Bank of America Small-Business Loans Review: Low Rates, If You Can Qualify

Most of us prefer email to faxes, mapping apps to atlases, and cell phones to pagers. But sometimes, there’s just something about the old way of doing things.

Maybe you prefer phone calls to texting, manual cars to automatics—or even funding your business via traditional banks rather than alternative lenders?

If you like big banks and you cannot lie, then we need to talk about Bank of America (BoA) and its small-business financing. With low rates, long terms, and simple qualifications, this traditional bank could be just what you need to expand your business.

Here’s what you should know before applying.

If you have good credit and your business has been around a while, you’ll probably like the rates and options Bank of America offers. It has a variety of loans for your working capital and expansion needs, all with attractive rates and terms.

Just keep that “if” in mind. As a traditional lender, Bank of America has stricter applicant qualifications than most online lenders; it asks for higher credit scores, longer business history, and more revenue.

For its unsecured loans, Bank of America looks for a personal credit score of 670 or higher. It also requires your business to be at least two years old and to have annual revenue of at least $100,000. For its other loans, Bank of America asks for an even higher $250,000 in revenue—but it offers great loan options in return.

While those lending requirements aren’t as strict as some other big banks, Bank of America’s criteria excludes young startups or other businesses with poor credit.

Still, if you’ve got strong credit and a somewhat established business, then Bank of America can offer appealing deals on working capital.

So what do those strict business lending requirements get you? First and foremost, lots of options.

Unlike many online lenders that offer just one type of loan, Bank of America offers many financing products to meet your working capital needs. It offers term loans and lines of credit both secured and unsecured, as well as specialized loans for vehicles, equipment, real estate, and medical practices.

That means you can decide which loan works best for your needs, rather than just choosing a loan because it’s the only option.

But Bank of America also offers the long terms you’d expect from a big bank. Its unsecured loans, for example, have terms ranging from one to five years—far longer than the terms of many lenders.

And of course, Bank of America has low rates that can compete with the best lenders. So you’ll pay less for the privilege of borrowing money.

Now, we should point out that Bank of America rejects more small-business loan applicants than any other big bank.2 So while Bank of America offers choice, long terms, and low rates, you’ll need to have a strong loan application to get those.

But we’ll assume you have that strong application. Let’s talk about exactly what kind of loans that can get you.

Like we said, Bank of America has lots of loan choices. But when each has unique terms, rates, and uses, how do you know which one you should get?

The answer, of course, depends on your business’s needs. If you’re buying a car for your business, for example, you’ll want the Business Advantage Auto Loan; if you just want some working capital, you might want the Business Advantage Credit Line.

But not all choices are quite that obvious, so let’s take a more detailed look at each of Bank of America’s small-business loans.

The Business Advantage Credit Line gives you revolving credit (you can draw and repay repeatedly) to improve your cash flow. As an unsecured option, this line of credit won’t require you to provide any collateral.

While many small-business owners will prefer a collateral-free option, this line of credit does come with lower credit limits and higher rates than its secured counterpart. Still, this line provides affordable revolving credit with a monthly payment schedule.

This line of credit also helps with cash flow, but it does require collateral. More specifically, this loan gets secured via a blanket lien on your business assets.

While that means you take on a little more risk as a borrower, you get rewarded with lower rates and higher credit limits. In fact, Bank of America doesn’t set a maximum credit limit for this line; your personal maximum depends on the worth of your assets.

This basic term loan provides another unsecured financing option for your cash flow or expansion needs. Again, that means a smaller maximum loan size—$100,000 vs. the virtually unlimited max for a secured loan—and higher rates.

But you still get a comfortable term of one to five years, and you need only $100,000 in revenue to qualify for this loan (rather than $250,000 for a secured version).

Bank of America’s secured business loan also helps with cash flow or business growth, but it requires either a blanket lien on your business assets as collateral or a certificate of deposit (CD).

The blanket lien can get you a term of up to four years; a CD gets you up to five years. As you’d expect, this secured loan has higher maximums than BoA’s unsecured loan, but it also requires higher revenue and comes with a 0.5% loan origination fee.

BoA’s Business Advantage Auto Loan is a vehicle loan—not a general equipment loan. You can use it only to buy cars, vans, and light trucks for your business, and the vehicle you buy has to meet some specifications: five years old or less, worth at least $10,000, and less than 75,000 miles on it. So as long as you don’t want to get a ’97 Pontiac Grand Am, you can get a term of four to six years with nice low rates.

This equipment financing, on the other hand, can help you buy larger commercial vehicles (think trucks or trailers) or other business equipment (think stuff like packing machines, office equipment, or construction equipment).

This versatility comes with a price—slightly higher rates and fees than BoA’s auto loan, in this case—but it provides a way to finance whatever kind of equipment you need.

Bank of America’s commercial real estate loans provide funding to buy real estate; that real estate then serves as collateral for the loan.

The term of these loans depends on your repayment schedule: if you choose balloon payments, you get a term up to 10 years; with fully amortizing loans, you’ll get up to 15 years.

Bank of America offers practice solution loans for dentists, veterinarians, and doctors. These loans give you up to $5 million to open or expand your medical practice.

While Bank of America promises “very competitive” rates and terms on these loans, you’ll have to speak with a banker about your practice needs to get more specific details.

We probably don’t need to tell you that Bank of America offers many other services for small businesses (but we’ll tell you anyway, just in case). These include banking services, like checking accounts, savings accounts, and credit cards; investing services, like 401(k)s and IRAs; and even other help like tax services, payroll services, and merchant services.

But what you might not know? Bank of America has Business Advantage Relationship Rewards, which rewards you for using Bank of America’s services with things like discounted rates on loans.

To qualify for Relationship Rewards, you need to start by getting a Bank of America business checking account. Then, when you have a three-month average of $20,000 in your BoA business deposit account or business investment account, you can sign up for Relationship Rewards at the Gold level.

With higher account balances, you can advance to the Platinum and then Platinum Honors levels. That interest discount will increase to 0.5% and then 0.75%.

As you can see, the Relationship Rewards program can get you big discounts on Bank of America’s already low interest rates. So you have some good incentives to use Bank of America for your small-business banking in addition to your financing needs.

But of course, Bank of America isn’t the only big bank offering both lending and banking services to small businesses. So how do they compare?

Bank of America competes primarily with other big banks, like Wells Fargo and Chase. Here’s how they stack up against one another.

Bank of America and Wells Fargo have similar financing products, including loans, lines of credit, and credit cards.

Wells Fargo has stricter application requirements than Bank of America. It requires a full three years in business to apply and asks for $1.50 in revenue for every $1.00 borrowed.

While Bank of America may look at all those as factors too, its actual requirements boil down to what we said up top: a 670 personal credit score, just two years in business, and $100,00 in revenue for unsecured loans or $250,000 for secured loans.

So if you have a younger business or less revenue, you should probably go with Bank of America.

In terms of reputation, customers like Bank of America more than Wells Fargo—but just barely. In a ranking of the 40 top banks in the United States, Bank of America comes in at 39, while Wells Fargo comes in at 40.⁴

Again, you’ll find similar small-business financing options at Bank of America and Chase, with both offering a variety of loans, as well as credit lines and credit cards.

Unlike Bank of America or Wells Fargo, Chase doesn’t publicize its application criteria or its rates.

But wait—there’s more! Let’s address a few of the common questions small-business owners have about Bank of America and its loans.

How you apply for a loan depends on your customer status and the loan you want.

Are you already a Bank of America customer? Then you can apply for a Business Advantage Credit Line or Business Advantage Term Loan on Bank of America’s website.

But if you’re not already a customer, or if you’re applying for any other loan or line of credit, you’ll have to either apply in person at a Bank of America location or over the phone. Your banker will help you gather everything you need, but expect to present profit statements, a business plan, and other financial documents.

The fees on Bank of America loans will vary depending on the precise loan. With the secured line of credit, for example, the origination fee amount depends on the credit limit.

As a rule, however, you can expect some kind of origination fee on your loan (often 0.5% to 0.75% of the loan amount). But you won’t pay application fees, and the lines of credit don’t have cash advance fees.

Yes, Bank of America offers two types of SBA loans: SBA 7(a) loans and SBA 504 loans. Both come backed by the U.S. Small Business Administration, but 504 loans work better for real estate needs, while 7(a) loans fund general working capital needs. You can talk to a Bank of America representative to apply.

And just so you know, Bank of America actually extends a lot fewer SBA loans than its competitors. Wells Fargo, for example, has approved 3,898 SBA 7(a) loans, totaling over $1 billion; Bank of America has approved just 247 loans totaling less than $200 million.³

Bank of America offers everything you’d expect of a traditional lender: lots of loan choices, low rates, long terms, and plenty of other financial services for small businesses.

The question, then, isn’t whether or not Bank of America is a good lender, but whether or not it will see you as a good borrower. Its fairly high application requirements will bar young businesses and businesses with poor credit history.

Still, if you think you can qualify, talking with a Bank of America representative is probably well worth your time.

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.