Your small business is a hit. Now you want to reinvest in your company, open another location or hire more staff. But what if your cash is tied up and bad credit or tough requirements are keeping you from getting a business expansion loan from a bank?
Online small-business lenders can fill the funding gap left by banks, and they typically offer higher approval rates and faster funding. However, they often charge more for financing in return for that speed, convenience and easier approval.
When comparing expansion loans, analyze your project to make sure profits will exceed the total cost of the loan. Below, we compare some of the best business expansion loans:
- If you need cash now for a short-term growth opportunity
- If you want a low-cost SBA loan for long-term expansion
- Low-cost options if you don’t qualify for an SBA loan
If you need cash now for a short-term growth opportunity: OnDeck
The main benefits of OnDeck’s loans are speed and convenience. The application process takes about 10 minutes and can be completed online or over the phone. Applicants may receive funding as fast as 24 hours but more typically in a few days to a week. To apply, you’ll need your business tax ID number, Social Security and driver’s license numbers, and credit card and bank statements.
A term loan of up to $500,000 is a better choice for an expansion than OnDeck’s line of credit, which is more appropriate for managing cash flow or unexpected costs.
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Before you apply for an OnDeck loan, find out whether you meet the lender’s minimum qualifications.
Do I qualify? ▾
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If you want a low-cost SBA loan for long-term expansion: SmartBiz
SmartBiz uses its online platform and streamlined application process to provide SBA loans at a much faster pace than traditional banks. Loans typically take at least a week to get funded.
SmartBiz loans have a 10-year repayment term, so your total monthly payment is much smaller than with other online lenders. With an APR of 7% to 8%, it’s also one of the cheapest business loans you’ll find, which makes SmartBiz a solid choice when you want a loan for a large business acquisition, to purchase real estate or to refinance existing debt.
Required paperwork for the application includes two years of business and personal tax returns, a lease agreement, photo of your driver’s license, and a home mortgage statement.
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Before you apply for a SmartBiz loan, find out whether you meet the lender’s minimum qualifications.
Do I qualify? ▾
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If you can’t qualify for an SBA loan, two low-cost options: Funding Circle, Fundation
At Funding Circle, you can borrow from $25,000 to $500,000, with repayment terms of one to five years and APRs ranging from 8% to 33%. The lender doesn’t impose prepayment penalties. Many Funding Circle clients use the funds for expansion, the company says, borrowing on average $120,000 and repaying over a three-year period.
All of Funding Circle’s loans require collateral, although a wide range of assets qualify, such as home equity, equipment, accounts receivable and cash savings or deposits. The company also requires a personal guarantee.
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Before you apply for a Funding Circle loan, find out whether you meet the lender’s minimum qualifications.
Do I qualify? ▾
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Fundation is also a good option for a large expansion if you don’t qualify for a SBA loan. The online lender provides fixed-rate term loans up to $500,000, with repayments made twice per month over a period of one to four years. It’s a much faster application process than with traditional banks; the online application can be completed in less than 10 minutes. Borrowers typically receive funds within three to five days of loan approval, according to the company.
Besides its minimum qualification requirements, Fundation also requires a personal guarantee and takes a lien on business assets. Unlike other online lenders, Fundation requires that your business have at least three employees.
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Before you apply for a Fundation loan, find out whether you meet the minimum qualifications.
Do I qualify? ▾
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Want to compare more small-business loan options?
NerdWallet has created a comparison tool for the best small-business loans to meet your needs and goals. We gauged lender trustworthiness and user experience, among other factors, and arranged lenders by categories that include your revenue and how long you’ve been in business, so that you know which loans you qualify for.
Compare business loans
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
This article was updated June 13, 2016. It originally published Aug. 24, 2015.
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