The loans from Upstart are designed especially for young graduates who have the potential to succeed in the future which is analyzed by their educational track record.

Great for start-ups: Most start-ups started by young graduates can’t look for funding from traditional sources as they don’t have any assets or a credit history. With Upstart, they get loans to quickly turn their dream of starting a business to fruition.

Borrowers with no or average credit: If you have no credit history or a very recent credit history, you can still apply for a loan from Upstart as long as your credentials are good.

Advantages of the Upstart Loan

Great for startups: If you have a start-up or want one, and have the right credentials, then Upstart is a great place to apply for a loan. The credit score requirements are easy and so is the application process.

Competitive rate of interest: With a maximum rate of interest of 25.77% a year, the interest rates are excellent and very low. The interest rates start at 5.26%.

Fast: The time that it takes from you to apply for the funding is mostly less than a week. You get the quote in minutes and the underwriter takes a couple of days at the most to approve the loan. Some loans are sanctioned within one business day.

No prepayment penalty: Many start-ups get seed funding or investors once their idea kicks off. In that case, you can repay the loan without any prepayment penalty.

Credit Card refinancing: With low-interest rates as compared to traditional credit card companies, Upstart loans can be used for credit card refinancing. 80% of the loans applied are for credit card refinancing.

Disadvantages of the Upstart Loan

It is unsuited for established businesses: Since the main focus of this loan is for low credit history, high education credentials, the loan amounts are still high as compared to traditional loans. If you have an established business then it is better to go for a traditional loan from a bank.

Potentially high origination fee: The origination fee that Upstart charges come out of the principal, so if you have a number in mind, make sure that you add the origination fee amount to the asking price.

Our Verdict on the Upstart Loan

You can apply to Upstart for a loan if you are a college graduate and have a limited credit history. You get loans at competitive rates which are calculated using their data-driven software which identifies creditworthy clients. It helps recent graduates to start the start-up of their dreams or to boost their careers. The application procedure is simple and easy, the rates are fixed and low and there is no pre-payment penalty.

To Apply for an Upstart Loan, Click Here

LendingClub Review

LendingClub started the trend of peer-peer or marketplace. This model matches investors who are willing to lend money to borrowers who need money. The borrowers who generally are attracted to LendingClub are people who have an established history of financial stability and responsible borrowing.

LendingClub today is the biggest online lender when it comes to personal loans in the States, with over $33.6 billion in loans facilitated. They have a stellar record of providing safety and excellent returns to investors and loans to borrowers at reasonable rates.

Who can avail of the LendingClub loan?

Good credit score: Your credit score should be high and you should have a great track record of repayment.

Long credit history: On an average, LendingClub borrowers have a credit history of 17 years.

High Income: Though this is not a criterion, a higher income shows a greater ability to pay and a lesser inclination to default. The average monthly income of a borrower from LendingClub is approximately $6,500/-.

Low debt-to-income ratio: If you have low debt as compared to your income, it will be easier for you to pay your loan back. The average borrower of LendingClub has a debt-to-income ratio of 18.29%. This excludes mortgages.

Advantages of the LendingClub loan

Clarity: LendingClub has very clear terms and the pattern is set so that both the lender and the borrower know exactly what they need to do even before they sign up for the program. You will know the exact amount right down to the cent that you will need to pay. Only then you can commit to the loan. There are no prepayment penalties and all the information that you would require is present on the website.

Speed Loan Processing: You can go to the website and get a pre-approved offer in a few minutes. Most of the borrowers get the money within ten days and with the highest levels of security, you are assured that your money and transactions are safe.

It is affordable: LendingClub’s interest rates from 6% to 30% are very competitive. If you have an excellent credit score, you can avail of low APR loans. Even with a lower credit scores, you can still get affordable money via this option. There are no hidden costs or fees.

It is available across the United States: Though LendingClub is not available in all states since it has to be approved at the state level; it is available in all states except Iowa in terms of borrowing capital.

Disadvantages of the LendingClub loan

Documents: Since this is a peer to peer transaction, you will need to submit all the necessary documentation to ensure that you have a good credit score and a long credit history. You will also need to provide your income details. Users may find inconvenient but it needs to safeguard against default.

Strict against defaulters: If you miss even one payment, LendingClub will call you on the phone. If you keep missing the payments, your account will be transferred to collections. This is done to reduce defaults.

Our Verdict on the LendingClub loan

If you have an excellent credit score and history, Lending Club would be one of the fastest and cheapest ways to get loans. You can apply for loans from $2000 to $35,000 for your various financial and business needs. There is a very high level of clarity and transparency when it comes to loans from LendingClub so you are assured that you pay only what you are told while taking the loan.

To Apply for a Lending Club Loan, Click Here

SmartBiz Review

SmartBiz is a service that has made getting loans from the SBA lending plan of the government very easy. It does not issue loans, instead, it uses its technology to analyze and match applicants who are eligible to an SBA bank in their list. They call themselves “white knight in small business lending”. You can check if you are eligible for an SBA loan within minutes. If you are not eligible then you save a lot of time putting together an application.

SmartBiz along with its partner banks take part in the 7(a) Business Loan program which is the most popular SBA loan program. You can use the loans that you get via SmartBiz for working capital, commercial real estate purchasing, and debt refinancing, or refinancing.

If you want to avail a loan via SmartBiz, you should be running your business for at least two years, have a business credit score of 150 or above and a personal credit score of 650 or above.

You will still have to make sure all the paperwork is in place as the SBA loans are supported by the government.

Who can avail of SmartBiz facility for SBA Loans?

If you want to refinance your debt or expand your business: You can get loans up to $350,000 at interest rates from 8.53% to 9.83%. As you can see the rates are very attractive.

Purchase commercial real estate: You can use SBA 7(a) to purchase commercial real estate which ranges from half a million to five million with APRs from 6.62% to 6.66%.

Established business: You need to be in business for a minimum of two years and have $50,000 in annual revenue to be eligible for this loan.

Advantages of SmartBiz

Cheap financing: The best part of getting an SBA loan is that the APRs are very low. You pay just 8.53% to 9.83% for normal term loans and 6.62% to 6.66% for loans for the commercial real estate.

Low-cost loans for the commercial real estate: SmartBiz offers 7(a) SBA-backed financing for the commercial real estate. This is from half a million to five million. With the low cost of borrowing and no balloon payments, you can use the loan to refinance your commercial real estate or to buy a new property. You can’t use it for new construction, the term 25-years and you may have to pay additional fees depending on the type of property, etc.

SmartBiz Advisor: The best reason to apply for an SBA loan via SmartBiz rather than going to the bank directly is so that you can get your loan approved fast. You can also use SmartBiz Advisor which is an online tool, which gives you the probability of your loan getting approved. It also makes suggestions which you can use to increase the chances of your loan getting approved.

Disadvantages of SmartBiz

Only for strong, healthy businesses: You need a high personal credit score, good business credit score and a stable business with good revenue to be eligible.

Steep revenue requirements: You need annual revenue of a minimum of $120,000 for a loan less than $150,000 loan and revenue of minimum $300,000 for a loan above that amount.

Higher fees: If you apply for a loan directly to the bank, you would save on cost. SmartBiz takes a 4% commission on the loan amount and it is added to the bank closing costs which the borrower needs to pay.

Strict approvals from SBA: Even though SmartBiz helps you speed up the process, you still have to meet SBA requirements which are tough and stringent.

Our Verdict on SmartBiz

SmartBiz allows you to check your eligibility for the SBA loan instead of spending time checking with the bank. If your business is eligible, you have all your paperwork in place and want a low-cost loan then SmartBiz is a perfect choice for you. It may take longer to get the loan approved but since you get the benefit of an excellent rate of interest, it is worth the effort.

To apply for a SmartBiz loan, click here

What to look for when you need a small business loan?

Depending on your requirements, you can consider any of the loan options above. However, there are a few key considerations to keep in mind when you apply for a small business loan. They are:

The rate of interest and ARP: The rate of interest of the loan may decide between you making a profit or a loss from your venture. The interest which you pay on the business loans that you take is a business expense. The rate of interest ranges widely depending on the institution you take the loan from, the tenure of the loan, your credit score, and your credit history. The purpose of the loan too is an important factor when it comes to the interest rate. In general, when the loan is availed to buy an asset like commercial real estate, the rate of interest is low. When the loan is for working capital, then the rate of interest is higher. Similarly, you get a lower rate of interest for long-term loans which are backed with collateral as compared to short-term loans which are not. If you need an emergency loan to meet cash flow needs or any sudden expenses then the rate of interest is generally higher.

The speed of disbursement: The speed in which a small business loan is disbursed is an important factor when it comes to deciding the loan. For a small business owner, cash flow plays an important role in the survival of the business. If the cash flow is negative then the small business loan is required urgently. Also, in times of an emergency, you may need the funds immediately. It could be to pay a repairman or for parts of a broken piece of machinery or to meet the next payday commitments. Some loan options disburse loans in a period as short as 24 hours. If you need a loan for short-term expenses, you may need a quick loan. If you are looking at medium to long-term expenses, it is better to consider the rate of interest rather than the speed of getting the loan.

Tenure of the loan: The tenure of the loan is very important to consider when you are taking the loan. Depending on the type of expense that you need to meet with your loan, you can either go for a short-term loan i.e. less than one year, a medium-term loan i.e. one year to five years or a long-term loan i.e. more than five years. Unless money is needed to buy real estate or expand your operations, most of the time, loans are short-term loans. Many loans are even for a month to tide over a tight cash flow situation which may be temporary. Make sure you match the type of loan you want with the tenure of the loan.

Hidden fees: Hidden fees are a bane in the financial industry tough with online reviews the trend is reducing. None of the five loan providers that we have reviewed have any hidden fees. However, you have to keep in mind hidden costs like prepayment penalties, etc when you apply for a business loan. While loan providers like OnDeck and Kabbage don’t have any extra fees, there are very fees if you are availing for an SBA loan via SmartBiz. It is best to check the fees before you apply. However, the low rate of interest when it comes to SBA loans is well worth the fees that they charge.

Credit Scores: Your personal credit score, personal credit history and the credit score of your business impacts the rate of interest or the ARP that you get on the loan availed. Sometimes the credit score can even impact if you get the loan or no. Obviously, the higher your personal credit score the easier it is to get a small business loan. Even with a personal credit score of 500 points, some institutions will give you a loan. Your credit history also plays an important role. The longer your credit history, the easier it is for you to get the loan. There are some loan providers like Upstart that gives you a loan even if your credit history is less and if you have a low credit score as long as you have good educational qualifications and future prospects.

Repayment: You also need to keep in mind the repayment terms and policies. In case of OnDeck, they start charging the repayment on a daily or a weekly basis. This may be a little difficult in case you have a tight cash flow. Comparatively, Kabbage allows you to pay monthly. This eases the cash flow situation. However, Kabbage charges a high amount in the first few weeks or months depending on the tenure so that may be an additional load that you have to consider. Loans from SBA banks via SmartBiz have the longest and the most relaxed periods of repayment, however getting the loan sanctioned is a bit of a hassle. Loans from Upstart are repaid with a long tenure if you like, you need to keep in mind though that they have a high origination fee that they charge from your principal before they disburse the loan so you keep to add the origination fee amount to your required loan amount and apply for the whole amount accordingly.

Pre-payment of loan: Most of the lenders don’t have any pre-payment charges so if you want to pre-pay the loan, you won’t have to pay any extra fees. It is always a good idea to check if there are any pre-payment options as you may suddenly get access to lower interest funds and then you don’t want to be tied down to the existing high-interest loan just because of high pre-payment fees. OnDeck has no pre-payment charges. Kabbage does not charge pre-payment but since a majority of the loan is repaid in the first few installments, you don’t really benefit from a pre-payment. Upstart has an easy pre-payment which is helpful if you get investors for your start-up and you want to reduce your debt.

Conclusion

As you can see, there are various options for getting small business loans. Each of the above five options reviewed is excellent but you have to understand which is the best for your needs. If your credit score and credit history is not on par, if you a quick hassle-free loan for the short term and don’t mind a high rate of interest then onDeck is a good option for you. If daily or weekly repayments is a problem and you don’t mind a majority of the amount repaid in the first few months, then Kabbage is a good option for you. Both these loan providers have a high rate of interest but the speed of disbursement is good so you can meet your short-term or emergency funding needs.

Upstart is a great option if you don’t have a long credit history and have good education credentials. It is a good option for credit card re-financing too. These days they accept applications from non-graduates too. It is a great option if you have a start-up idea and need funding for it.

If you want a medium to long-term loan then you can consider LendingClub and SmartBiz. With both these options, your documents and credit scores should be good. The rate of interest in these options is much lower but the disbursement period is longer. With SmartBiz, you can apply for SBA loans for purchasing commercial real estate too. The process is lengthier and more stringent but considering the rate of interest and the amount you save, it’s a worthwhile option.

I hope you liked our selection of the Best Business Loans for 2018. Do let us know if you have availed of any of the above loans and what has been your experience with it. Do also comment below if you would like us to include any other loan option for our review.

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