The Best Business Loan and Financing Options of 2020

By Simone Johnson, writer
| Updated
May 26, 2020
Image Credit: Dutko / Getty Images


Update: This page has been updated to include information on how alternative lenders are participating in the Paycheck Protection Program.

Part of running a business is seeking funding. If you're working on a startup, you'll need financing to get things off the ground. If you run an established small business, you'll need funding to expand operations at some point. Even enterprise companies sometimes need loans and investments to kick off new projects and expand. Funding can mean growth, and if you get the right loan with the right terms for your business, you can benefit highly from financing. 


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There are many different types of financing for small businesses. Traditional long-term loans are ideal for real estate, SBA partners offer disaster relief loans, and alternative lenders can provide fast business loans without collateral. As long as your business is stable and healthy, you'll be able to find some form of funding.

February 2020: New research shows that accessing capital is a priority for many businesses during the first quarter of 2020. The study from Balboa Capital revealed that among small businesses that need growth capital in the first few months of the year, 25% will apply for a small business loan, 19% will apply for a business line of credit, and 13% will apply for equipment financing. Of those, 42% plan to turn to banks for the money, with 29% looking for loans from alternative lenders and 21% expecting to reach out to credit unions for an influx of capital.

Editor's note: Looking for a small business loan? Fill out the questionnaire below to have our vendor partners contact you about your needs.


Here are all our reviews of business loan and financing providers. These services include small business loans, merchant cash advances, equipment financing and alternative business loans.

What to Expect in 2020

In 2020, the number of companies that offer online and mobile lending is expected to grow. Since digital options provide extensive financing opportunities and faster approval, they are expected to be popular choices compared to traditional banks and credit unions.

In recent years, large companies like PayPal and Amazon have joined and made a big impact in the small business lending market. PayPal made $10 billion and Amazon $1 billion in loans to American small business owners over the last five years. Along with Square, they have become top loan options for small businesses.

Digital lenders' use of personalized offers makes them more attractive to small business owners. Brands have learned to target consumers based on their specific interests, and we expect more lenders to follow suit. To provide entrepreneurs with the specialized funding they need and at the right time, we predict digital lenders, like PayPal and Amazon, will increase their personalized offers to small businesses.

Peer-to-peer lending is also projected to increase among small businesses. With peer-to-peer lending, interest rates and loan offers are based on a business's earning potential rather than its credit score. As peer-to-peer loans become more common, the camaraderie within small business groups is likely to strengthen and grow. Transparency Market Research predicts the global peer-to-peer lending market will reach $897.85 billion by 2024.

March 2020: Traditional bank loans are difficult to secure for small businesses. However, Fifth Third Bank is hoping to bridge the gap with its new partnership with Fundation, an alternative online lender.

When banks don't qualify for traditional bank loans, this partnership will steer business owners toward alternative options. As alternative lending becomes increasingly popular, partnerships like this are projected to grow to accommodate the financing struggles of small businesses. For companies that fall short of Fifth Third's loan requirements, the bank will use Fundation's tools to help them access loans that reach $10,000 to $100,000. Their partnership makes the loan process easier and gives small business owners better access to financing opportunities. It also speeds up the process by giving small business owners the ability to accept and decline loan offers and sign contracts online.

As we move through 2020, it will be interesting to see if other traditional banks follow suit and form their own partnerships with alternative lenders.

April 2020: The effects of the coronavirus pandemic have left many small businesses in need of flexible support. SoLo Funds, an online lending platform, is offering interest-free, peer-to-peer microloans of up to $1,000.

May 2020: A number of online alternative lenders are joining traditional banks in processing Paycheck Protection Program loans. Earlier this month, the federal government released an additional $310 billion in funding for its forgivable loan program, which is designed to help small businesses stay afloat during the coronavirus pandemic. Fintech companies and alternative lenders, like Kabbage and OnDeck, are among those partnering with the Small Business Administration to distribute the funds.

Research from the Census Bureau revealed that about three-quarters of U.S. small businesses applied for a PPP loan, with two-thirds of those receiving one. As businesses continue to struggle financially due to COVID-19, we expect more alternative lenders to figure out different ways, such as this, to provide some much-needed financial relief for small businesses.

Rates and Terms

Small business loans include some form of interest, which can be either a fixed or fluctuating rate depending on your agreement. Many alternative lenders provide a fixed payback amount at the beginning of the loan. This means you make weekly or monthly fixed payments toward both the interest and the principal.

You can also sign up for loans with interest rates. Sometimes, rates are adjustable, meaning they can fluctuate over the time of the loan. Depending on your agreement, lenders often charge either simple or annual percentage rates. While a simple interest rate would be the percentage of interest paid off on the total loan, an APR is an annualized interest rate that accounts for fees as well. The total cost to you is based on your agreement and the type of interest rate, so it's important to analyze how much the loan will cost you in total (not just per month) before you sign.

In addition to a few different kinds of interest rates, companies may charge various fees, such as origination or returned-item fees. As with any business agreement, make sure you read the fine print and understand the fees you're being charged.

Some lenders also require collateral, which can take many forms. Banks and alternative lenders often require business or personal assets to back a loan. These assets can be liquidated in the event of a default. When you provide collateral, you're entering into a secured loan. Unsecured loans have no collateral, but they sometimes require a personal guarantee. The personal guarantee is a legally binding statement that says you personally will pay back the loan if your business defaults on its payments.


Our Methodology

To find our best picks, we started by analyzing more than 130 lenders. We compiled this initial list by finding industry leaders, considering vendor list requests, researching other review websites and reviewing former best picks. We started by considering each company's loans, website experience and online reputation. We also looked at whether the lender is geared toward small businesses. From this stage, we narrowed our list down to roughly 30 lenders. 

We then took a more in-depth look at each lender, analyzing loan amounts, specific loan options, online transparency and deposit time. This brought our list down to about 18 companies, each of which earned a review on We looked at each company's loan process, requirements, individual rates, term lengths and customer reviews. We called some company's sales teams to find out more about their loans. 

After this stage, we compiled potential best picks – about six companies – and took an even deeper dive into each company's service. We posed as small business owners and called each company's sales teams to test its customer service and learn more about its loans. We verified online information and asked for other information that wasn't available online. We looked at additional fees, repayment structure, other considerations and requirements for a loan, and restricted industries. Our best picks withstood each round of research and held up as the best lenders in the industry.

How to Qualify for the Right Loan for Your Business

Qualifying for a loan basically means proving to the lender that, based on your revenue and credit, your business is healthy enough to pay back the money you're asking for with interest. Individual requirements and qualifications depend largely on what type of lender you work with. Traditional banks, for example, have higher requirements and standards than alternative lenders. However, there are a few basic principles to keep in mind when looking for a loan from any source. Lenders generally have benchmarks for credit scores and revenue. This verifies that you have a history of paying back loans and currently have a business that can support monthly payments. In general, the less stable your business, the higher the interest rate. 

Some alternative lenders will give you a loan without checking your credit score. Instead, they want to get a detailed idea of your business's cash flow so they know you can pay your loan back based on how much money you take in each month. Others give credit scores much more weight. While revenue benchmarks vary widely among lenders, credit scores are easier to quantify. You need a credit score of at least 500 to secure a loan from some companies. In general, the higher the credit score and the better the revenue, the lower the interest rates. 

Documentation and Financial Statement Preparation 

The required financial documentation also depends on what type of lender you're dealing with. Almost all lenders want to at least look at your recent bank statements, so make sure you have the last six months of statements at the ready. Some lenders require tax returns or business plans. Financial documentation required for a loan varies so widely that it's a good idea to ask your loan specialist upfront – especially if you're looking for quick funding. They'll be able to tell you exactly what the lender requires in your situation.

State of the Industry

There are a few different kinds of alternative lenders that provide small businesses with the funding for growth. Each has varying requirements and qualifications to get a loan. While traditional banks can be great funding resources, they will likely be the hardest to get financing from. They have strict underwriting processes and require a lot of financial documentation for a loan. You'll also have to put up collateral with loans from traditional banks. Wells Fargo is the only traditional lender we looked at with unsecured loans. In May 2018, big banks only approved roughly 25% of the small business loan applications they received, according to Biz2Credit

In the same month, Biz2Credit found that alternative lenders approved around 56% of their applicants. Alternative lenders provide a wider range of loans and qualifications, like unsecured loans and short-term funding. Interest rates with these lenders will likely be higher than with traditional banks, but if your business can't meet the standards of a traditional lender, alternative lenders can be a great option. They often provide instant quotes and prequalified information online without a hard credit inquiry. This is a good way to see what kind of loan you would qualify for without committing to a loan. 

In addition to traditional banks and alternative lenders, small businesses can get funding through the Small Business Administration. The SBA has a lending program that provides various types of loans for small businesses. These loans are financed by banks, like Chase or TD Bank, and the SBA incentivizes these institutions to lend to you by guaranteeing a certain percentage of the loan. As with traditional banks, getting an SBA loan may be a longer, more difficult process than going with an alternative lender, but it's a great way to get funding from a reliable source. 

Regardless of the lender, there are a few types of small business loans to know about:

  • Term loans are more traditional loans for small businesses.
  • Revolving lines of credit generally have no defined terms and can be drawn on, paid off and drawn on again.
  • Working capital loans are generally short-term loans to help manage cash flow.
  • Invoice financing is a way to get an advance on outstanding invoices. Lenders will generally provide factoring services or provide a line of credit backed by your accounts receivable for a loan.
  • Merchant cash advances are cash advances that are paid back with daily credit card sales; these loans are also ideal for quick funding needs.
  • Equipment financing loans are tied specifically to vehicle, equipment and software purchases.

Knowing about these types of loans and what your business needs can help you make the right decision when it comes time to partner with a company.

Common Business Loan and Financing Options Questions & Answers

Have a business loan or financing option question of your own?

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