The best small business loan is going to mean something different to everyone. Some want the cheapest loan they can get while others want the longest term. Both of these types of loans are typically found at your local bank, or by checking out an online SBA lender like SmartBiz.
In this article we’re going to discuss the three best online small business loans in the market today: Kabbage vs OnDeck vs Propsper. These types of loans didn’t exist 15 or 20 years ago, but the growth of the internet has created a fantastic opportunity for businesses to get the funding they need to take on new projects or to fix a specific cash flow problem.
Best Online Small Business Loan: OnDeck
If you’re making at least $100K in yearly business revenue, have been in business for at least 1 year, and have a credit score of at least 500 then you can qualify for a short term loan from OnDeck. OnDeck offers loans up to $500,000 with terms between 3 months and 3 years.
OnDeck services many different types of businesses. They are a terrific option for online and ecommerce businesses, but also work well for industries that banks don’t like to lend to. Some of these include restaurants, realty businesses, and auto shops. You can prequalify in minutes and typically are funded within 2-3 business days.
Best Small Business Loan Providers at a Glance: OnDeck vs Kabbage vs Prosper
|Loan Amount||$2,000 – $100,000||$5,000 – $500,000||$2,000 – $35,000|
|APR||40%-80%||30% – 50%||10% – 30%|
|Loan Term||6-12 Months||3-36 Months||3 or 5 years|
|Funding Time||1-2 Days||1-2 Days||1-3 Days|
|Business Revenue||$50,000+||$100,000+||No minimums, but $70,000+ is typical|
|Time in Business||9+ Months||1 Year||No requirement, but 2+ years is typical|
|Apply Now||Apply Now||Apply Now||Apply Now|
Kabbage offers a great product that can get you funded for up to $100K as quickly as 1 business day. They also offer a line of credit product that many consider to be the fasted LOC available in the market today. By simply completing an online application, you can be pre qualified with a few minutes. Loan terms range between 6 and 12 months, and only requires you to pay with one simple monthly payment.
The downsides are the same as they are with pretty much any short term loan. Their APR is typically much higher than most types of loans in the market today, which runs between 30% and 70%. Kabbage is a great service for short-term loans if speed in getting funded is more important than how expensive it is. If you’re paying back the loan quickly then it may also be a good option and an affordable total cost of capital option that can fund within a day. Read our full review of Kabbage to learn more.
OnDeck is our recommended option for short term loans because of their flexible products and great customer service. OnDeck offers loans that start as low as 6.99% for prime borrowers, which can be a great way for strong borrowers who have the capacity to repay the loan quickly gain access to capital very fast.
OnDeck’s typical APRs range from 30% to 50% for non-prime borrowers, but the application process is very simple. Much like Kabbage, all you need to do is to fill out an online application, which takes about 10 minutes, and then you connect your online accounting software to OnDeck. Once that is complete you can typically be fully approved within a few hours and funded within 1-3 business days.
Customer service is where OnDeck really shines. The staff appears to be transparent and interested in educating clients about their options, how they can help your business, and industry loans in general. Their reviews across the internet by their current customers are typically very positive, and their customers rave about the 1-on-1 attention that they get from OnDeck if they have questions or concerns. Check out our full review of OnDeck to learn more.
Peer-to-peer lending has been growing online for the last several years. An example that many people are familiar with in this space is Lending Club. However, Prosper was also one of the first peer-to-peer platforms in the marketplace. While the loans may come from a group of individuals, the company generates its income through charging borrowers one-time fees for every loan and annual fees to investors. The upside part of this approach is that any intermediary – bank or small-loan company – has been cut out. Prosper has emerged as a leader in lending fast money to small businesses with lower qualification standards, much like Kabbage and OnDeck.
A small-business owner who wants to borrow money simply needs to sign up for free and list the amount he or she needs through Prosper’s website. If the listing satisfies a loaner’s personal criteria, then the money will be transferred immediately. After that, each month, the borrower will deposit payments into the loaner’s account. It is a very smooth process that we believe works extremely well.
Propser is the most difficult to qualify for out of the whole group, and their loan maximums are much lower. Unlike the previous two, Kabbage and OnDeck, who require borrowers to have credit scores of 550 respectively 500, Prosper requires a credit score above 640 for loans between $2000 and $ 35,000. The APR averages around 11% – 12%
Prosper represents an attractive alternative to bank and credit-card loans. Interest rates are competitive, approval rates are fast, and money is directly deposited quickly. Interest is based on the current loan balance, so there is no penalty for paying the loan early. Check out our full review of Prosper to learn more.
Other Great Alternative Loan Providers for Small Business Financing
If there is no rush to get a short-term loan, small-business owners can opt for other interesting alternative options. In our opinion, there are 4 other options that might be a good fit for your business, depending on what your exact needs are, and how your business operates.
#1 Invoice Factoring
Invoice factoring represents a type of financing that is available to businesses that invoice B2B or B2G customers. Businesses can sell invoices that are due in the future to a factor, who will typically pay a percent (about 80-90%) of the funds on the invoice up front and then collects the payment for you. Once the payment is collected then the Factor will take out their fees and send you the remaining balance.
One example of such a lender is BlueVine. Founded in 2013, BlueVine is a marketplace lender whose scope is to help merchants overcome cash-flow problems. As a borrower, the small-business owner must have the company which has been operating for at least 3 months, and credit scores must be at least 530.
#2 Equipment Financing
Equipment financing is funding for the purpose of purchasing something specific. You can buy large equipment or machinery and borrow the money from an equipment lender, using that piece of equipment as collateral.
Smarter Finance USA is a lender who offers several good options to potential clients. Equipment financing rates depend on a couple of factors such as equipment costs, methods of financing, equipment age, credit, and business longevity.
#3 Inventory Financing
This is an option designed for small businesses that need money in order to purchase in ventory. The purchased goods serve as collaterals for the loan, and the purchase of inventory is the only thing that you can use the funds for.
Our recommended inventory financing company is Behalf. You can get a 6 month loan of up to $50,000 within a few days. Behalf doesn’t require a minimum credit score and their rates are about 40%.
#4 Merchant Cash Advance
A Merchant Cash Advance (MCA) constitutes an expensive alternative for borrowers with poor credit who also process a lot of credit card sales. An MCA is not a loan, but an advance on credit card sales that is paid back daily. The amount you pay each day depends on how many credit card sales you process for the day. This can hurt your cash flow moving forward if you rely heavily on your credit card revenue. Our recommended lender is RapidAdvance because they are the most affordable MCA option. However, this should only be a last resort financing option.
The Smart Hack
If you’re looking for the best small business loan then you’re likely wanting the convenience of an online lender. A short term business loan can be a great option for businesses who need money quickly. Its an option that even works for prime borrowers who have the capacity to pay back the loan quickly. Each of the loan providers we’ve covered in this article are good options depending on what your business needs are.
If you need a quick business loan or don’t want to go through the headaches of dealing with a traditional bank, then a loan from OnDeck is probably your best option. After reviewing many companies, we consider OnDeck to be a little bit ahead in flexibility, costs, and customer service. An OnDeck loan is easier to qualify for than a traditional bank loan, and the process is quicker and easier as well. Visit them today to see how much you qualify for because it only takes about 10 minutes and you can be funded in 1-3 business days.