Conventional Business Loans

Conventional business loans offer flexible financing for small businesses and franchises, such as those in international trade or retail, without the government backing of SBA loans. Provided by banks, credit unions, and online lenders, these loans rely on the lender’s risk assessment, leading to stricter eligibility but faster approvals and competitive terms for qualified borrowers. Whether you’re acquiring a franchise or expanding operations, conventional loans can meet your needs. As of June 2, 2025, LoanBox connects you with top conventional lenders, streamlining the process to secure the best terms for your business.

About Conventional Loans

Conventional business loans are traditional financing options offered by commercial lenders, including banks, credit unions, and online platforms, without government guarantees. Unlike SBA loans, which reduce lender risk through partial guaranties, conventional loans depend solely on the borrower’s creditworthiness and financial health, resulting in more rigorous requirements but quicker funding.

Key Features:

  • No Government Backing: Lenders bear full risk, leading to stricter criteria.

  • Faster Approvals: Streamlined processes, especially with online lenders, often within days.

  • Diverse Uses: Fund real estate, equipment, working capital, debt refinancing, or acquisitions.

Qualification

Creditworthiness:

  • Personal Credit: FICO ≥680 preferred; ≥720 for best rates. Lower scores (600–680) may qualify with strong financials but face higher rates.

  • Business Credit: Dun & Bradstreet Paydex ≥80 or equivalent, reflecting timely payments.

Financial Health:

  • DSCR: ≥1.25, ensuring cash flow covers debt payments (EBITDA ÷ total debt service).

  • Debt-to-Equity Ratio: ≤3:1, showing balanced financing.

  • Financials: 2–3 years of tax returns, profit/loss statements, and a robust business plan demonstrating repayment ability.

Industry and Experience:

  • Time in Business: ≥2 years preferred; startups face stricter scrutiny unless in stable sectors (e.g., franchises).

  • Industry Stability: Preference for proven sectors (e.g., healthcare, retail franchises) with consistent demand.

Collateral:

  • Business Assets: Equipment, inventory, or receivables, secured with a first lien.

  • Personal Guarantees: Often required, sometimes with personal assets (e.g., real estate) as secondary collateral.

Terms and Rates

Conventional loans offer varied terms, rates, and structures, tailored to your business needs and lender policies.

Terms:

  • Term Loans: 3, 5, 7, or 10 years for equipment, working capital, or acquisitions.

  • Real Estate Loans: Up to 25 years, aligning with property financing needs.

Rates:

  • Bank Loans: Prime (7.5%) + 0.5%–3.5% or Treasury (~4.0–4.5%) + 2%–4%, yielding 8%–11%. Fixed or variable options available.

  • Non-bank Loans: 10%–20%+, reflecting higher risk tolerance.

Lien Position:

  • Lenders take a first lien on business assets (e.g., equipment, receivables), ensuring priority in default. Real estate loans include first mortgages.

Loan Amounts:

  • Range: $100,000–$50M, depending on lender capacity and borrower qualifications.

  • Typical: $500,000–$10M for small to mid-sized businesses, including franchises.