Wells Fargo Small-Business Loans Review: Low Rates—And One Big Catch

Quick! When we say, “Wells Fargo,” what do you think of?

A. The third-largest American bank²
B. A jaunty tune from the 1950s musical The Music Man
C. The bank recently fined for opening fraudulent accounts in customers’ names
D. A bank where you have a personal loan, auto loan, or personal checking account

These are all reasonable answers (B, personally), but as a small-business owner, you should probably choose option E:

E. A major source of funding for US small businesses

After all, Wells Fargo offers business loans, lines of credit (LOCs), and other funding products for small businesses—all at rates that can compete with the best lenders.

In this review, we’ll discuss those small-business financing products and everything else you need to know before applying for a Wells Fargo loan. Plus, keep reading to see why—despite its low rates and long terms—we don’t recommend Wells Fargo for most small-business owners.

Here’s the thing about Wells Fargo: it asks a lot of small-business loan applicants. How much, you ask? Well, here’s just a few things Wells Fargo looks for in a loan application:

• At least three years in business
• No bankruptcies in the prior 10 years (business or personal)
• At least five other current sources of credit
• Profitability for at least the two most recent years
• $1.50 in revenue for each $1.00 you want to borrow

So while Wells Fargo doesn’t ask for a specific personal credit score, its other demands disqualify many young, less-established, or newly-profitable businesses.

Put bluntly, if you want a line of credit so you can pay your bills on time next month, you need to look elsewhere. Wells Fargo doesn’t want to help you with your cash flow problems (no really, Wells Fargo’s FAQ gets pretty explicit about this).

If, on the other hand, you want a line of credit so you can continue building business credit while having access to working capital that will let you expand your business and achieve financial success, you might be the ideal Wells Fargo customer.

As a traditional lender (aka a bank or credit union), Wells Fargo offers loans and other financing at better rates than many online lenders. Much better, sometimes. Consider, for example, that an APR of 20% would be very high for Wells Fargo, but very low for Kabbage.

Plus, Wells Fargo offers lengthy terms—think years as opposed to the months or weeks you find with many alternative lenders.

So not only do you get to pay a lower interest rate on your loan, but you get to make many smaller payments over a period of years, rather than a few larger weekly payments over a period of months.

And then there’s the reputation factor. Some small-business owners will prefer to borrow from Wells Fargo because it’s a name they know and feel they can trust. Wells Fargo has been around for quite a while, after all; you don’t need to worry about it going out of business.

(This admittedly goes both ways—some people would rather not deal with a bank that was a key player in the subprime mortgage process and that got in trouble just a couple years ago for opening fake accounts.)

So let’s say you meet Wells Fargo’s applicant criteria and decide you want in on those sweet low rates and long terms. What can you get?

You’ve got several different options: business lines of credit, commercial real estate loans, practice financing, and SBA loans.

You can see some of the details on these products in the table below, and we’ll explain what makes each one unique and why you might want it.

But first, a note: if you haven’t been a Wells Fargo customer for at least a year, you’ll have to go to a Wells Fargo location in-person to apply for these financing options. In fact, you’ll have to apply for some in-person regardless of how long you’ve been a customer.

Now, onto the loan details.

Wells Fargo offers two versions of its BusinessLine line of credit: an unsecured line and a secured line. The secured line obviously requires collateral, but it also gives you access to lower rates. The unsecured line requires a personal guarantee, but no collateral.

Both versions work as a revolving form of credit, so you can repeatedly draw and repay funds. This means you get continual access to capital (provided you don’t max out your credit limit), making these lines of credit a good way to deal with surprise expenses or simply improve your cash flow with more working capital.

Unlike the BusinessLine line of credit, the Small Business Advantage LOC comes backed by the US Small Business Administration (SBA). So while it functions in pretty much the same way, you’ll have to meet SBA requirements to qualify for this line.

Specifically, the SBA requires that your household have less than $200,000 in personal liquid assets. Also, this line is exclusive to for-profit businesses. And while you’ll get similar rates to the BusinessLine LOC, the Small Business Advantage LOC has a much lower credit limit of just $50,000.

Finally, Wells Fargo offers two types of SBA business loans: SBA 7(a) loans and SBA 504 loans. SBA 7(a) loans can be used for working capital, real estate, debt refinancing, and more. SBA 504 loans, on the other hand, are designed primarily for equipment and commercial real estate needs.

In either case, Wells Fargo SBA loans will get you competitive interest rates and very long repayment terms.

Another reason you might want to consider Wells Fargo for your small-business financing needs? It can also help with your other small-business needs.

As you likely already know, Wells Fargo offers business banking—including business checking accounts and savings accounts for small businesses.

But that’s just the tip of the iceberg. Wells Fargo also can help small-business owners with everything from merchant services (like facilitating credit card transactions) to payroll services.

Plus, in addition to the small-business loans we discussed above, Wells Fargo offers small-business credit cards, perfect for building business credit. It even has a few commercial real estate loans.

So if you want to keep all your business finances in one place, you’d be hard-pressed to do better than Wells Fargo. You can even get discounts or better rates this way. For example, Wells Fargo waives some fees for its small-business checking account customers.

Now that you know what’s what with Wells Fargo, let’s address some other common questions about its small-business financing.

No, Wells Fargo doesn’t offer startup loans. As we discussed above, Wells Fargo lends to businesses that have been around for at least three years and profitable for at least two.

Those qualifications, along with some of Wells Fargo’s other preferences, exclude most startups; they’ll need to look elsewhere for a loan.

No, Wells Fargo doesn’t have minority business loans—but neither does any other lender. Lenders aren’t allowed to discriminate because of race, which would include offering incentives to certain races.

To give credit where credit is due, however, Wells Fargo has conducted several studies on minority small-business financing. Based on those results, it launched several initiatives to help minority small-business owners, such as creating a referral network and a credit coaching program for minority business owners.

Yes, Wells Fargo offers SBA loans. As an SBA-approved lender, it offers the versatile SBA 7(a) loan, the real estate-specific SBA 504 loan, and the faster SBA Express loans.

As with all SBA loans, you’ll need to meet some specific criteria to apply, such as being a small-enough small business, getting rejected for standard financing, and meeting other lender qualifications.

And just as with Wells Fargo’s other loans, you’ll need to apply in-person for an SBA loan. First, you’ll talk to a banker who will decide what (if any) SBA loan might work for you. Then, you’ll work with a Wells Fargo SBA specialist who’ll help you get started on your application.

Wells Fargo doesn’t list fees for all its business financing, and the precise fees you’ll pay will depend on your unique situation and the product you use.

You can expect to pay origination fees on most term loans. And many Wells Fargo lines of credit have either an opening fee or an annual fee.

As with all business loans, you should read your loan’s terms and conditions carefully to make sure you understand the fees you’ll have to pay.

No, Wells Fargo is no longer offering PPP loans (loans made through the Paycheck Protection Program). That’s because PPP loan funds are gone, so no other lenders are accepting new PPP loan applications either.

To get a small-business loan, you’ll need to have a decent personal credit score, a business that has been around for at least a few months, and at least $50,000 in annual revenue.

Of course, specific qualifications vary from lender to lender. Wells Fargo, for example, has much stricter borrower qualifications than an online lender would.

For more information, check out our guide to business loan requirements.

Wondering how Wells Fargo compares to its competition? Let’s take a look.

Because Wells Fargo and Capital One are both traditional financial institutions, they both offer low interest rates and long terms. In fact, their offerings look pretty similar: Capital One also has term loans, lines of credit, equipment financing, real estate loans, and SBA loans. And as with Wells Fargo, you have to apply in-person for Capital One small-business loans.

As for differences, Capital One has looser lending requirements; you only need to have been in business for two years, for example. But honestly, the biggest difference comes from their reputations: customers like Capital One better than Wells Fargo. How much better? One customer survey gave Capital One a 79.9 rating, ranking it sixth among US banks.² Wells Fargo, on the other hand, got a 63.4, putting it in 40th place. Out of 40.

Yet another traditional bank, Chase also offers similar small-business financing to Wells Fargo. Again, you’ll find term loans, lines of credit, credit cards, and SBA loans.

Like Capital One, Chase has a better reputation than Wells Fargo, though by a much smaller margin: Chase got a 76.5, placing it in 24th place.²

We’ve already touched on this, but let’s review: Wells Fargo offers lower rates and longer terms than most alternative lenders. That makes it more attractive for many small-business owners, because you make low, monthly payments rather than higher, weekly payments.

However, Wells Fargo has those really strict application requirements. Online lenders, on the other hand, have much laxer qualifications. So if you have a younger business, worse credit, a higher debt ratio, or less annual revenue, you’ll likely be better off going with an alternative lender.

As one of the largest financial institutions out there, Wells Fargo offers ultracompetitive rates and terms on its small-business loans and lines of credit. If you can qualify for its financing, you’ll likely get a good deal—but many young or less-profitable businesses simply can’t qualify.

So while Wells Fargo has some of the best rates you can get, we don’t recommend it widely. Most small business owners will have more success applying with alternative lenders or smaller banks.

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.