Bank of America Small Business Loans: 2023 Review
Pros and cons of Bank of America
| Pros | Cons |
|---|---|
Wide suite of business lending products Products available to help new businesses build credit and business history Relatively low minimum loan amounts compared to other large banks Rate or fee discounts available for veterans or those with significant balances in Bank of America business checking accounts | Not transparent about minimum credit score requirements or maximum rate ranges Significant fees on many business lending products Annual revenue requirements may be high for some new business owners |
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Bank of America small business loans review
As the second-largest bank, Bank of America is a traditional brick-and-mortar bank offering a wide range of small business loan products. It is a Small Business Administration (SBA) Preferred Lender and has relatively low minimum loan amounts on its in-house financing products for a bank of its size.
Who is Bank of America for?
- Business owners with significant revenue. The lowest annual revenue requirement is $50,000, and it can climb up to $250,000 for some products.
- Business owners currently with Bank of America. You’ll get an interest rate discount, but only if your average daily balance is over $20,000.
- Business owners with strong credit. Most products at Bank of America may come with stringent credit requirements. Its cash-secured Business Advantage Credit Line is the exception, built specifically with the goal of building credit in mind.
Bank of America small business financing at a glance
| Product | Loan amounts | Repayment term | Estimated interest range | Fees |
|---|---|---|---|---|
| Unsecured term loan | Starting at $10,000 | 12-60 months | Starting at 6.50% | $150 origination fee |
| Secured term loan | Starting at $25,000 | Up to 48 months with business assets as collateral Up to 60 months with CD as collateral | Starting at 6.25% | 0.50% of loan amount as origination fee |
| Unsecured line of credit | Starting at $10,000 | Revolving with annual review | Starting at 8.75% | No cash advance fees |
| Secured line of credit | Starting at $25,000 | Revolving with annual review | Starting at 8.00% | Upfront and renewal fees: $150 on lines of up to $100,000 $250 on lines over $100,000 up to $250,000 0.50% of line amount for lines of more than $250,000 |
| Cash-secured line of credit | Starting at $1,000 | Revolving | Variable | $150 annual fee, waived for first year No origination fees |
| Business auto loan | Starting at $10,000 | 48-72 months | Starting at 5.79% APR | No application fee No prepayment penalty |
| Equipment financing loan | Starting at $25,000 | Up to 60 months | Starting at 6.25% | Origination fee of 0.50% of total amount financed |
| SBA 7(a) loan | $200,000-$5,000,000 | Up to 300 months | Rates vary, subject to SBA maximums* | Not disclosed |
| SBA 504 loan | $200,000-$12,000,000 | Up to 300 months | About 3.00%* | Not disclosed |
| Commercial real estate loan | Starting at $25,000 | Up to 180 months | Starting at 5.25% | Upfront fee of 0.75% of total amount financed |
*Terms and rates based on SBA guidelines
Unsecured term loans
Bank of America’s Business Advantage term loans are unsecured, which means you don’t have to put up any collateral to get approved. Instead, your eligibility will be determined by your credit score and any existing business relationship you may have with Bank of America.
Rates start as low as 6.50% on these loans, though Bank of America doesn’t advertise a ceiling, so your rate could end up being much higher. This product is eligible for the Preferred Rewards rate discount.
There is an origination fee of $150 on these loans, and it is not pre-calculated into the interest rate. It’s an additional cost. Payments are due monthly, and terms can stretch from 12 months to 60 months. You can take out amounts as low as $10,000, which is lower than the minimum on secured term loans.
Secured term loans
If you can’t qualify for a Business Advantage Term Loan or want a lower interest rate, you may consider a secured term loan from Bank of America instead. You can secure your loan with business assets or a certificate of deposit (CD) serving as collateral. If you use business assets, your maximum term will be 48 months, but you get up to 60 months if you’re using a CD.
Rates on secured term loans start at 6.25%, and the Preferred Rewards rate discount is identical to the one offered on Business Advantage Term Loans. You can borrow amounts starting at $25,000, and the origination fee is 0.50% of your loan amount.
Unsecured line of credit
You can borrow against a line of credit when you need the money. You won’t owe any money on this product unless you’ve made a draw that hasn’t been repaid in full. Bank of America’s Business Advantage Credit Line is unsecured, which means you won’t need any collateral.
You can get a line of credit as small as $10,000, at rates as low as 8.75%. You can get your interest rate down lower if you’re a Preferred Rewards member. When you owe money, payments will be due monthly, and there are no cash advance fees.
Secured lines of credit
You may opt for a secured line of credit if you want a lower interest rate or can’t qualify for a line of credit based on your credit history alone. Bank of America’s secured lines of credit use business assets or CDs as collateral, and they are available for amounts starting at $25,000.
Interest rates start at 8.00%, though they can be lower if you are a Preferred Rewards member. These loans are revolving, which means you’ll only owe monthly payments when you use the line of credit. The loans are renewed annually, at which point you will owe a renewal fee:
- $150 if your line of credit is $100,000 or less
- $250 if your line of credit is over $100,000 up to $250,000
- 0.50% of the total line amount if it’s over $250,000
There is also an upfront fee of the same amount.
Cash-secured line of credit
If you can’t get an unsecured line of credit because of your credit history, and you don’t have any collateral to put up for a secured line of credit, you may gravitate toward the cash-secured Business Advantage Credit Line. Think of this product like a secured credit card: You’ll be required to put down a deposit, then that deposit will serve as your line of credit. You cannot “borrow” more than your total deposit at any given point in time. When you make on-time payments, it may help improve your credit score.
The minimum deposit for these lines of credit is $1,000. Interest rates are variable, though you can still secure a rate discount identical to the one offered on unsecured credit lines if you are a Preferred Rewards member. There is an annual fee of $150, but the fee is waived for the first year. There are no origination fees.
If you manage your line of credit well and your business matures to meet Bank of America standards, you may be eligible to get your deposit back and upgrade to an unsecured credit line at the 12-month mark.
Business auto loans
Your vehicle must be a maximum of 5 years old with less than 75,000 miles to qualify for a Business Advantage Auto Loan from Bank of America. These term auto loans start at $10,000 and come with rates starting at 5.79% APR. Unlike the rates given for every other Bank of America business lending product, this one is an annual percentage rate (APR), which means it is already inclusive of any potential origination fees. You can get a rate discount based on your Preferred Rewards membership tier, but rate discounts are different from other lending products.
There are no application fees or prepayment penalties on Business Advantage Auto Loans. Terms are available for 48–72 months. If you have a vehicle that is over 2.5 tons, you will need an equipment financing loan.
Equipment financing
Business equipment loans on larger vehicles and other business machinery, like computers, start at $25,000 with terms of up to five years. Interest rates start at 6.25%, and you can get them even lower if you’re a Preferred Rewards member.
There is an origination fee of 0.50% of the total amount financed, which is not pre-calculated into the interest rate like it would be in an APR.
SBA 7(a) loans
SBA loans are backed by the SBA and offered through partner lenders, like Bank of America. Bank of America offers SBA 7(a) loans and SBA Express loans. SBA 7(a) loans can cover working capital, business acquisition, equipment, partner buyouts, owner-occupied commercial real estate or debt restructuring. They require a 10% down payment, and at Bank of America, you can borrow anywhere between $200,000 and $5,000,000. The SBA charges Bank of America guarantee fees of 2%-3.5%. Bank of America may or may not pass these charges on to you as origination fees or other fees.
Terms can last for up to 25 years. Under very specific circumstances, you may end up paying a prepayment penalty. Your loan term would have to be 15 years or more, and the penalty would only apply if you paid off 25% of the principal or more within the first three years of repayment.
SBA Express loans are smaller with shorter terms and are generally used for working capital, inventory and equipment. Loan amounts max out at $500,000, and terms go as high as 180 months. Rates on these loans are variable.
SBA 504/CDC loans
SBA 504 loans can be used for either equipment or owner-occupied commercial real estate. The biggest advantage of this loan is that you can borrow significantly more: up to $12,000,000 at Bank of America. Terms are available for up to 300 months, and interest rates are at about 3.00%. You have to put at least 10% down. The SBA charges Bank of America a 0.50% guarantee fee and an annual fee of 0.2475%. Bank of America may repackage these fees and pass them down to you.
Commercial real estate loans
You can also secure Bank of America commercial real estate loans without SBA backing. These loans start at $25,000 with terms of up to 180 months. You can opt for a shorter term of 10 years, but you will need to be prepared for a balloon payment at the end of the term.
Interest rates start at 5.25% for the most qualified borrowers, with Preferred Rewards member rate discounts in line with Business Advantage auto loan rate reductions. There is an upfront fee of 0.75% of the total amount of financing. The total amount financed isn’t just your loan principal; it can include insurance premiums, closing costs, appraisal fees, etc.
Health care practice loans
Bank of America also offers medical practice loans for dentists, veterinarians, physicians and optometrists. These health care practices can secure up to $5,000,000 in financing and use their funding for things like office space, equipment or debt consolidation.
Bank of America doesn’t publicly share much information about the rates or terms of these financing options, but if you are taking out a new term loan or line of credit and are a Preferred Rewards member, you can get an interest rate discount.
Franchise financing
You can secure franchise financing through Bank of America through any number of lending products, including SBA loans. Franchise financing starts at $10,000, and you can use the funding for things like owner-occupied commercial real estate, refinancing debt and resale opportunities.
Bank of America borrower requirements
For almost all Bank of America products, you will need at least two years in business. The only exception is the cash-secured Business Advantage Credit Line, which requires only six months of history. If you have one of these credit lines, you will be able to convert it to an unsecured Business Advantage Credit Line once you’ve built up two years of time in business — assuming your credit score, revenue and business history with Bank of America are up to par.
Minimum annual revenue requirements vary greatly from product to product. Bank of America does not share minimum credit score requirements, but the lowest rates are highly likely to go to those with the best scores.
Interest rate and fee discounts
If you are a Preferred Rewards member, you may be eligible for a rate discount. To become a Preferred Rewards member, you will need a business checking account with Bank of America. This discount applies to all conventional business lending products from Bank of America, and the amount varies based on your membership tier and the specific product.
| Tier | Three-month average daily balance | Interest rate discount |
|---|---|---|
| Gold | $20,000-$49,999.99 |
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| Platinum | $50,000-$99,999.99 |
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| Platinum Honors | $100,000+ |
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If you’re a veteran, active duty, or in the reserves or national guard, you’re eligible for a 25% discount on administration and origination fees for some loan products.
Alternatives to Bank of America
| Bank of America | PNC | Wells Fargo | |
|---|---|---|---|
| Minimum credit score | Not publicly disclosed | Not publicly disclosed | Not publicly disclosed |
| Loan products offered |
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| Time to funding | Not publicly disclosed | Not disclosed | Approval within 10 days or less for unsecured credit lines. Wait may be longer for other products. |
| Starting rates |
| Not disclosed |
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| Minimum loan amount |
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| Time in business requirements | 6 months or 2 years | 3 years | Not disclosed |
| Minimum annual revenue | $50,000, $100,000 or $250,000 | Not disclosed | Not disclosed |
Bank of America vs. PNC
Bank of America offers a similar suite of business lending products as PNC, but minimum loan and line amounts are much lower at Bank of America. For example, if you want to borrow between $10,000 and $20,000 via an unsecured loan or line of credit, Bank of America can meet your needs, while PNC can’t. PNC has notably higher minimum loan amounts for commercial real estate loans and secured lending products in particular.
Bank of America vs. Wells Fargo
As the fourth-largest bank in the U.S., Wells Fargo offers a similar line of products as Bank of America. The only things you can’t get at Wells Fargo are generalized business term loans and cash-secured lines of credit. The only rate publicly shared by Wells Fargo is for its unsecured credit lines, which is the prime rate plus 4.50%. For example, as of Sept. 1, 2022, the Wells Fargo prime rate is 5.50%. So the current interest on its unsecured credit lines is 5.50% + 1.75%, or 7.25%. This is actually lower than Bank of America’s lowest offer of 0.00% on unsecured lines of credit.