-
- Bussiness Loans
- Business Credit Cards
- Business Checking
- Accounting Solutions
- Business Formation
- Business Insurance
- Business Grants
-
Blog
BUSINESS CREDIT CARDS
BUSINESS LOANS
Additional Topics
BUSINESS CREDIT CARDS
BUSINESS LOANS
Additional Topics

Bank loans
Banks are the largest business lending institutions and probably the first place you think of when getting a small business loan. While bank term loans are some of the lowest-cost types of financing available, it can sometimes be difficult to qualify: many require high credit scores and longer time in business than alternative lenders do. But if you are able to qualify for a traditional bank loan, it can be an affordable way to maintain cash flow or get funds to expand your business.
Bank Loan Details
LOAN AMOUNTS
$250,000 – $1 million
INTEREST RATES
4% – 13%
REPAYMENT TERMS
3 – 25 years
TURNAROUND TIME
2 weeks – 6 months
Pros
- Very low, fixed interest rates
- Predictable monthly payments
- Helps build business credit
- Professional banker relationship
- Lending available for many uses
Cons
- Lengthy paperwork
- Longer wait time
- Requires strong credit
- Usually requires specific collateral
Banks usually require strong personal and/or business credit scores, a personal guarantee, collateral, and healthy financials. And applying also takes serious effort and time: the whole process can last about one to three months.
Still, if you are able to qualify for a traditional bank loan, it can be an affordable way to maintain cash flow or get funds to expand your business.
Get to know Bank Loans
Gerri Detweiler • January 7, 2021
How Do Bank Loans for Business Work?
A business loan works much as a personal loan does. Business loans are offered by banks (as well as other lenders) who, in exchange for the money they lend you, will charge interest on top of the loan amount and possibly an origination fee or annual fee. Typically, business term loans are paid back over a set amount of time, with regular repayments deducted from your business checking account. Lines of credit work similarly to credit cards.

Need more money? Sign up for Nav to see what options are available.
Get StartedWhat You Need to Know About Bank Financing for Business Loans
As a long-term financing option, traditional bank loans have a lot going for them. At the same time, there are a few drawbacks you should be aware of before diving in.
Pros of Bank Loans
Pros
- Very low, fixed interest rates
- Predictable monthly payments
- Helps build business credit
- Professional banker relationship
- Lending available for many uses
Traditional bank loans typically have lower interest rates than other financing options like credit cards, payday loans, or short-term loans from online lenders. And you may build your business credit when you make on-time payments if the lender reports payments to commercial credit agencies. (Many banks report to the Small Business Financial Exchange and may report to other credit reporting agencies.)
There should not be a lot of surprises as you repay the loan: you’ll know the terms of your loan when you sign your loan agreement. However, keep in mind that payments on lines of credit will vary, depending on how much you borrow. Additionally some loans may have variable interest rates, which means payments may change if the interest rate they are tied to may change. And some loans may feature balloon payments. Make sure you understand the terms of your loan before you sign.
Many banks offer you the assistance of a professional banker or loan officer at a local branch you can turn to when you have questions about your loan or other financial products that might benefit your company.
And there are many things you can use your business loan for, from stabilizing cash flow to buying equipment or financing commercial real estate. Many banks also offer SBA loans.
Cons of Bank Loans
Cons
- Lengthy paperwork
- Longer wait time
- Requires strong credit
- Usually requires specific collateral
If you have less than perfect or even bad credit, you may have trouble qualifying for a traditional loan. Banks usually require strong personal and/or business credit scores, a personal guarantee, collateral, and healthy financials.
And if you’re in a hurry, you may be disappointed: these loans can take longer to apply for: the whole process can last about one to three months.
And if you’re in a hurry, you may be disappointed: these loans can take longer to apply for: the whole process can last about one to three months.
If you don’t have a solid credit history and financial profile, you will likely need to provide collateral for your loan — if you qualify at all. Traditional lenders like a bank don’t want to lend to borrowers that have a weak personal credit score or a shaky business credit profile.
Most banks prefer to make larger loans, so if you’re looking for a few grand, you might be out of luck at the local bank where you have a checking account or personal loan. Even loans of $50,000—$250,000 may be too small for some lenders, since the larger the loan, the more profit they make.
Banks are often slow to approve or reject applications, and the reasons for rejection are often not clear. Borrowers often complain about the lack of transparency in the approval process. (Learn more about what lenders do and don’t have to tell you when they reject a commercial loan.)
Your application may be rejected simply because your business operates in an industry in which the bank doesn’t make loans (or has already reached a maximum amount of loans for the year). Industries like real estate, retail, and restaurants may be considered a higher risk, for example.
And if you run a startup, you may find it more challenging to get a traditional bank loan; it’s unusual for traditional lenders to loan to startups. Many will require at least two years in business and some require four to five years of sufficient revenues.
Still, if you are able to qualify for a traditional bank loan, it can be an affordable way to maintain cash flow or get funds to expand your business.

Get to know SBA Loans
- SBA Loans
- Bank loans
- Merchant Cash Advance
- Microloans
- Cash Flow Loans
- Online Business Loans
- Construction Business Loans
- Retail Business Loans
- Restaurant Loans & Financing Options
- SBA 7(a) Loans
- SBA Express Loans
- Business Credit Cards
- Equity Crowdfunding
- Reward-Based Crowdfunding
- Equipment Financing
- Invoice Financing
- How Trade Credit Can Help Your Business
- Medical Practice Loans
- Manufacturing Business Loans
- Commercial Real Estate Loans
- SBA Microloans
- SBA 504 Loans
- SBA Disaster Loans