If you’re starting a business, it’s virtually impossible to get a loan in your company’s first year. Lenders require cash flow to support repayment of the loan, so startups are typically immediately disqualified from financing.

Instead, you’ll have to rely on business credit cards, borrowing from friends and family, crowdfunding, personal loans or a microloan from a nonprofit lender. Here’s more information on startup business loans. For businesses with a year or more of history and revenue, you have more financing options, including SBA loans, term loans, business lines of credit and invoice factoring.

You can get small-business loans from several places, including banks, nonprofit micro-lenders and online lenders. These lenders offer products including term loans, lines of credit and accounts receivable financing.

You should approach small-business-loan shopping just as you would be shopping for a car, says Suzanne Darden, a business consultant at the Alabama Small Business Development Center.

Once you determine which type of lender and financing vehicle are right for you, compare two or three similar options based on annual percentage rate (total borrowing cost) and terms. Of the loans you qualify for, choose the one with the lowest APR, as long as you are able to handle the loan’s regular payments.

USE ONLINE LENDERS WHEN:

-          You lack collateral.

-          You lack time in business.

-          You need funding quickly.

Online lenders provide small-business loans and lines of credit from $500 to $500,000. The average APR on these loans ranges from 7% to 108%, depending on the lender, the type and size of the loan, the length of the repayment term, the borrower’s credit history and whether collateral is required. These lenders rarely can compete with traditional banks in terms of APR.

HOW LONG HAVE YOU BEEN IN BUSINESS?

In addition to your credit score, lenders will consider how long your business has been operating. You need to have been in business at least one year to qualify for most online small-business loans and at least two years to qualify for most bank loans.

CAN YOU MAKE THE PAYMENTS?

Look carefully at your business’s financials — especially cash flow — and evaluate how much you can reasonably afford to apply toward loan repayments each month. Some online lenders require daily or twice-monthly repayments, so factor that into the equation if that’s the case.

For example, if your business’s income is $10,000 a month and you have $7,000 worth of expenses including rent, payroll, inventory, etc., the most you can comfortably afford is $1,000 a month in loan repayments.

Compare small-business loans

We offer a list of 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.

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