Find the best business loan rates (2024)

By Roy Rasmussen Updated on October 6, 2021

Private Business Loans: The Types, the Pros and Cons (Plus How to Qualify)

Private business loans represent an alternative to conventional bank lenders. 

Here’s our beginner’s guide to the basics of online private loans. We’ll cover:

  • What they are
  • What types of loans are available
  • How much you can borrow
  • What rates you can expect
  • How to qualify 

Then we’ll consider the pros and cons, walk you through the application process and point you toward resources for finding private lenders to finance your business.

What Are Private Business Loans?

A private business loan is a form of small business financing extended by a lender other than a conventional bank or credit union. Nonbank lenders face fewer regulatory restrictions than conventional lenders, which can allow them to extend financing to a wider range of borrowers with more flexible options, lower qualifying barriers and quicker approval.

Private loans may come from a variety of sources, including:

  • Online lenders
  • Family and friends
  • Venture capitalists
  • Angel investors

Because of this diversity of lending resources, the terminology surrounding private business loans can be inconsistent. In this guide, we’ll be focusing on private business loans from online lenders.

What Types of Private Business Loans Are There?

Private business loans come in a wide variety of forms. Examples of private funding products include:

  • Business term loans: sums of capital paid back at interest in installment payments distributed over a set interval
  • Short-term loans: term loans extended over short durations, typically 3 months to 2 years
  • Working capital loans: financing designed to support a company’s operational expenses
  • Small Business Administration (SBA) loans: government-backed loans extended at low interest rates to business borrowers who have difficulty qualifying for standard loans
  • Business lines of credit: accounts with a set limit which may be borrowed against up to the designated maximum, with interest charged on amounts borrowed and money that has been repaid becoming available to borrow again
  • Accounts receivable financing: loans advanced against unpaid invoices owed to the borrower, with the invoices serving as collateral
  • Merchant cash advances: loans advanced against future sales revenue, repaid as revenue is collected
  • Equipment financing: loans advanced for the purpose of buying or leasing equipment, with the equipment serving as collateral

This diverse variety of loan options reflects the wide range of borrowers served by private lenders. There are private lenders for business startup loans, established companies and everything in-between. Products such as business term loans and lines of credit serve the needs of most types of borrowers. 

Other types of financing cater to specialized needs. Accounts receivable financing is designed to meet the cash-flow requirements of companies in industries that rely heavily on extending customers credit. Merchant cash advances help businesses such as retailers which need to finance inventory purchases ahead of sales. Equipment financing helps companies in industries such as construction and transportation.

A businesswoman shakes hands with an angel investor, complete with wings and a halo.

How Much Can You Borrow With a Private Loan?

The amount you can borrow from a private lender varies by lender, by loan product and by the borrower’s credit score and collateral. 

In general, business term loans may be approved in amounts of up to $1 million or slightly more. SBA loans are available in amounts up to $5 million. Other loan products typically have lower limits.

What Kind of Rates Can You Get from Private Lenders?

Interest rates vary based on your lender, what type of loan product you’re using and your creditworthiness. 

Within Fast Capital 360’s network of lenders, the lowest rates available are for SBA loans, which start as low as 6.25% for loans with terms of 5 to 25 years. Some commercial loans also are available at these rates. Business term loans and working capital loans start at 7%. Short-term loans generally have higher rates, starting at 10%. Business lines of credit start at 8% for terms of 6 months to 2 years.

Equipment financing starts at 8% for terms of 1 to 5 years. For accounts receivable financing and merchant cash advances, rates are expressed as factor rates representing a percentage added to 100% of the amount borrowed. As for merchant cash advances, rates start at 1.10, equivalent to 110%. For accounts receivable financing, rates start at 1.02, or 102%.

Your ability to obtain the best rates will depend on how strong your creditworthiness is and how your lender perceives you as a credit risk. The higher your revenue, the longer you’ve been in business and the higher your credit score, the better rates you’re likely to be offered.

How Do You Qualify for a Private Business Loan?

When evaluating loan applications, private lenders consider criteria that reflect your ability to repay what you borrow. 

The most common criteria include:

  • Your company’s monthly revenue
  • How long your company has been in business
  • Your personal or business credit score

Your company’s revenue shows how much money you have coming to cover debt repayments. Also, your time in business indicates how sustainable your revenue model is. Moreover, your credit score reflects your track record of repaying debts and your spending habits.

In general, the higher your numbers are in these areas, the better your chances of qualifying for a loan and securing higher limits and more favorable terms and rates. Different lenders have different policies on what numbers they will consider for financing. 

For example, Fast Capital 360 finances borrowers who meet minimum requirements of $10,000 in monthly revenue, 6 months in business and a personal FICO credit score of 500 or more. Better numbers can allow you to access greater amounts and better terms and rates.

For some loans, you may be required to provide collateral or guarantees.

An arm holding a sack of cash extends toward a businesswoman. The sleeve of the arm reads “Private Lender.”

What Are the Pros and Cons of Using Private Business Lenders?

One of the biggest advantages of private funding is that it can be easier to qualify for a private loan than a conventional loan. Private lenders face fewer regulatory restrictions than conventional lenders, allowing them more flexibility about deciding when to extend financing. Many private lenders are willing to provide financing to borrowers with less annual revenue, less time in business or lower credit scores.

Moreover, private lenders also can process loan applications faster than conventional lenders. The application process often is simpler, requiring less paperwork. The approval process can be significantly faster. Instead of waiting weeks or months for approval, you may be able to get approved in days or even hours.


As a tradeoff for taking on higher risk, private lenders tend to charge higher rates. This is one of the biggest downsides of private lending. 

However, private loans aren’t always more expensive than traditional loans. For instance, SBA loans facilitated through private lenders are subject to SBA interest caps just as they would be when extended through conventional lenders. Rates charged by private lenders may vary significantly from one lender to another.

How Do You Apply for a Private Business Loan?

Applying for a private business loan usually begins by filling out an online form to submit prequalifying data, although this process can also begin over the phone. During the prequalifying phase, lenders consider criteria such as your:

  • Monthly revenue
  • Time in business
  • Credit score

If you meet prequalifying criteria, you may be asked to provide additional information. This may include your:

Collecting this information before you submit an application can speed up the approval process.

So, How Do You Find Private Lenders for Business Loans?

You can find many online lenders by searching online. However, sorting out the ones with the best reputations and rates can be time-consuming. One shortcut is to use review sites that compare and rate the best online lenders.

An even more efficient solution is to use online providers who work with networks of prescreened lenders. Fast Capital 360 uses digital technology to let you fill out an online form and quickly compare offers from multiple lenders without affecting your credit score. This saves you time finding reliable financial providers while speeding up your application and approval process.

Find Out If You Qualify for a Private Business Loan

Private business loans are small business financing products provided by lenders other than conventional banks, such as online lenders. They come in a variety of forms, including business term loans, short-term loans, SBA loans, business lines of credit, accounts receivable financing, merchant cash advances and equipment financing.

Loan limits vary by product, lender and borrower creditworthiness, with term loans available in amounts over $1 million and SBA loans available in amounts up to $5 million. When considering borrower qualifications, lenders review criteria such as monthly revenue, time in business and credit score.

Note that the advantages of private lending include ease of qualifying and quickness of turnaround. However, disadvantages can include higher rates.

Applying for private business loans usually starts by filling out an online form that provides prequalifying data such as time in business and monthly revenue. Fast Capital 360 provides a free, no-obligation prequalifying form you can fill out to see your loan options. If you’re seeking financing for your business, take a few minutes to complete our form and find out what loan options may be available to you.

Roy is a respected, published author on topics including business coaching, small business management and business automation as well as an expert business plan writer and strategist.
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