Whether you want to buy new equipment, expand to a new location, or purchase additional inventory, you may one day need a bank loan for your business. But do all banks offer small business loans?
The short answer is that most banks include business loans in their products. Exceptions are investment banks such as Goldman Sachs and especially small banks and credit unions.
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How do you choose the right bank with thousands of options? Your choices range from major national banks like Bank of America; to small, local banks like Oakwood Bank of Texas, possibly the smallest bank in the country; to credit unions such as Suncoast Credit Union. And some banks even operate completely online.
Banks versus other lenders
Whether you are applying for a business loan from a bank, credit union or online lender, as a small business you need to determine what type of loan you want, such as commercial real estate, equipment financing or line of credit. Not all banks offer all types of business loans.
You’ll also want to review the lender’s requirements. They can evaluate things like annual sales, your business plan, and your credit score.
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Banks often set stricter requirements than online and alternative lenders. Often they require at least two years of experience; many online lenders want between six months and a year. They may also require a higher personal credit score and even an established business credit score.
However, having a corporate banking relationship with a bank can help build trust and increase your chances of being approved.
|Approval rate, February 2023||Change from January 2023||Change from February 2022|
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Business loans from major banks
When considering a bank for a business loan, some people automatically think of major national banks such as Bank of America, PNC Bank, TD Bank, US Bank or Wells Fargo.
As of February 2023, these banks were approving small business loans at a rate of 14.2 percent, according to Biz2Credit. This is 0.2 percent less than in January and 0.5 percent less than a year ago, in February 2022.
Although these banks often have strict qualification requirements, they also often offer large amounts, low rates and years of expertise in handling business loans.
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Business loans from small banks
While the major banks listed above are well known, there are thousands of smaller banks – local, regional or community banks – across the country.
Small banks are approving business loans at a higher rate – 21.3 percent as of February. While the small bank approval rate fell 0.1 percent from January, it rose 0.8 percent from the previous year.
Smaller banks may not have the financial resources of the Big Five, but they may be more willing to partner with fellow local businesses, especially if you have a previous banking relationship.
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Business loans from credit unions
Small business owners should not overlook the options offered by credit unions. There are more than 4,800 credit unions in the country, many of which offer small business loans.
In February, credit unions approved small business loans at a rate of 20.0 percent, down 0.1 percent from January and 0.7 percent from February 2022.
You may need to be a member to secure a loan from a credit union. But because credit unions operate as nonprofits, you can find better rates and lower fees with them than many other credit unions.
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it comes down to
Between major national banks, small local/regional banks and credit unions – both physical and online – there are thousands of options if you are looking for a business bank loan.
The key is to compare options and evaluate each institution’s credit requirements.
Start by looking at where you do your business banking, as your existing relationship can increase your chances of getting a loan. Next, compare the terms, interest rates, and fees of several other banks. Compile the requested documents and you may be on your way to securing your small business bank loan.