Small businesses are an essential aspect of the American economy. They create jobs, bring new ideas to the market, and support local communities. However, running a small business requires more than passion. It takes steady cash flow, the right resources, and access to reliable financing. For many entrepreneurs, small business loans in the US are the bridge that makes growth possible. These loans provide the capital needed to hire employees, purchase equipment, cover operating expenses, or expand into new markets.
The year 2024 was a good year for small business lending. The Small Business Administration (SBA) authorized over $31 billion of loans. However, 2025 saw a downward trend with lending volumes dropping 15% year-over-year. Rates have increased simultaneously, and small business lenders, both traditional banks and fintechs, are watching loan demand closely. They are more cautious with their lender underwriting, as credit conditions have become tighter.
Additionally, digital lending will continue to change the market drastically, and as of now, it is clear that more than half the loans will be digitally processed by this time next year. The following article will discuss the small business loans in the US, the role of banks and fintechs, the type of loans available, and how to increase your chances of being approved for a small business loan.
The Current State of Small Business Loans in the US
The lending market for small businesses is changing quickly. While the SBA reported a 13% year-over-year increase in loan approvals in 2024, volumes overall have declined by about 15% in 2025. This slowdown reflects stricter lending standards, higher interest rates, and greater caution among banks.
Still, there is significant demand. The unsecured business loan market in the US was valued at around $5.5 trillion in 2024 and is expected to reach $9.3 trillion by 2030. This growth highlights how necessary financing is for small businesses.
Digital lending has also become more common. By the end of 2025, 50% of new small business loans in the US are expected to be processed through online platforms. This means shorter waiting times and easier applications than traditional methods for business owners.
On the economic side, interest rates continue to change the lending system. The federal funds rate is between 4.25% and 4.50%, with the prime rate near 7.5%. Analysts expect a rate cut later this year, which could reduce borrowing costs for small businesses.
Who Provides Small Business Loans in the US?
There are several sources of financing available to business owners in 2025. Each has different approval processes, costs, and benefits.
1. Traditional Banks and Credit Unions
Large banks still play a role, but approval rates have fallen to about 13.5%. Community banks remain strong, holding around 45% market share. They are often more flexible with local businesses. Credit unions also provide competitive loans, focusing on serving members rather than maximizing profit.
2. Government Programs
The SBA loan programs are among the most popular. These include the 7(a) loan, often used for working capital; the 504 loan for property and equipment; Microloans for smaller amounts; and Express loans, which offer quicker decisions. The USDA also supports rural businesses, and many states run their own funding initiatives.
3. Fintech and Alternative Lenders
Fintech platforms have proliferated, providing about 28% of new small business loans in the US. They are attractive because of faster processing and fewer requirements. Alternative lending options include merchant cash advances, invoice factoring, and revenue-based financing. While these can be helpful, costs are usually higher than bank or SBA loans.
Types of Loans Available
Not all loans are the same, and choosing the right one depends on the business’s specific goals. Small business loans in the US are designed with different structures, repayment terms, and costs so that owners can select what fits their situation best. In short, the correct type of loan depends on whether the business is addressing day-to-day expenses, making a large purchase, or funding long-term growth. Understanding the different types of small business loans helps owners find the balance between cost, speed, and repayment flexibility. Below are the most common types explained in detail.
1. SBA Loans
SBA loans are among the most trusted options because the US government partially backs them. This reduces risk for lenders and makes it easier for small businesses to access financing. They typically come with lower interest rates and more extended repayment periods, which is helpful for companies that need time to grow before paying back large amounts. However, the application process can take longer, and the requirements are stricter than other options.
2. Term Loans
Term loans provide a lump sum of money upfront that is repaid over a fixed period, usually with monthly installments. These loans are best for businesses making significant investments such as expanding operations, opening a new location, or purchasing substantial assets. Because repayment schedules are predictable, term loans provide stability for planning long-term financial commitments.
Read More: How Much Should I Borrow? Answering 5 Questions of Startups About Business Loans
3. Business Lines of Credit
A line of credit works more like a safety net. Instead of taking out a single loan, the business is approved for a credit limit and can draw funds as needed. Interest is charged only on the amount used, making it flexible for covering seasonal expenses, payroll gaps, or short-term cash flow issues.
4. Equipment Financing
Equipment financing is a targeted solution for businesses that rely on machinery, vehicles, or technology. The equipment itself usually serves as collateral, which reduces the risk for lenders and can lower interest rates. This option is standard in industries like manufacturing, logistics, or healthcare.
5. Merchant Cash Advances
This type of financing offers fast access to cash but comes at a high cost. Repayment is typically structured as a percentage of daily credit card sales, which can quickly add up. While convenient in emergencies, merchant cash advances should be used carefully because of their expensive nature.
Credit Profile:
- Both personal and business credit scores are reviewed
- Strong scores demonstrate reliability; weak scores may lead to higher rates or rejection
Cash Flow:
- Evidence of sufficient income to cover loan repayments and operating expenses
- Healthy cash flow statements instill lender confidence
Collateral:
- Property, equipment, or inventory is often required as security
- Startups without collateral may face additional hurdles
Time in Business:
- Businesses with several years of operation are viewed as lower risk
- Some lenders and SBA programs accommodate startups with robust business plans
Documentation:
- Tax returns (personal and business)
- Profit and loss statements and balance sheets
- Bank statements and cash flow projections
- Incomplete or outdated paperwork is a common rejection reason
Overall Preparation:
- Organizing financial records and reducing outstanding debt improve approval odds
- Consistent, on-time credit payment history is essential
- Thorough preparation before applying can be the difference between approval and rejection
Access for Different Groups
While small business loans in the US are available nationwide, access is not equal for every entrepreneur. Women-owned businesses, for example, receive less than they request more often than men. Studies show that only 36% of women business owners secure the full amount they apply for. This funding gap limits opportunities for growth and expansion, although women-owned businesses are one of the fastest-growing segments of the economy.
Minority-owned businesses face additional hurdles. Black-owned companies, in particular, pay higher interest rates, sometimes three percentage points above average, and experience lower approval rates. Latino and Asian-owned businesses also report challenges, though targeted initiatives by the SBA and community lenders aim to close this gap. With nearly 18.3% of US businesses owned by minorities, these disparities represent a significant issue for economic inclusion.
Veteran-owned businesses face challenges, especially when transitioning from military service to entrepreneurship. While some may struggle with building a credit history or providing collateral, special programs, including SBA Veterans Advantage loans and state-level veteran financing initiatives, are designed to support them.
Rural businesses encounter another set of barriers. Fewer local bank branches and limited community financing often make it harder to obtain capital. USDA Rural Development loans and state economic development funds are crucial lifelines. They ensure that small towns and agricultural businesses are not left behind.
These differences highlight that small business loans in the US are not equally accessible to all groups. Government programs, nonprofit lenders, and community initiatives remain essential in addressing these gaps and ensuring every entrepreneur has a fair chance at growth.
The Loan Application Process
Applying for a loan requires preparation. Approval times vary widely. SBA loans can take one to three months. Fintech loans can sometimes be approved in a few days.
The basic steps include:
- Determine the amount needed and the purpose of the loan.
- Select the correct type of loan that fits the need.
- Prepare financial documents such as tax returns and statements.
- Apply through the lender, whether a bank, SBA, or fintech.
- Follow up to provide extra information if requested.
Rates and Terms in 2025
Interest rates remain one of the most critical factors. Business owners are advised to compare multiple offers before deciding. Even slight differences in rates or fees can add up significantly over the loan’s lifetime. Negotiating repayment schedules, fee structures, and prepayment terms is recommended.
As of mid-2025:
- SBA 7(a) loans carry variable rates of 9.75%–12.25%.
- Fixed SBA loans range from 12.5% to 15.5%.
- Other bank loans are usually priced above the prime rate of 7.5%.
The Role of Technology
Technology is changing small business lending. Digital applications reduce paperwork and speed up approvals. AI underwriting allows lenders to consider more than just credit scores by looking at sales data or payment records.
Embedded lending is another trend, with financing offered directly within accounting software or payment platforms. This makes it easier for businesses to access funding without going through traditional bank channels.
Conclusion
For many entrepreneurs, access to financing can make the difference between growth and struggle. Despite tighter credit standards in 2025, Small Business Loans in the US continue to provide vital support for hiring, expansion, and investment.
Success depends on preparation: keeping financial records in order, choosing the right type of loan, and applying through the best channel. Opportunities remain available through a bank, the SBA, or a fintech platform. For business owners who plan carefully and stay persistent, loans can provide the foundation to build a stronger future.
