What Is The Easiest Business Loan To Get?

Business loans are an easy way to get lump-sum capital for your business.

Revamping your existing business or building one up from scratch can require more money than you can imagine. There are lots of costs and expenses piled up even before you start making sales, and for that beginning, you need that kind of money.

Most entrepreneurs proceed to business loans that help them kickstart their venture, here’s what you need to know about business loans.

What is a Loan in Business?

A loan is a lump-sum amount given to a party for their business. They can use this money as working capital, paying off business debts, making inventory purchases, buying office space or renovating their existing business.

When the loan is given, a repayment plan is mutually agreed upon between the lender and the borrower. The duration of repayment, which is for how long the loan has to be repaid in installments is set as well as the interest rate that is liable on each installment of the principal amount.

The interest rate is usually decided upon how much credibility the borrower has, which is measured by their credit rating and debt-to-income ratio. If the credit score is less, the borrower has a higher chance of defaulting on the loan, hence they may get a loan with a higher rate of interest, and vice versa.

Business Loan Types

Essentially, there are 5 major types of loans, and each one of them has its own share of pros and cons. All of these are accessible, however some may have a criteria the borrower doesn’t fit in.

SBA Loans:

These are small business administration loans that are aimed to help out small-scale businesses ready to start up. The range is also relatively lower, but they can be anywhere from $5000 to $5 million. These also have very low interest rates from 5% to 13% because small business owners may find it hard to repay as their business is only just starting.

Pros:

  • Low interest rates
  • Long term given for repaying the loan
  • Don’t need experience in business- even beginners can apply

Cons:

  • Application process can take long, even several months
  • Strong credit history required

Business Term Loan:

A business term loan usually works the same way as a traditional loan, but these have a specific term of 5 to 10 years. The duration of the loan purely depends on the case and how much money is being borrowed. The average interest rate is from 7% to 30%.

Pros:

  • Can be used for any business
  • Guaranteed repayment plan
  • Can borrow more amount too
  • Takes less time to be approved

Cons:

  • Early repayment charges
  • Collateral is required

Business Line of Credit:

There are many deserving entrepreneurs who are refused traditional loans because of their poor credit history. A business line of credit is a loan type where poor performing borrowers are also given the loan, average APR rates are 7% to 25%, and repayment terms are usually between 6 months and 1 year, but exact terms vary depending on your business’ revenue and credit score.

Pros:

  • Available for emergencies
  • Fast approval times
  • Lower APR rates
  • No high credit rating required

Cons:

  • Can be used for any business
  • Guaranteed repayment plan
  • Can borrow more amount too
  • Takes less time to be approved

Equipment Financing:

This is the type of loan that is only dedicated to buying the equipment that many businesses need. It also doesn’t require a lot of money so the loan amount and duration is less too, around 5 years.

Pros:

  • No high credit score is required
  • Equipment serves as collateral for the loan
  • Quick source of funding

Cons:

  • Equipment depreciation can end up paying more than what’s worth
  • Equipment could be obsolete during the time of the loan

Working Capital Loan

This is also a short term loan aimed at expanding the current mode of business by bringing in more inventory, cutting down debts etc. This kind of loan requires an adequate amount of paperwork and a proper application to come through.

Pros:

  • Low interest rates, in between 3% to 7%.
  • Easily accessible through commercial banks

Cons:

  • Good credit history required
  • Takes a lot of time for the paperwork to get accepted

Business Loan Benefits

Let’s be real, having someone lend you a big amount of money upfront is the biggest benefit of a business loan! But that’s not all, there are a couple of other benefits too:

  • You can borrow as much amount as you need for your business
  • You’re the sole owner of the money
  • Funds can be easily accessed
  • Low interest rate
  • The interest paid on the business loan is tax deductible
  • Assets are liquidated in case you can’t pay, so if your business fails, you don’t have to worry about repaying it from your pocket or savings
  • Usually no collateral is needed
  • Business credit is likely to improve if monthly payments are made promptly

Business Loan Process

Acquiring a business loan is a complicated, time-consuming process. It is not as easy as you walking in and the lender gives you the loan. There is a proper loan protocol that everyone one must follow.

The first step is always background research. It starts with the purpose of the loan, why do you want and how much you want. You can do a quick calculation through business loan calculators available online, and see how much loan you can qualify for.

When you’re going to the loan lender, he will ask to see your business plan. A business plan is a complete document about your business, it’s vision, strategies and budgeting. The lender is more interested in how you will utilize the money and how you plan on paying it back. Make sure your business plan is well crafted and contains all the information you need.

The lender will then verify all information you’ve provided: your credit score, DTI, tax report, insurance history and any other relevant financial records. Make sure all documents are up-to-date and are true to your understanding.

After assessing your documents and loan application, the lender will tell you their final verdict; whether the application is approved or not. If yes, you can move forward with obtaining the loan and decide the rules, if not, you will know what went wrong with the application. If you can fix it, you may still have a chance of reapplying for the loan, and this time actually getting it.

What is the easiest Business Loan to get?

Once you’ve gotten the whole process sorted and assembled the documents, you must be wondering what is the easiest business loan to get after all. Here is a list that might be helpful for you!

Loan Provider Best For
Fundbox (Best Overall) Easy qualifications for revolving credit up to $100,000
BlueVine Same-day funding on a short-term loan up to $250,000
Kabbage Easy monthly payments on revolving credit up to $250,000
OnDeck Short-term funding with an easy application and low rate for prime borrowers
LoanBuilder Easy-to-customize loan terms up to 52 weeks with funding up to $500,000
National Funding Low-credit borrowers wanting a short-term loan up to $500,000 with easy

Note: Sample rates have been extracted online, courtesy of FitSmallBusiness.

Conclusion

Obtaining a business loan has become accessible for many Americans, and often for people with a low performing credit too. The best way is to shop around for rates to make sure you get the best deal possible!

Nabeel Ahmad

Nabeel Ahmad

Nabeel Ahmad is the founder and editor-in-chief of Insurance Noon. Apart from Insurance Noon, he is a serial entrepreneur, and has founded multiple successful companies in different industries.

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