Bank of America Small Business Loan Review

Estimated interest range: Starting at 6.50%  Best for: Business owners who want a large range of funding solutions with relatively low minimum loan amounts

Pros and cons of Bank of America

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Bank of America small business loans review

Bank of America is one of the largest banks in the country, offering both online and traditional brick-and-mortar services. It offers a litany of small business lending products and it’s also an SBA Preferred Lender. For such a large bank, it’s relatively transparent about its starting rates, and offers smaller borrowing minimums than some other competitors.

Bank of America small business financing at a glance

*Please note that APR rates include the cost of the interest rate and any other standard fees

**Terms and rates based on SBA guidelines

Preferred Rewards tiers by product

You can get an interest rate discount for some products if you’re a Preferred Rewards member. You’ll need a Bank of America business checking account in order to qualify — but even if you don’t have one, you can open one during the loan application process.

Preferred Rewards Member Tiers

Unsecured term loans

Bank of America’s Business Advantage term loans are unsecured, which means you won’t have to put up any collateral. Interest rates start at 7.75%, with an origination fee of $150. Loan amounts start at $10,000 and term lengths last between 12 and 60 months.

Secured term loans

Secured term loans require collateral, but interest rates start lower than unsecured one, at 7.25%. The minimum loan amount is $25,000, and the interest rates start lower than unsecured loans at 7.25%. Terms on these loans can last up to 48 months if you secure your loan with business assets, or up to 60 months if you secure your loan with CDs. There’s also an origination fee of 0.50%.

Veterans can qualify for a 25% reduction on origination fees — to claim the discount, you’ll need to provide proof of your service.

Unsecured line of credit

With a line of credit, you’ll be able to borrow as the need arises, rather than getting all of your funding upfront in a lump sum as you would with a term loan. Bank of America’s Business Advantage credit line offers a starting interest rate of 10.00%.

Unsecured lines of credit start at $10,000. There are no cash advance fees, though information about other fees isn’t publicly disclosed.

Secured line of credit

Secured business lines of credit come with lower interest rates and higher minimum amounts. These lines of credit start at $25,000, and the lowest interest rate is 9.50%.

Secured and unsecured lines of credit undergo an annual review, but Bank of America only provides information about upfront and annual review fees for secured lines of credit:

• $25,000 to $100,000: $150 upfront and annual review fee
• $100,000.01 to $250,000: $250 upfront and annual review fee
• $250,000.01 and up: 0.50% of the credit limit

Cash-secured line of credit

Cash-secured lines of credit from Bank of America are a business credit building product, with rules similar to those you might find on a secured credit card for people with bad credit. Your business won’t need to be as established or as profitable as it would be for other Business Advantage loans and credit lines.

You’ll need to secure this credit line with your own money upfront, and the minimum security deposit is $1,000. When you draw against your line of credit, you’ll repay with a variable interest rate. There are no origination fees, but there is a $150 annual fee after the first year, a $29 stop payment fee and a 3% international transaction fee.

And if you’re late on a payment, your late fee will vary depending on your balance amount:

• $0 to $100: No late fee.
• $100.01 to $1,000: $29 late fee.
• $1,000.01 to $5,000: $39 late fee.
• More than $5,000: $49 late fee.

Bank of America will review your line of credit after 12 months. If you’ve managed your line of credit responsibly and meet other business qualifications, you may be upgraded to an unsecured line of credit.

Business auto loan

You can use Bank of America business auto loans for purchase or refinance. The vehicle must weigh under 2.5 tons, have less than 75,000 miles, be valued at at least $10,000 and can’t be more than five years old. Terms range from 48 to 72 months; interest rates start at 7.09% APR.

Equipment financing

Vehicles that weigh over 2.5 tons and other types of equipment can be financed through Bank of America’s equipment financing loans. Loans start at $25,000 with terms of up to 60 months. Interest rates start at 7.50%, and there’s an 0.50% origination fee.

Commercial real estate loans

Bank of America’s commercial real estate loans start at $25,000 and can be used to purchase land or commercial property, or to leverage equity to expand your business. Rates start at 6.50%, and there’s a 0.75% upfront fee, with the potential for other fees and closing costs.

The maximum loan term can vary: It’s 180 months if you make fixed payments, but it can be just 120 months if you choose a loan with a balloon payment. Balloon payments are usually undesirable, as you’ll have one, large payment at the end of your loan term — that said, if you plan ahead for it and find it’s manageable, you may be willing to take on the risk.

SBA 7(a) loans

Bank of America offers SBA 7(a) loans that range from $200,000 to $5,000,000. SBA loan rate maximums are set by the Small Business Administration. Equipment, working capital and inventory loan terms can be as long as 120 months, while commercial real estate terms can last up to 300 months.

The SBA typically charges financial institutions a guaranty fee, which the lender often passes on to the borrower. Sometimes, however, the SBA or Bank of America will waive the guaranty fee for SBA 7(a) loans.

SBA Express loans

SBA Express loans are akin to SBA 7(a) loans, except the amounts are smaller and the turnaround time is faster. Standard SBA 7(a) loan applications can take five to 10 business days for the SBA to review but applications for SBA Express loans take the SBA a maximum of 36 hours.

At Bank of America, you can borrow between $25,000 and $500,000 with an SBA Express loan — though expect to be asked for collateral. Rates can’t exceed the SBA maximum, and Bank of America will normally pass on any extra fees (like the guaranty fee) to the borrower.

SBA 504/CDC loans

SBA 504 loans are often issued for real estate, machinery or equipment, with a maximum term of 300 months. Bank of America issues these loans in amounts that range from $400,000 to $20,000,000, which is quite high even for an SBA 504 loan. SBA fees, like the guaranty fee, will most likely be passed on to the borrower.

Health care practice loans

Bank of America has a specialized department for health care practice financing, including financing for physicians, dentists, optometrists and veterinarians. You can receive up to $5,000,000 in total financing. Suggested uses for financing include starting a new practice, acquiring a practice, expanding your practice and consolidating debt.

Franchise financing

Bank of America also provides financing for restaurant franchises, with a dedicated team specifically for McDonald’s franchise financing. The financing you can receive includes term loans, loans for construction, equipment loans or business lines of credit.

Bank of America borrower requirements

Eligibility for business lending varies by product. The easiest product to get is the cash-secured line of credit, which requires the least amount of business history and revenue. All other products will require at least two years of business history with minimum annual revenue requirements of at least $100,000.

Bank of America doesn’t publicly share its minimum credit score requirements for all of its business lending products. However, if you’re getting an unsecured loan or line of credit, you will need a credit score of at least 670. (Still, unless you have an excellent credit score, it’s likely the interest rate you’re offered will be higher than the starting rates.)

Required documents

When you apply for a Bank of America business loan, you and other business owners will be asked for some personal information and documentation, including proof of your:

• Business name and address
• Business phone number
• Business tax ID
• Industry and business start date
• Date of acquisition (if applicable)
• Number of employees
• Annual net profit
• Annual gross sales
• Business’ outstanding debts, including lender name, account balance and monthly payment amount
• Personal information for all owners/guarantors/controlling managers:
  • Name and title, date of birth and Social Security or passport number
  • Personal income
  • Monthly housing payments

Bank of America should be able to verify a lot of this information using your business and personal tax returns, though you’ll likely need more documentation to qualify for a business loan.

Alternatives to Bank of America

Even though it only lists starting rates and amounts for most products, Bank of America is still more transparent than other large, traditional financial institutions. If you’re trying to figure out which bank has the most competitive rates, the best way to find out is to fill out applications at multiple financial institutions.

Bank of America vs. KeyBank

Both Bank of America and KeyBank are SBA Preferred Lenders. But although our review of KeyBank’s business loans shows it has a much larger selection of SBA options, it only offers them in 17 states. Bank of America has a smaller selection, but its SBA products appear to be available nationwide, and it has more conventional business lending products than KeyBank.

Bank of America vs. PNC

In most cases, Bank of America is better for newer businesses than PNC, as you’ll need at least three years under your belt to qualify for most PNC business lending products. Bank of America also has lower minimum borrowing amounts across all products. In addition, PNC doesn’t publicly disclose its rates and fees, so you’ll need to apply to both banks to find out which one is right for you.