Online Business Loans: What They Are and Where to Find Them

Shopping for small-business loans sometimes involves trade-offs.

You could shoot for a bank loan guaranteed by the Small Business Administration with a low interest rate, but you’d have to wait months for the money.

Or you could try online business loans, aiming for a short-term lending that would be funded within days, even a few hours. The requirements typically are easier to meet, but you’ll pay for the speed and convenience with a higher annual percentage rate.

Why online lending?

Online business loans are playing an important role as banks have scaled back on loans to small businesses over the past decade. Small-business loans made up nearly half of all bank loans in 1995; that share had dropped to about a third in 2012, according to a Harvard Business School study. Small banks still fill a key role, meeting some of the financing needs of 76% of applicants, a 2015 Federal Reserve Bank survey shows. Large banks have been less generous than smaller lenders, approving only 58% of applicants.

Meanwhile, in a sign of the sector’s growth, online business lenders had the second-highest loan approval rate, at 71%. Alternative lenders use algorithms based on traditional credit standards, such as personal credit score and cash flow, as well as nontraditional metrics, including social media presence and payments to vendors, to underwrite loans, lines of credit and accounts-receivable financing.

Online lending isn’t for everyone, however. If you’re just starting out, you probably won’t qualify. You’ll have to consider other options, including borrowing from friends and family, microloans, crowdfunding and business credit cards. But if you’ve been in business at least a year and need quick access to cash or can’t qualify for a bank loan, online business loans are worth exploring.

Although you can find many small-business financing alternatives by surfing the Web, the choices can be confusing. NerdWallet prepared this guide to help you decide. We’ve made our picks based on lender trustworthiness, market scope and user experience, among other factors.

Choose your business’s age and monthly income

From the options below, select the number of years you have been in business and the revenue your business makes each month to find out what loans and funds you may qualify for:

Less than 1 year; under $4,000

Less than 1 year; over $4,000

1 to 2 years; under $12,000

1 to 2 years; over $12,000

More than 2 years; under $6,000

More than 2 years; over $6,000

For businesses less than a year old, making under $4K a month

Funding options	Good option if:	Time to get funds	Amounts	Rates and fees	Repayment period
Business credit cards Apply now	You own a business with low revenue	2 - 3 weeks	$5,000 - $50,000	12.9% - 29.9% APR	Monthly payments
Apply now	You have a credit score of at least 640 You don't need funds immediately	Preapproval in seconds; full approval and funding in 2-14 days	$2,000 - $35,000	6% - 36% APR	3 or 5 years
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 - 3 days	$500 - $30,000	44%- 64% APR	12 weeks

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For businesses less than a year old, making over $4K a month

Funding options	Good option if:	Time to get funds	Amounts	Rates and fees	Repayment period
Apply now	Your business is 6 months to 1 year old and you have $100K in annual revenue Revenue requirement drops to $25K after business is 1 year old	1 - 5 days	$2,000 - $100,000 Loan cannot exceed 20% of your annual revenue	8% - 40%	3 months to 3 years
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 hour - 1 day	$5,000 - $250,000	23% - 61% APR	1 - 12 weeks
Apply now	You have a credit score of at least 640 You don't need funds immediately	Preapproval in seconds; full approval and funding in 2-14 days	$2,000 - $35,000	6% - 36% APR	3 or 5 years
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 - 3 days	$500 - $30,000	44%- 64% APR	12 weeks

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For businesses 1-2 years old, making under $12K a month

Funding options	Good option if:	Time to get funds	Amounts	Rates and fees	Repayment period
Apply now	You need cash quickly You're able to make daily or weekly repayments	As fast as 24 hours	$5,000 - $500,000	9%- 98% APR	3 months to 3 years
Apply now	You need cash quickly You have annual revenue of at least $25,000	1 - 5 days	$2,000 - $100,000	8% - 40% APR	3 months to 3 years
Apply now	You need cash quickly You prefer monthly payments	A few minutes to several days	$2,000 - $100,000	32% - 108% APR	6 or 12 months
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 hour - 1 day	$5,000 - $250,000	23% - 61% APR	1 - 12 weeks
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 - 3 days	$500 - $30,000	44%-64% APR	12 weeks

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For businesses 1-2 years old, making over $12K a month

FUNDING OPTIONS	Good option if:	Time to get funds	Amounts	Rates and Fees	Repayment period
Term loan Apply now	You need to finance a one-time purchase You are profitable You can put up collateral and a personal guarantee	Average of 10 days	$50,000 - $250,000	11% to 28% APR	6 months to 4 years
Asset-based line of credit Apply now	You have outstanding invoices You are profitable You can put up collateral and a personal guarantee	Average of 10 days	Up to $500,000	11% to 22% APR plus prime rate	6 months per draw
Apply now	You need cash quickly You are able to make daily or weekly repayments	As fast as 24 hours	$5,000 - $500,000 for term loans	9%- 98% APR for term loans	3 months to 3 years
Apply now	You need cash quickly You prefer monthly payments	A few minutes to several days	$2,000 - $100,000	32% to 108% APR	6 or 12 months

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For businesses over 2 years old, making under $6,000 a month

Funding options	Good for you if:	Time to get funds	Amounts	Rates and fees	Repayment period
Apply now	You need cash quickly You prefer monthly payments	A few minutes to several days	$2,000 - $100,000	32% - 108% APR	6 or 12 months
Apply now	You need cash quickly You have at least $25,000 annual revenue	1 - 5 days	$2,000 - $100,000	8% - 40% APR	3 months to 3 years
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 hour - 1 day	$5,000 - $250,000	23% - 61% APR	1 to 12 weeks
Apply now	You have outstanding invoices from customers You want an advance on unpaid invoices rather than a traditional loan	1 - 3 days	$500 - $30,000	44% - 64% APR	12 weeks

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For businesses over 2 years old making over $6K a month

Funding options	Good option if:	Time to get funds	Amounts	Rates and fees	Repayment period
Apply now	You can wait to get cash at a better rate You want a long payback period Your personal credit score is 600+ You can put up collateral, personal guarantee	1 week and up	$30,000 - $350,000	7% - 8% APR	10 years
Apply now	You can wait to get cash at a better rate Your personal credit score is 600+ You own at least 20% of your business You can put up collateral, personal guarantee	1-2 weeks	$5,000 - $300,000	8% - 32% APR	1 to 5 years for term loans; 25 months for lines of credit
Term loan Apply now	You need to finance a one-time purchase You are profitable You can put up collateral and a personal guarantee	Average of 10 days	$50,000 - $250,000	11% to 28% APR	6 months to 4 years
Asset-based line of credit Apply now	You have outstanding invoices You are profitable You can put up collateral, personal guarantee	Average of 10 days	Up to $500,000	11% to 22% APR plus prime rate	6 months per draw
Apply now	You can wait to get cash at a better rate You have personal credit score of 620+ You can put up collateral, personal guarantee	Less than 10 days	$25,000 - $500,000	8% to 33% APR	1 - 5 years
Apply now	Your personal credit is 600+ You can put up collateral, personal guarantee You have at least three employees	3-5 days	$20,000 - $500,000	8% to 30% APR	1 - 4 years

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Benjamin Pimentel is a staff writer at NerdWallet, a personal finance website. Email: bpimentel@nerdwallet.com. Twitter: @benpimentel.

This article was updated. It was originally published Aug. 4, 2015.