If you’re a small business owner on the hunt for business loans, you probably know the deal with traditional banks: big banks just don’t lend to small businesses.
That’s partly true. More than 80% of banks reported that they tightened their lending standards for small businesses after the recession. Today, only about 20% of small business owners who apply for bank loans are approved. Bank standards go up and small business lending goes down—the numbers add up.
But banks haven’t totally shut their doors to small business owners. In fact, the largest bank in the U.S. has a pretty sizeable small business lending program.
We’re talking JPMorgan Chase & Company—or Chase, as you probably know it. Chase has over $2.4 trillion dollars in assets and is used in almost half of the households in the United States today.
So how can a bank this big help your small business grow?
Use this insider guide to Chase small business loans to find out.
Chase naturally offers the traditional bank loans that you know well: term loans and lines of credit.
But that’s not all they offer. As a business account holder with Chase, you can also secure SBA loans, equipment financing, and business credit cards for your small business.
We’ll get into the details of these Chase small business loans in a little bit. But first, how do you qualify for Chase small business loans?
First off, if you have a business checking account set up with Chase, you’ve met the first eligibility requirement for Chase small business loans.
After that, you’ll have to prove that you’re a top-notch borrower to qualify for Chase small business loans.
In general, here are some things to keep in mind when you apply for any of Chase’s loans.
We’re talking about that 3-digit, all-important number when it comes to borrowing money: your credit score.
Just like any traditional bank, Chase will consider your personal and business credit score closely. If you don’t have a strong credit score to prove that you’ll repay your small business loan, Chase probably won’t work with you.
Chase also considers your assets when deciding your eligibility for Chase small business loans. Banks are looking for valuable assets that they can easily liquidate in case you default on your loan payments—and Chase is no exception. Expect Chase to look at your cash reserves, home equity, and vehicle ownership to understand the value of your assets.
Next, Chase will take a look at your debt-to-income ratio.
Your debt-to-income ratio evaluates how much debt you have compared to how much income you’re bringing in. Your debt includes any mortgage or rent payments, car loan payments, credit card payments, and existing business loan payments. As you can imagine, the best borrowers have the lowest debt-to-income ratios. If you have a debt-to-income ratio below 20%, you might be able to qualify for Chase small business loans.
While it’s mostly about the numbers for Chase, they’ll also consider your business’s history and future.
To qualify for any of these Chase small business loans, make sure you’ve prepared a stellar business plan. All banks (including Chase) will want to see your past financial performance and your financial projections for the future—both optimistic and pessimistic.
Be realistic with your business plan and put some thought into it. It’s your opportunity to prove to Chase that lending to your business is a smart investment.
Your eligibility for Chase small business loans is based on your existing relationship with Chase and gets decided on a case-by-case basis.
You won’t be able to determine your eligibility online. In fact, in order to apply for any of the Chase small business loans, you’ll have to visit your local Chase branch and talk to one of their loan officers in person.
Chase offers 6 loan products for small businesses. Use this guide to see if any of them are right for you.
Like any other line of credit, a Chase business line of credit is a great option for business owners who need flexibility in their business financing.
With a line of credit, Chase approves you for a pool of funds—anywhere from $10,000 to $500,000. You can draw on the capital whenever you want or need to for your business. You’ll pay Chase back, plus interest, over a monthly payment schedule. A Chase business line of credit is revolving credit, so once you pay back what you’ve borrowed, your credit line gets refilled to its original amount. Until you’ve fully repaid what you borrowed, Chase will automatically deduct monthly payments from your Chase business checking account.
A Chase business line of credit comes at a variable interest rate (indexed to the Prime Rate) depending on your credit score and business financials. You’ll also have to pay an annual fee to have a line of credit with Chase. If your credit line is $50,000 or less, your annual fee is $150. If it’s more than $50,000, you’ll have to pay $250 as an annual fee.
A Chase line of credit is the ideal option for business owners who need easy access to cash for just a short period of time.
When your cash flow fluctuates or you need to purchase inventory for your small business, you can tap into your line of credit to use the funds how you’d like.
While most of the time you’ll be using your line of credit for business purposes, Chase also allows you to use your line of credit as overdraft protection. This means that when your line of credit is linked to your Chase Business Banking checking account, you can draw from your line of credit to make purchases even when you don’t have sufficient funds in your checking account to actually make the purchases.
Tapping into your Chase line of credit might be a different process for each borrower, but expect to write a check, use an access card, transfer funds via telephone, or go through Chase’s website to access your line of credit.
When you think “business loan,” what comes to mind?
We’re willing to bet that the first kind of business loan you think of is a term loan. Most banks, including Chase, offer term loans as their main financing solution for small businesses that qualify.
Chase offers a business term loan ranging anywhere from $5,000 to $5 million. Your term will depend on the amount you borrow, but it could be as short as 1 year and as long as 7 years. To collect repayment, Chase will make monthly pulls from your Chase Business checking account.
Chases quotes your business term loan at both fixed and adjustable rates, but expect an APR as high as 10% on your loan. You should also know that Chase requires that borrowers put a down payment of around 20% when taking out business term loans.
Chase considers their term loan a perfect fit for businesses who need to “preserve working capital.”
Put simply, you can use funds from a term loan to making sure you have enough working capital to cover any emergencies or take advantage of business opportunities.
You can also consolidate any of your business’s existing debt with a Chase business term loan—which is pretty unusual for a traditional term loan from a bank.
Here’s where Chase shines in the small business loan department: SBA loans.
While it’s ranked 4th in the list of most active SBA lenders, Chase still provides a very sizable amount of 7(a) loans to small businesses—$551,564,600 in 7(a) loans, to be exact.
And when it comes to Chase’s SBA lending program, they have variety, not just volume.
Chase provides loans through the SBA’s 7(a) Loan Program, Express Loan Program, and 504 Loan Program.
Chase funds loans from the SBA’s 7(a) program—its most general and popular program—for borrowers who need to expand their businesses, purchase another business, or simply manage cash flows.
Chase gives up to $5 million in 7(a) loan amounts. If you’re planning on using your 7(a) loan for working capital, Chase will lend to you at a maximum term of 7 years. And if you’re purchasing equipment with your 7(a) loan, your term can be up to 10 years.
When Chase issues you the loan, the SBA actually guarantees up to 75% of it. Chase is still the lender, but in the case you default, the SBA is responsible for fulfilling the guaranteed portion of the loan. In the end, Chase is way more likely to lend to business owners who wouldn’t qualify for other Chase small business loans.
And for interest rates, that’s up for negotiation between you and Chase. But don’t worry, it won’t be too high—the SBA sets a cap at how much Chase can charge as interest on your 7(a) loan.
Chase also provides loans through the SBA Express loan program.
An SBA Express loan is a great option for smaller businesses who don’t have time to wait for other SBA loans, and only need a small amount in the first place—SBA Express loans go up to $350,000 in amount.
With an SBA Express loan, the SBA is the one determining whether or not you’re eligible for the loan, not Chase. And unlike other SBA loans, you won’t have to wait weeks to hear back—Express loans can be reviewed with 36 hours of applying.
Once you’re approved by the SBA, Chase tells you how much you’re approved for. After that, it’s the same deal for interest rates. Chase will set your interest rate, but can’t charge more than 6.5% over the going prime rate (for Express loans of $50,000 or less).
When you secure one of these Chase small business loans, be prepared to pay a little more in interest. Faster approval means less time for the SBA and Chase to evaluate the risk on lending to you, so Chase might charge a steeper interest rate to cover the risk. On top of that, the SBA only guarantees 50% of the Express loan.
Under the SBA Express program, Chase secures Export Express loans for certain small businesses, too. Chase offers up to $500,000 through the SBA Export Express program specifically for small businesses that export goods or need to finance an expansion overseas. If this is you, check out the details of the Export Express program before you apply for a Chase SBA loan.
If you’re making a major real estate or equipment purchase for your small business, consider applying for a 504 loan from Chase.
There’s no maximum amount for 504 loans, but they must be used for big purchases—like land acquisitions, building acquisitions, and construction or equipment financing. Depending on what you’re buying, Chase could offer you a 504 loan at a 30 year term.
If you need to purchase new equipment for your business (and you think an SBA 504 loan from Chase isn’t for you), you should consider Chase’s equipment loan program.
Chase offers three types of equipment financing: a term loan, a Draw Loan, and an Advised Line.
Each option lets you finance up to 100% of the cost of the equipment with no down payment necessary. Chase might also finance up to 10% of the “soft costs” on your equipment—like freight, training, installation, software, or sales taxes.
The interest rate you’ll get on these loans will depend on a few things: your banking relationship with Chase, your credit history, the equipment itself, and the term of the loan.
Speaking of the term on your Chase equipment loan… that’s where the three equipment loans get a little different.
A Chase equipment term loan is just as you’d expect—you’ll have a term as long as 7 years or up to 75% of the equipment’s estimated useful life. And when the term is up and you’ve paid Chase back with monthly payments, you own that piece of equipment.
With a Draw Loan, Chase allows you to draw on your equipment loan for a 12 month period. After that, you’ll repay what you borrowed to purchase your equipment by a fully amortizing repayment term.
And with the Advised Line, Chase pre-approves your equipment loan. Once you’re given the funds, you can make multiple equipment purchases for 12 months.
You might not have thought to add business credit cards to the list of Chase small business loans. But you should seriously consider using one of Chase’s business credit cards to finance your small business.
If you take out one of Chase’s business credit cards—either the Chase Ink or Chase Ink Plus—you’ll have easy access to credit for your everyday business spending needs. Plus, you could be earning valuable rewards and cash back on those purchases.
If you’re looking to earn cash back on your purchases, consider the Chase Ink Business Card. You’ll earn 5% cash back on the first $25,000 you spend at cellular, internet, or cable providers, 2% cash back on the first $25,000 you spend at gas stations and restaurants, and 1% cash back on everything else. If you already spend a lot for your business in those categories, there’s no reason not to have the Chase Ink card.
Or if you prefer to earn points on your purchases, check out the Chase Ink Plus Business Card. You’ll earn 5 points for every $1 you spend at cellular, internet, or cable providers, 2 points for every $1 you spend at gas stations and hotels, and 1 point for every $1 you spend anywhere else. Once you accrue a certain amount of bonus points, you can redeem them for cash back, travel purchases, and gift cards.
The valuable rewards program on both of Chase’s business credit cards is reason in itself to apply for one. But you might also want to consider using one of Chase’s business credit cards in place of a loan.
Chase small business loans are hard to qualify for, especially if you only want a very small amount in financing. A loan smaller than $10,000 just isn’t worth it for Chase. A $10,000 or $20,000 loan costs the same as a $500,000 loan to issue—at much less return.
So if you only want a small amount, you might have an easier time qualifying for a business credit card instead.
Plus, the Chase Ink Business Card comes with a 0% introductory APR for a whole year. In a lot of ways, that’s like a free loan for a year. As long as you pay off the minimum amount due on your balance, you won’t pay any extra on what you borrow. (If that’s not reason enough to use this Chase business credit card as a loan, we don’t know what is.)
Remember when we said that you have to apply with a loan officer in person for any of the Chase small business loans?
Well, Chase’s Business Quick Capital Loan is an exception to that.
With some behind-the-scenes work, Chase has teamed up with OnDeck Capital, an alternative lender that provides online loans for small businesses. With the help of OnDeck’s technology, Chase can approve Quick Capital Loans as fast as other non-bank online lenders can.
Chase’s Quick Capital Loan is applied to, approved, and funded entirely online. But here’s the catch: not just anyone can apply.
Chase has about 4 million small business customers in their database. Those existing customers are being prescreened for the Quick Capital Loan, and the most eligible borrowers are invited to apply for up to $250,000 in capital.
So you won’t really know whether or not a Quick Capital Loan is an option for you until Chase tells you so. But if you are tapped to apply for one, you should definitely consider it—you’ll get a fast business loan at a lower rate than most online lenders have to offer.
Now that you’ve reviewed all the small business loans Chase has to offer, your next question is probably this: “Should I apply for one?”
Here’s the bottom line on Chase small business loans:
They’re great financing options for your small business—but only if you can qualify for one. Chase’s small business loans are still bank loans, of course, and bank loans are hard to secure.
If you’re worried about your eligibility for a Chase small business loan, your best bet is to go the SBA-route.
Chase offers a lot of funding for small businesses through the various SBA loan programs—it’s just not as risky a deal for them. In the end, you might be able to get the most loan at the lowest cost with an SBA-guaranteed Chase business loan.
But as always, do your research on all your small business financing options. If Chase can offer you the financing you need at the lowest cost, it might just be the best solution for you!