Best small business loans for $100,000 or less

Business loans for $100,000 or less can be obtained from almost any lender, but loans from banks and credit unions typically come with lower interest rates and stricter rules of approval, whereas loans from online and alternative lenders may cost you more but approval rules are easier. As a rule of thumb, the larger the sum you are trying to borrow, the harder lenders will look at your business and your application.

How to improve your chances of getting approved

You can improve your chances of getting approved for a $100k or less business loan by preparing in advance. Key tasks to take care of include:

• Identify your need for the loan. Why do you need the money? You must present a strong case for funding to secure a large business loan and your financial records must support this need, indicating how the loan will deliver your plan – and critically, how you will pay the loan back. 
• Check your personal and business credit scores. It is common for mistakes to occur on credit reports. Incorrect information could have an adverse impact on your loan application. Note that business credit scores are usually graded from 1 to 100 and are different than personal scores. A good business credit score is 80+. Additionally, not all organisations will have a business credit score, in which case, the lender will scrutinise your personal credit report. Ensure it is correct. If there are errors, get them fixed before applying for your loan – and be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.
• Get your paperwork in order. Lenders will need to see bank statements (at least 18 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, documents that reveal the structure of your business (corporation, LLC, etc.), certificates of good standing, tax statements and more. 
• Collateral. Lenders like to know they can get their money back if things go wrong. Often this means you must provide security for the loan – collateral – usually in the form of real estate or some other hard asset that the lender can sell to recover their funds if the worst should happen. If you don’t have sufficient collateral yourself, you could ask a cosigner who has real estate or other assets to join the deal. Most lenders will want collateral to the full value of the loan and will usually consider provided assets at less than general market rates – known as the ‘distress value’ – as they may need to sell the assets quickly, often by auction where values tend to be lower.
• Build a good business plan and pitch. This goes back to your need for the loan. Depending on how much you are asking for, lenders will expect a detailed and insightful business plan that explains why you need the funds and what they will do for your business once you have them. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. If you cannot produce a business plan yourself, it may be worth paying an external service to do this for you. 

What affects your chances of getting a business loan?

Business loan applications can be affected by a number of different factors:

• Credit score – typically you need 80+ for business credit and 550+ for personal credit (600+ with many major banks and credit unions)
• Length of time in business – start-ups and very young businesses will find it more difficult to secure a business loan
• Business track history – this means having a strong financial record and a habit of paying your debts on time
• The type of industry you operate in – some business sectors are riskier than others
• Sufficient documentation – lenders will need to see accurate and up to date records
• Use of funds – what you want the money for is important. Lenders will usually want to see the funds will be used to power growth