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Small-Business Term Loans: Where to Find Options

Business term loans can finance one-time investments for your small business. Your options include SBA loans and business loans from online lenders.
Steve NicastroSeptember 21, 2021
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Does your business need to purchase equipment, renovate office space or make a similar type of investment? A term loan is likely your best option, giving you the cash to grow your business.
Term loans for businesses are offered by traditional banks, credit unions and online lenders. Here’s what you need to know about term loans, including their pros and cons and how to apply for financing. It's always smart to compare small-business loans to find the right type of financing for you.

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Our pick for

Term loans from online lenders

Credibility Capital - Online term loan

Est. APR

6.99 - 24.99%

Depending on your creditworthiness and your business's financials

Min. Credit Score

650

Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.

Pros

  • Competitive rates among online lenders.
  • No prepayment penalty.
  • Extra monthly payments can save interest cost.

Cons

  • Requires high minimum credit score and revenue.
  • Requires business lien and may require personal guarantee.
  • Not available in Nevada, North Dakota, South Dakota or Vermont.
Read full review

Qualifications:

  • Minimum credit score: 650.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: $200,000.
  • No bankruptcies in the past 5 years.

Funding Circle - Online term loan

Est. APR

12.18 - 36.00%

Depending on your creditworthiness and your business's financials

Min. Credit Score

660

Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.

Pros

  • Cash can be available within 3 business days.
  • Competitive rates among online lenders.
  • No minimum revenue requirement.

Cons

  • Requires business lien and personal guarantee.
  • Not available in Nevada.
Read full review

Qualifications:

  • Minimum credit score: 660.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: None.
  • No bankruptices in the past 7 years.

OnDeck - Online term loan

Est. APR

9.00 - 99.00%

Depending on your creditworthiness and your business's financials

Min. Credit Score

600

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.

Pros

  • Cash can be available within the same business day.
  • Requires low minimum credit score.
  • Less paperwork than most lenders.

Cons

  • Fixed-fee structure means early repayment will not save interest.
  • Requires frequent (daily or weekly) repayments.
  • Requires business lien and personal guarantee.
Read full review

Qualifications:

  • Minimum credit score: 600.
  • Minimum time in business: 1 year.
  • Minimum annual revenue: $100,000.
  • No bankruptcies in the past 2 years.

Our pick for

Term loans backed by the government

SBA 7(a) loan

Est. APR

5.50 - 8.00%

Min. Credit Score

650

7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.

Pros

  • Available as a term loan or line of credit.
  • Interest rates are capped.
  • Long repayment terms available.

Cons

  • Personal guarantee is required.
  • Collateral is typically required.
  • Longer processing times than online lenders.
Read full review

Qualifications:

  • Be a for-profit U.S. business.
  • Must first use alternative financial resources, including personal assets.
  • Financial qualifications determined by individual lender.

How Much Do You Need?

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Summary of Small-Business Term Loans: Where to Find Options

LenderBest ForEst. APRMin. Credit ScoreNext Steps

Credibility Capital - Online term loan

Best for Term loans from online lenders6.99 - 24.99%650
See Your Loan Options

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Funding Circle - Online term loan

Best for Term loans from online lenders12.18 - 36.00%660
See Your Loan Options

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OnDeck - Online term loan

Best for Term loans from online lenders9.00 - 99.00%600
See Your Loan Options

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SBA 7(a) loan

Best for Term loans backed by the government5.50 - 8.00%650
See Your Loan Options

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What is a term loan?

If you have a car loan, student loan or a mortgage, then you likely already know how a term loan works. You borrow a lump of cash upfront for a specific purpose and repay the loan over a set period of time with fixed, equal payments.
Requirements, rates and speed of funding vary between banks and online lenders. Term loans range in size from $2,000 to $5 million, with annual percentage rates ranging from 6% to 99%.
Banks offer low rates on term loans, but typically carry stricter requirements — such as a strong personal credit score and high annual revenue — and take longer to fund. Bank term loans typically have long repayment terms of up to 10 years.
Online lenders offer speed and convenience, but typically carry higher costs. They also tend to have looser qualifications than banks. In addition, you can get short-term loans with repayment terms between three months and three years from online business lenders.
Both banks and online lenders provide Small Business Administration loans, which are guaranteed by the federal agency. This type of term loan provides up to $5 million and carries repayment terms of up to 25 years, depending on what the money is for. SBA loans also have some of the lowest APRs, making them a good option for long-term financing.
Like mortgages and car loans, term loans typically follow an amortization schedule. This means most of your payment goes toward paying interest at the beginning of the loan, and more toward principal near the end. Term loans can usually be repaid early to save on interest, although lenders may charge a prepayment penalty.
Term loan example: On a $100,000 term loan with a five-year repayment period at 20% APR, you’d make fixed monthly payments of $2,649 and pay total interest and fees of $58,963. Use NerdWallet’s business loan calculator to figure out the costs and repayments on a term loan.
For information on other financing options, read our guide on business loan types.

Business term loans: Pros and cons

Pros

  • You can borrow large amounts of money to finance expansion or growth.
  • Long repayment terms can make big investments more affordable.
  • Repaying term loans on time may help you build business credit.
  • Loans at online lenders can be approved and funded quickly, usually within a few days to a week.
  • Qualification requirements for online lenders may be looser than those for traditional banks.

Cons

  • Less flexibility than business lines of credit, as payments begin immediately after funding.
  • Shorter term loans may carry high costs and frequent repayments, although this depends on the lender.
  • SBA loans are low cost, but carry strict requirements and can take a while to fund.
  • Collateral may be required — this would be an asset, such as equipment or real estate, that the lender can sell if you can’t make payments.
Last updated on September 21, 2021

To recap our selections...

Small-Business Term Loans: Where to Find Options

Does your business need funding? Find your best loan options with Fundera by NerdWallet.

See Your Loan Options