Top Small Business Loans of 2025

Small Business Loan Uses

The Small Business Administration (SBA) says that small businesses borrow mainly for four reasons: to start a business, to purchase inventory, to expand, or to strengthen the firm’s financial health.

Specifically, small business owners might consider a loan to:

• Buy commercial real estate

• Purchase or repair equipment

• Cover working capital expenses

• Buy inventory at a discount and/or in preparation for a busy season

• Add to the kinds of products offered

There are loans designed for specific uses (such as equipment financing) and loans that may be used for a variety of business expenses (for example SBA 7(a) loans). Comparing the options can help you figure out what type of small business funding would best suit your needs.

Types of Small Business Loans

Different kinds of loans may help support your small business at every step of your journey. Some loans are geared toward startups, while others help established companies extend their reach even further. There is no one best place to get a small business loan.

Whatever your goals, here are a few options you may want to consider for small business funding, depending on your specific needs. 

SBA loans

The SBA backs these loans, it doesn’t directly disburse them. The SBA loans’ goal: Help businesses get funding by setting guidelines for the loans and reducing lender risk. 

You can get $500 to $5 million to fund your business through a SBA loan, but there will be restrictions on the funds and approvals aren’t the speediest. Because the risk for lenders is lower, SBA loans tend to have favorable interest rates and terms. However, this can also make them highly competitive. 

Types of SBA loans include:

• 7(a) Loans

  • Can be used for nearly any business need, including but not limited to:

    • Working capital 

    • Equipment purchases

    • Commercial real estate

    • Renovating an existing building 

    • Establishing or acquiring a business

    • Refinancing existing business debt (under certain conditions)

  • Maximum amount of $5 million

  • Must do business in the U.S., have invested equity, and have used other financial resources, among other requirements

• 504 Loans

  • Certified Development Companies (CDCs) work with the SBA to provide up to $5 million for growing businesses

  • Provides funding for things like:

    • Purchase or construction of existing or new facilities

    • Equipment and machinery 

    •  Modernizing land, streets, and parking lots

    • Renovating existing business facilities

  • CANNOT be used for:

    • Working capital or inventory 

    • Consolidating, repaying, or refinancing debt 

    • Speculation or investment in rental real estate

  • Long-term, fixed-rate loans

  • Eligible businesses must be in the U.S., be worth less than $15 million, and have an average net income of less than $5 million

• Microloans

  • Nonprofit, community-based lenders work with the SBA to provide small businesses with funds to repair, renovate, or expand their operation

  • Worth up to $50,000, but average amount is $13,000

You can use the SBA’s Lender Match portal to get started on finding SBA-backed financing for your business.

Term loans 

Small business loans can typically only be used for business-related expenses. 

Like other types of loans, if you’re approved, the lender will provide you with a lump sum of money, which you’ll repay with interest over a predetermined amount of time. 

Such loans are available in long-term (typically 10 years) and short-term (as brief as three months) options. The lender will determine rates and terms based on your creditworthiness.

Note: Some lenders charge borrowers a fee for paying off their loan ahead of schedule. The reason for this: offsetting the lost interest the lender expected to receive over the full term of the loan. 

Commercial real estate loans 

Commercial Real Estate Loans finance property that’s used for business-related purposes, such as a shopping mall or an apartment complex. The commercial loans for small businesses are commonly offered by banks but you can also seek one through the SBA or from a private investor. In contrast to a residential mortgage, which is a loan given to an individual borrower, a commercial real estate loan is offered to a business entity. These entities can include:

• S- and C-Corporations

• Funds

• Trusts

• Limited partnership

• Limited liability company (LLC)

Note: Interest rates on commercial real estate loans are often higher than those for residential loans.

Types of commercial loans include:

• Long-term commercial real estate loans – terms between 5 and 25 years and often used for construction, land development, or property purchases.

• Short-term commercial real estate loans – these are sometimes bridge loans, which can prove convenient but might be more expensive than the long-term ones

Microloans  

• A microloan connects a borrower and a lender for a non-traditional, smaller loan. Startups and small businesses that might have trouble obtaining a traditional loan can grow thanks to a microloan, offered by nonprofits, government agencies, or individual lenders.

• Nonprofit, community based lenders work with the SBA to provide small businesses with funds to repair, renovate, or expand their operation

• A microloan is worth up to $50,000, but average amount is $13,000

Microloan uses may include:

• Working capital

• Inventory or supplies

• Furniture or fixtures

• Machinery or equipment

• Seasonal expenses

Additional Small Business Financing Options 

Securing financing for a small business can be a challenge if your business is brand-new or your credit history is rocky. Besides traditional loans for small businesses, there are other sources of  funding, each with pros and cons. 

Business line of credit 

A business line of credit functions as revolving credit that a business owner can repeatedly borrow from and pay off—up to a certain limit.

• May be used for any type of purchase

• If balance is paid off monthly, it can be an affordable way for business owners to maintain cash flow

• Can be valuable for covering gaps in cash flow or emergency expenses

Equipment financing

Equipment financing provides loans for any type of business-related equipment (such as computers, work vehicles, and desks).

• Equipment could be new or used

• Equipment usually acts as collateral for the loan

• Depending on the lender, financing may be available for up to 100% of equipment cost

Invoice factoring and financing

Invoice Factoring and Invoice Financing have been known to come to the rescue of a small business.

Invoice factoring means you sell your unpaid invoices to a factoring company, or factoring receivables company, that then takes ownership of the invoices.

Invoice financing means that the invoices are used as collateral to receive a cash advance, rather than being sold to a factoring company. You receive access to a percentage of the invoice amount either in the form of a line of credit or loan.

• Both may help improve cash flow when waiting on payment from unpaid invoices.

• Exercise caution: With fees and relatively high rates, invoice factoring can be costly—particularly if customers delay payment. 

Business credit cards 

A business credit card is a credit card intended for use by a business rather than for an individual’s personal use. They’re available to businesses of all sizes and tend to fall into two categories: low interest cards and rewards cards. 

• Business credit cards allow small business owners to separate their company’s expenses from their own–very helpful at tax time

• These cards often come with cash-back and special travel perks, but they lack some of the consumer protections that are required on credit cards for individuals.

Where Can I Get a Small Business Loan?

When searching for the best small business loans, the question becomes: Where to look? You can generally find small business loans at banks, credit unions, online small business lenders, and peer-to-peer (P2P) networks. Each type of lender has unique requirements, as does each specific lender.

There is no one best place for loans for small businesses. When applying, consider each lender’s qualifications and potential offerings:

• Banks

  • Refers to traditional brick-and-mortar banks (though they may also have online services

  • Could have more favorable terms and rates compared to online lenders, especially if you already have a relationship with the bank

  • Application process is often lengthy

  • May have more stringent eligibility requirements

• Credit Union

  • Member-owned, non-profit entities that may have brick-and-mortar locations as well as online services

  • Often have competitive terms and rates

  • Frequently have flexible qualification requirements for members

  • More likely to be focused on helping the local community

• Online Lender

  • Applications often reviewed quickly

  • Funds typically dispersed in a matter of days

  • Can easily compare lenders

  • May be more open to those with poor credit or a short history

  • Online small business lenders generally have higher APRs than other options

• P2P Network

  • Business owners are matched with investors on the P2P platform

  • Odds of qualifying may be higher compared to other types of lenders, even with bad credit

  • Fast application and quick time to funding

  • Could have transaction fees others don't

  • Platforms facilitate transfers and payments

Note: The above is general information. Different lenders may vary.

Choose your lender based on your unique business needs. Don't hesitate to compare small business lending options before applying, and pre-qualify when you can.

What Do I Need to Apply for a Small Business Loan?

Loan requirements vary by type of loan and individual lender. This is what lenders of small business loans are usually looking for:

• Good business and personal credit scores

• Strong business plan

• A well-established company

• Acceptable revenue history 

• Low debt-to-income (DTI) ratio

Recommended: Guide to Small Business Loan Requirements

How to Apply for a Small Business Loan

Small business loan application processes may differ by lender and loan type. However, you can expect a few common steps when applying for business loans:

1. Evaluate your business and personal credit history against the minimum requirements of the lenders you're considering to determine what you'll qualify for. 

2. Prepare relevant documentation like bank statements, legal documents, business expenses, and tax returns. Come up with a required-document checklist.

3. Shop small business lenders and see who can give you the right financing for your specific business needs.

4. Apply with the lender(s) that suit your business needs and qualifications. Bank business loan applications require a hard credit pull, so prepare yourself for temporary damage to your credit score.

Note: SBA loans have their own rates and terms.

You can streamline your research process through the marketplace on Lantern. It’s possible to review rates from multiple small business lenders without making a commitment.

How Do I Choose the Best Small Business Loan for My Needs?

There are many things to consider when choosing the right small business lending option for you. 

Determining factors may include, but aren't limited to:

• How much funding you need: Small business lenders have different maximum loan amounts they’re willing to lend to borrowers. 

• Why you need it: Is it an emergency expense that requires a quick application and time-to-funding? Or is it a larger expense that requires more time to compare rates and lenders?

• The type of loan you want: Different business loans are crafted for different business uses. Think about what best aligns with your qualifications and the reason you need funding.

• Whether you meet requirements: Try to be realistic with yourself about the strength of your credit and business history when going after the best small business loans. Focus your attention on the types of loans and lenders that can offer you the best rates for your qualifications.

• How much of a monthly loan payment you can afford: Running a business is expensive. You’ll want to make sure you find a loan with rates and terms that allow you to make the monthly payments without cutting too deep into your business’ cash flow.

If you have a history with a lender that offers multiple types of loans, it may be one of the best places to get small business loans when you are shopping for small business financing. You could also consider working with a financial advisor before applying.

Small Business Loan Application Tips for Beginners 

How do you get financing if your business is brand new? While the widespread belief is that a business needs to show at least one year and preferably two or three years of existence before an entrepreneur can hope to get a loan, that’s not always the case. There are small business loans for startups–if you present a case for it in the right way.

Research as many loan and grant opportunities as possible to see what you qualify for. You can apply for:

• Small business loans for women

• Small business loans and grants for disabled veterans

• Business loans, grants, and resources for Hispanic and Latinx Owners

• Guide to small business loans for minorities

When you’re getting your dream venture off the ground, you need to be sure that your small business is not only a great idea but seizes an opportunity. Your business should:

• Solve a problem for a customer

• Exist in a space that isn’t too crowded

• Can be executed in a strategic space where you will hold an advantage

• Fill a critical customer need that may not be obvious to them

You can compensate for a short history of cash flow (or no cash flow yet) with a stellar business plan in order to get a small business start up loan, experts say. To write your plan and conduct market research, the SBA offers free mentorship programs, as do other organizations. 

When applying for small business financing, owners need to avoid the following mistakes:

• Out-of-date financial records

• Unclear case for how funds will be used

• Ignorance of business credit score

• Skeletal business plan

• Applying for wrong kind of loan

• Not enough free capital to pay loan

If your loan application is rejected, you will almost always be told why–and you can come up with a plan of attack to remedy those weaknesses.

Other paths to take if you own a startup without collateral are creating a crowdfunding platform and seeking out investors.

Recommended: You Built It, Why Didn’t They Come? 6 Reasons Small Businesses Fail