When it comes to securing financing for your small business, choosing the right bank can make all the difference.
With so many options available, trying to find the most optimal solution for your business can be overwhelming.
We’ve done the legwork and crafted our list of the 6 best banks for small business loans to help you make a decision.
Let’s dive in!
6 Best Banks for Small Business Loans To Check Out
Below are the highlights of our top picks of the best banks for small business loans.
1. Santander
Santander is one of the major players in Western Europe, with offices in Spain, Portugal, and the UK.
It caters to SMEs and provides financial services spanning Borrowing, Insurance, Credit Cards, etc.
Key Highlights
✨ Overdrafts
- You can borrow from £500 up to £25,000.
- Only pay interest on the amount you borrow on overdrawn days.
- 10.00% EAR ( Effective Annual Rate) represents the yearly cost of an overdraft and doesn’t include any other fees or charges.
- Annual fee of 1% of the agreed overdraft (minimum fee £50).
✨ To apply for an overdraft, you must have a Santander business current account and must supply your business turnover and costs for the last 12 months.
In addition, you need to supply the anticipated business turnover and costs for the next 12 months.
2. Československá obchodní banka (ČSOB)
Československá obchodní banka (ČSOB) covers Central and Eastern Europe and offers solutions for:
- Lending,
- Banking,
- Financial markets, and
- Trade finance.
It heavily focuses on digitization, and besides providing digitized products, it also has a digital branch and assistant as part of its self-service.
Key Highlights:
✨ You can start the loan application process through ČSOB’s website or mobile app, where you can calculate potential loan amounts and arrange meetings with bank representatives.
✨ Standard Business Loans — The maximum amount is approximately €400,000.
- Flexible repayment terms of up to 15 years.
- No collateral or security for loans up to approximately €24,000.
✨ Concessionary Loans — Guaranteed by the European Investment Fund (EIF).
- You must have an annual turnover of up to €50 million or assets up to €43 million.
- You can obtain up to €4.700.
- No origination and maintenance fees.
✨ Digital Services — Offers digital onboarding services, a mobile app that includes a virtual branch, and AI assistance.
3. HSBC
HSBC is a UK-based bank with offices in Europe, the Americas, the Middle East, and the APAC region.
It provides solutions within the following categories:
- Business Accounts
- Finance and Borrowing
- Imports and Exports
- Insurance
- Payments
- Savings Accounts, etc.
Key Highlights:
✨ Small Business Loans are available from between £1,000 and £25,000.
✨ Repayment terms of between 12 months and 10 years.
✨ 11.3% Representative APR for loans up to and including £10,000, while for loans over £10,000, Representative APR is 8.6%.
✨ The interest rate is fixed for the loan term and charged throughout the total loan.
✨ You don’t need to have an HSBC Business Current Account to apply for a loan.
✨ In most cases, you do need to provide a personal guarantee.
4. NatWest
NatWest is a UK commercial bank that provides services in both personal and business banking.
Regarding business banking, it allows you to create multiple business accounts, and apply for credit cards, business loans and overdrafts.
Key Highlights:
✨ Small Business Loans — The borrowing amount is between £1,000 and £100,000.
- Repayment terms range from 1 to 7 years.
- There are no arrangement or early repayment charges.
- Representative APR is 12.24%.
✨ Fixed and Variable Rate Loans — Loans for bigger projects, where you can borrow from £25,001 up to £10 million.
- Repayment terms are up to 25 years.
- Fixed-rate terms are 3,5,7,10, or 15 years.
✨ Business Overdraft — Unsecured, short-term loans up to £50,000.
- You pay interest only on the amount you use.
- Repayment terms up to 12 months.
- The arrangement fee is usually £50 - £750, depending on the amount requested.
- Representative EAR is 14.75%.
5. Holm Bank
Holm Bank is an Estonian bank that provides Business, Investment, and Limit loans to businesses.
In addition, it also has leasing possibilities with a contract for up to 7 years.
Key Highlights:
✨ Small Business Loans — You can apply for a loan via self-service.
- Loans range from €10,000 to €25,000.
- The repayment period is up to 12 months.
- You’ll need to provide collateral such as real estate, MES or Kredex surety, surety of people related to the company, etc.
- The contract fee is €250.
✨ Investment Loan — Loan amount starts from €25,000.
- The annual interest rate depends on the amount and collateral.
- The contract fee starts from 1% of the loan amount.
- The repayment period is up to 15 years.
✨ Limit loan — Suitable for working capital and short-term investments.
- The loan amount starts from €25,000.
- The repayment period is up to 12 months.
- The obligation fee is 3% of the unused limit per year, and the contract fee starts from 1% of the loan amount.
6. KfW Bank
Kfw Bank is a German state-owned development bank that supports startups and SMEs with various financing programs.
The bank also offers advisory services to help you navigate the application process and understand financing options.
Key Highlights:
✨ In order to apply for a loan, you need to present a viable business plan and demonstrate how you’ll use the funds.
✨ You can apply for loans through local banks or financial institutions that partner with KfW.
✨ ERP Start-up Loans — For businesses running under 5 years.
- The loan amount is up to €125,000.
- The repayment term is 5 or 10 years
- The loan rate is fixed for the entire term of up to 10 years.
✨ KfW Entrepreneur Loans — For mature businesses operating for more than 5 years and wishing to expand.
- The loan amount is up to €25 million.
- Companies can’t have more than 250 employees, and the group turnover mustn’t exceed €500 million.
Pros and Cons of Borrowing a Small Business Loan from a Bank
If you consider getting a small business loan from a bank, you should weigh all the pros and cons to make an informed decision.
Pros:
✅ Favorable Interest Rates
Bank loans typically offer lower interest rates than alternative lenders, especially if you are an established business with a good credit history.
✅ Large Loan Amounts
Banks can provide you with substantial loan amounts, which can be crucial if you want to finance significant projects or expansions.
✅ Longer Repayment Terms
Many bank loans have extended repayment periods, allowing for lower monthly payments.
✅ Tax-Deductible Interest
The interest you pay on business loans is generally tax-deductible, which can provide additional financial benefits.
Cons:
❌ Strict Eligibility Criteria
Banks often have strict requirements for loan approval, including a solid credit history and significant business experience.
Thus, it may be quite challenging to qualify if you are a startup or a business in an emerging industry.
❌ Lengthy Application Process
The application process can be time-consuming, requiring extensive documentation such as business plans, financial statements, and tax returns.
Consequently, approval and funding can take several weeks.
❌ Limited Use of Funds
Bank loan funds are typically earmarked for specific purposes, such as capital investments, rather than ongoing operational expenses.
Thus, it may limit your flexibility in using the funds.
❌ Collateral Requirements
The majority of banks require collateral or personal guarantees, which can put personal assets at risk if your business fails to repay the loan.
❌ Potentially Higher Costs for Poor Credit
If your business has lower credit scores, it may face higher interest rates or be denied loans altogether, limiting access to necessary funding.
While bank loans can provide substantial financial support with favorable terms, they come with challenges related to eligibility and the application process that may be particularly hard for startups and small businesses.
Puls Project — A Robust Alternative to Traditional Banks
Puls Project is a robust all-in-one financial tool that provides:
- Multi-banking
- Loans, and
- Cash flow management and liquidity solutions to SMEs.
Thus, with Puls Project, not only can you benefit from loaning possibilities, but also get advanced tools to streamline and manage your cash flow and improve creditworthiness.
We issue loans from our credit fund, Montold SME Lending Fund GmbH & Co, registered with BaFin.
What are the perks?
💰 Minimal requirements from your side:
- The loan agreement and personal identification of beneficial owners and directors as per GwG.
- No FICO score needed.
- You must be running for at least 6 months.
💰 Quick access to cash
- You can obtain a loan of up to €100,000 for 12 months, within 48 hours of submitting your application.
- You can use credit limits when you need them without any costs and without them affecting your creditworthiness with banks.
- You can tailor the loan by setting the amount and repayment period to see the total cost and interest rate.
💰 Maximal security
- Amazon Aurora encrypted DB clusters with AES-256 encryption to secure data on servers hosting the DB clusters.
- Partnership with FinAPI, a GDPR-compliant service provider, and
- The Transport Layer Security standard ensures data and information security in transit.
In addition to loaning possibilities, we equip you with cash flow and management tools to simplify financial management and improve credit limits through accurate planning and forecasting.
💰 Our real-time Planner functionality allows you to get an accurate view of your transactions across all companies and accounts for better organization.
💰 You can monitor cash flow and immediately detect any gaps to take proactive actions.
💰 Furthermore, you can centralize all your financial operations and activities and link any bank account from over 4,000 banks without switching between different banking platforms.
💰 Organize finances, transactions, and activities by categories and labels for easier management.
And much more.
Ready to explore all the possibilities Puls Project offers?
Sign up for Puls Project today and quickly access the necessary funds while effectively managing cash flow.
Keep Learning:
How to Choose the Right Financing Option for Your Business?
