Small Business Loans: Types, Rates, and How to Qualify in 2026

Table of Content

• Key takeaways
• What are small business loans and how do they work?
• Types of small business loans
• Options for women- and minority-owned businesses
• How to choose the right small business loan
• How to qualify for loans for small businesses
• Can you get a small business loan with bad or no credit?
• How to apply for loans for small business owners
• Emergency loans for small businesses
• Other options to consider
• Frequently asked questions

Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice.

What Are Small Business Loans and How Do They Work?

A small business loan is a financing option designed to help small business owners cover operating costs, purchase inventory, or refinance existing debt. Some loans for small businesses have long repayment terms of up to 25 years, while other options are designed for short-term cash flow gaps and come with repayment periods of 6 months or less.

Loan amounts can range from $500 to $5.5 million, depending on the loan type, lender, and your business credit and revenue. The money may arrive in your company’s bank account as a lump sum or as a revolving line of credit that you can use up to a specific limit.

Types of Small Business Loans

There are 6 main types of small business loans, each with its APR ranges, requirements, and terms.

SBA Loans

SBA loans are loan products backed by the Small Business Administration (SBA). They are offered through authorized private lenders, including banks and credit unions, and the SBA guarantees a portion of the debt, which means the government will pay the lender if you default on payments. As this reduces lenders’ risks, SBA-backed loans often have lower APRs and more favorable terms.

The SBA requires a personal guarantee from anyone owning at least 20% of the company. Each guarantor is personally responsible for repayment. The money can be used to fund day-to-day operations and business expansion.

There are three key types of SBA loans.

Loan Type	Best For	Max Amount	Repayment Terms	Interest Rate (APR varies by fees)
SBA 7(a)	Working capital, expansions, refinancing, real estate, equipment, furniture, and more	$5 million	Up to 25 years for real estate Up to 10 years for equipment	9.75%–13.25% as of July 2026 (calculated as base prime rate plus 6.5%, 6.0%, 4.5%, or 3.0%, depending on the loan amount)
SBA 504	Major asset purchases — real estate, machinery, equipment	$5 million ($5.5 million for manufacturers and qualifying energy-efficiency projects)	10, 20, or 25 years	Fixed, pegged to an increment above the current market rate for 10-year U.S. Treasury issues
SBA Microloan	Startups and early-stage companies with modest financial needs	$50,000	Up to 7 years	Generally between 8% and 13%, depending on the intermediary lender

Note: Actual APR will be higher due to SBA guarantee fees, packaging fees, and other charges. Prequalify with a lender for a full APR disclosure.

Business Term Loans

A business term loan is a financing product that provides you with a fixed amount that needs to be repaid with interest over a set period. Loan amounts range from $5,000 to $5 million, with APRs ranging from 6% to 100%+. Alternative online lenders may charge higher APRs.

Repayment terms can be from 6 months to 7+ years. Entrepreneurs can use them for a wide range of purposes, including working capital needs, real estate purchases, debt consolidation, and seasonal cash flow needs.

Lines of Credit

Lines of credit (LOCs) work similarly to credit cards. They allow you to access the funds up to the approved limit and pay interest only on what you actually use. While credit cards usually have a grace period that allows you to save on interest once you repay your balance before the period ends, most LOCs accrue interest from the day you make a withdrawal.

There are 2 common types of LOCs available to small businesses:

• Revolving. This is a line of credit you can access multiple times once you repay what you used. It has a higher interest rate than non-revolving facilities, because the lender must keep the credit available indefinitely. Credit limits vary widely by lender and creditworthiness.
• Non-revolving. A non-revolving line of credit does not replenish as you repay. Once drawn down, the credit is gone and you cannot borrow again from the same facility. Due to lower risks, companies offering it usually set lower interest rates.

LOCs can be either secured or unsecured. Interest rates typically range from 8% to 25% or more, depending on creditworthiness and lender type. Prime borrowers at traditional banks may see rates as low as 8%–10%, while online and alternative lenders often charge 25% or above.

Equipment Financing

Equipment financing refers to any type of loan used to purchase equipment, including machinery, vehicles, technology, or furniture. The assets you buy are used as collateral for a loan, meaning that a lender can repossess them if you default.

Terms and rates vary by lender. Typical repayment periods are 2–7 years, with SBA-backed options offering longer terms of up to 10 or 25 years. Interest rates usually range from 5% to 45%.

Invoice Factoring

Invoice factoring is technically not a loan (it’s the sale of receivables), but it is a useful option for small businesses with outstanding invoices that need cash before clients pay. If you have a pending invoice, you can sell it to a factoring company. It will advance you a portion of the invoice value, typically 70–90%*, and assume the obligation to collect.

The factoring company will then send you the remaining amount and charge a fee for its services (1%–5%* per month or per invoice period). To put this in perspective, a 3% monthly fee on a 30-day invoice is equivalent to roughly 36% annualized — factor this into your cost comparison.

There are 2 common types of factoring:

• Recourse. You are liable for any unpaid invoices. In turn, you get better terms and up to 90%* of the invoice value in cash.
• Non-recourse. The factoring company absorbs the risk of debtor insolvency, though you may still be liable for invoices unpaid due to disputes or fraud. You also get a lower portion of the invoice value (usually 60–70%*).

Besides the service fee, you may incur application and invoice processing fees.

*Rates and advance percentages vary significantly by factoring company and industry.

Microloans

Microloans are small business loans of up to $50,000 that can be used for a wide range of business needs, including building working capital, purchasing inventory, or covering initial start-up expenses.

Beyond SBA-backed microloans, there are products offered by non-profits and private lenders. Programs can focus on specific types of entrepreneurs, such as women-owned businesses, businesses in underserved communities, or veteran-owned businesses. Sometimes, lenders may offer specific microloans for marketing, financial counseling, traveling, and technical assistance purposes.

Options for Women- and Minority-Owned Businesses

Small business loans for women are available through the SBA’s Office of Women’s Business Ownership (OWBO), which coordinates training, counseling, and access to financing through a nationwide network of Women’s Business Centers (WBCs).

Minorities can get support through 2 key SBA programs: the 8(a) Business Development program and the HUBZone program.

The 8(a) program is a 9-year business development initiative designed to help socially and economically disadvantaged entrepreneurs expand their businesses in the federal marketplace. The HUBZone program targets businesses in historically underutilized zones, with a goal of awarding at least 3% of federal contract dollars to HUBZone-certified companies each year.

How to Choose the Right Small Business Loan

Each entrepreneur has their own reasons for borrowing. That means there is no one-size-fits-all solution. When choosing the loan option for your particular needs, consider the following factors:

• How much money you need. Knowing the exact amount helps you choose a loan with a suitable borrowing limit. Calculate it carefully before you start shopping around to better understand whether a lender you’re considering can meet your needs.
• What you need the funds for. Each loan option works best for its specific purpose. Revolving LOCs can fit if you want to cover ongoing needs or projects with uncertain costs. For larger purchases, such as equipment or real estate, consider equipment financing or SBA-backed loans. If you want to cover small expenses or operating costs, microloans can provide you with a suitable amount.
• Your business’s revenue, assets, and credit score. These are 3 factors lenders consider when determining your creditworthiness and loan eligibility. Stable revenue and good credit allow you to access more options on favorable terms.
• Interest rates and fees. To understand the real cost of borrowing, look at the APR that includes interest and any fees associated with your loan. Then, watch for extra charges that may apply under certain conditions, such as late fees or prepayment penalties.
• Repayment options. If you need a large amount, pick a longer loan term to prevent financial strain due to high monthly payments. However, look at the total cost of your loan, since the longer loan term results in more interest paid over time. Choose a repayment period that balances both.
• Collateral. Some small business loans may require collateral, so make sure you understand the risk and are ready to pledge an asset. If you fail to repay, the lender may repossess your property.

How to Qualify for Loans for Small Businesses

Most lenders expect you to meet the following criteria:

Credit score

Traditional lenders will require a score of 670 or more to approve your application. SBA usually does not set minimum credit score requirements for its loans, but authorized lenders often ask for a score of at least 650. Some options, such as microloans, can be obtained with bad or no credit, though they usually have higher interest rates and shorter repayment terms.

Time in business

Traditional lenders require at least 2 years of operating history. Startups and early-stage companies can consider SBA Microloans or products offered by nonprofit organizations designed specifically for newer ventures.

Annual revenue

Lenders want to see your business generate enough income to handle repayments comfortably. Most will require a minimum annual revenue of $50,000–$100,000. Be ready to provide the last 2 years of business tax returns, recent bank statements, and formal financial statements, such as a Profit and Loss (P&L) statement, balance sheet, and cash flow statement, to verify it.

Debt-service coverage ratio

This metric measures your ability to cover debt obligations. Lenders analyze your operating income to see whether it’s enough to safely make loan payments. Your DSCR is calculated by dividing your net operating income by the total debt service. A ratio of 1.25 or higher is typically considered acceptable.

Collateral

Some loan types may require collateral. For example, SBA 7(a) loans over $350,000 require you to pledge an asset where available. For smaller amounts, lenders may still request it at their discretion. On top of that, SBA-backed lenders ask for a personal guarantee from owners who hold 20% or more in shares.

Business plan

Particularly relevant for startups, a good plan demonstrates financial viability and a clear repayment strategy. Lenders use it to assess how you will use the funds and whether the business model is sustainable.

Can You Get a Small Business Loan with Bad or No Credit?

Yes, it’s possible. While traditional banks often set strict minimum credit score requirements, alternative and online lenders are more forgiving of bad or no credit. Instead, they are usually focused on your business’s revenue and cash flow. However, their interest rates are likely to be higher compared to traditional options.

There are also SBA-backed options offered through nonprofit community-development organizations. As they are mission-driven, they typically don’t place much weight on your credit score and also offer educational support.

How to Apply for Loans for Small Business Owners

The process depends heavily on the lender and the loan type you choose. Here are common application steps:

1. Check your credit. Your business credit score determines your eligibility and whether you qualify for the loan type you are considering. You can check it through business financial platforms like Nav or request information directly from the three major commercial bureaus: Dun & Bradstreet, Experian, and Equifax.
2. Choose the right loan type. Follow our guide to determine what type of small business loan meets your needs based on your loan purpose and the amount you need.
3. Research and compare lenders. Don’t go with the first offer. Compare terms across multiple lenders. Banks and credit unions generally offer lower rates, though the fastest options typically come from online lenders at a higher cost. Avoid predatory lenders offering guaranteed approvals or hiding fees in the fine print.
4. Assess eligibility. Pay attention to the lender’s requirements before applying to ensure you can meet them. Not only does your business credit score play a role, but also the annual revenue, years in business, and sometimes your assets.
5. Gather your documents. Check what paperwork your particular lender requires. You will likely need a business plan, tax returns for the last 2 years, bank statements, financial statements, legal registration documents, and personal information of all owners with stakes of 20% or more.
6. Submit your application. Many lenders offer online applications, but some may require you to visit their branch in person, especially if you are applying for a secured loan. After submitting, follow up within a day or two if you haven’t heard back. A loan officer should be able to confirm your status and flag any missing documents.
7. Review and sign the agreement. If approved, the lender will get back to you with a loan offer. Evaluate the terms carefully, paying special attention to APRs, extra fees, the repayment period, collateral requirements, and other details. If you’re comfortable with the terms, sign the agreement.
8. Get the funds. The money is typically deposited into your business bank account. Funding times may vary by lender but are typically 1–3 business days.

Emergency Loans for Small Businesses

If you need fast cash and none of the options considered above meet your needs, emergency business loans may help. These loans range from small short-term products (typically up to $50,000) to options with larger amounts and longer repayment terms. Funding timelines vary but some lenders can disburse within 1–3 business days. Here are a few common emergency loan products available to small businesses:

Personal Loans

A personal loan allows you to borrow money as an individual. It works similarly to a business term loan, providing you with a lump sum amount for a wide range of purposes. You then repay the money plus interest in fixed monthly installments.

Loan amounts typically range from $1,000 to $50,000, with some lenders offering up to $100,000. Repayment terms are usually 12–84 months. Personal loans have fixed APRs that are generally between 6% and 36%, but higher APRs are possible in states where it’s allowed. Instead of assessing your business revenue and stability, lenders verify your personal credit score, income, payment history, and employment stability.

Keep in mind that some lenders may prohibit using personal loan funds for business expenses, so read the agreement carefully or ask your lender directly before signing a contract.

SBA Economic Injury Disaster Loans (EIDLs)

EIDLs are loans designed to support eligible small businesses and private non-profits in declared disaster areas. They provide financing for day-to-day operating expenses when businesses incur losses from disasters, even if there is no physical damage.

The maximum amount you can get with the EIDL is determined by the SBA based on the actual economic injury (up to $2 million in federally declared disaster areas, based on verified economic injury). There is a payment deferral over the first 12 months, with no interest accruing during this period. Then, an interest rate will not exceed 4%. The repayment period can be up to 30 years.

Emergency Bridge Loans

Emergency bridge loans are short-term, temporary financing designed to provide quick cash to businesses or individuals facing an urgent financial gap. These loans can be issued by state agencies, local community foundations, and private lenders.

Terms vary widely, depending on the issuing agency or company. For example, the Florida Small Business Emergency Bridge Loan Program provides short-term, 0%-interest working capital loans of up to $50,000 for up to 12 months, while the Wyoming Small Business Emergency Bridge Loan Program offers loans of up to $750,000 for a maximum period of 3 years, with interest rates determined by the State Loan and Investment Board (SLIB) Rules, Chapter 14.

Other Options to Consider

Borrowing is not always the best solution. If you do not want to take on debt, look at the following alternatives:

• Negotiating with suppliers. If you have trouble paying your invoices, ask suppliers to extend standard Net 30 terms to Net 45 or Net 60, or negotiate a consignment model where you only pay after an item is sold. A brief, honest explanation often goes a long way when requesting extended terms.
• Grants. Various grants are offered to small business owners. Some of them target specific types of entrepreneurs or social groups, for example, IFundWomen Coaching + Grants and the Visa She’s Next program for women and the NAACP Powershift Entrepreneur Grant for black entrepreneurs. Others, such as the Lenovo Evolve Grant, are available to businesses based on their location and annual revenue.
• Nonprofit credit counseling services for businesses. If you are struggling with debts or need a new loan to refinance or consolidate existing ones, turn to a professional credit counselor. Instead of taking on more debt, they can help you create a debt management strategy and negotiate with creditors for interest rate reductions or flexible payment plans..

Frequently Asked Questions

How can I get a business loan with no prior credit history?

Some loan options may have little to no credit score requirements. For example, SBA microloans or products offered by online lenders are more focused on your revenue, assets, and the ability to repay on time. However, expect higher APRs and fees, lower borrowing limits, and shorter repayment terms.

Are small business loans secured or unsecured?

Small business loans can be either secured or unsecured. The actual terms depend on the lender, the loan type you choose, your business credit, assets, and revenue.

Are small business loans installment or revolving?

Loans typically have an installment structure, meaning that they are repaid over a set period in fixed monthly payments that cover both principal and interest. A revolving structure typically refers to lines of credit that you can also obtain for business purposes.

Are there any small business loans that don’t require personal guarantees?

Personal guarantees are usually required for most business loans, including SBA loans. Options without personal guarantees exist, but they usually require collateral or are offered based on revenue or invoice value.

How many SBA loans can you have?

There is no strict limit on the number of SBA loans a small business can have at one time. However, there are dollar caps that effectively limit total borrowing exposure. For example, the SBA 7(a) program has a maximum outstanding balance of $5 million, while the SBA 504 program caps the balance at $5.5 million.

What’s the difference between a small business loan and a credit card?

A small business loan provides a lump sum that you repay with interest over a fixed period. A credit card is a revolving line of credit you repeatedly draw from up to a set limit, paying interest only on what you use.

Loans work better for large, one-time expenses. Credit cards may be a better choice for ongoing expenses and projects where flexibility matters more than a fixed repayment schedule.

Are there any business loans for women with bad credit?

Yes. Bad credit limits your options, but it doesn’t eliminate them. Consider SBA Microloans, products from nonprofit lenders, and loans offered by CDFIs. Instead of relying solely on your credit score, they evaluate overall ability to repay. As a female entrepreneur, you may also qualify for dedicated programs that are backed by the SBA’s Women’s Business Centers.

What unsecured short-term loan options are there for small businesses?

Common options available without collateral include business term loans, lines of credit, microloans, personal loans, and emergency loans.