Bank of America vs. Wells Fargo: Which small business lender is right for you?

If you want to work with a bank for your business financing, Bank of America and Wells Fargo are two of the largest banks in the United States. Bank of America offers a variety of loan types, including term loans, lines of credit, SBA loans and equipment financing, while Wells Fargo focuses on SBA loans and lines of credit.

Either Bank of America or Wells Fargo could be a good choice, depending on your needs. Let’s compare the offerings of each bank to see who is the best small business lender.

Bank of America vs. Wells Fargo at a glance

The right lender for you will depend on your business needs. Bank of America offers flexible business loans with repayment terms that may start as soon as six months, but go as high as 25 years. Wells Fargo helps small business owners that only need a small amount of business financing, with starting amounts of $5,000 for its Small Business Advantage® line of credit.

Bank of America business loans

Bank of America small business loans have low starting rates. If you have great credit, it’s possible to secure financing with rates as low as 7.00 percent APR for equipment financing and secured loans. Commercial real estate loans go even lower, with rates starting at 6.25 percent.

The lender also is one of the few banks to offer a credit-builder line of credit. Businesses that don’t need a loan but want to build their business credit can open a cash-secured line of credit with a $1,000 minimum security deposit. Bank of America also offers several other types of business loans, including healthcare practice loans and auto loans.

The lender also offers SBA loans. Bank of America SBA loans include SBA 7(a) and 504 loans, which are the common SBA loans offered by banks. But the lender also offers SBA Express loans.

Where Bank of America business loans shine is with businesses that make use of its business banking services. Your cash deposits can help serve as collateral for your business loans, making them easier to qualify for. You’ll also benefit from Bank of America’s Preferred Rewards program based on your balance at the bank. That can help avoid banking fees, get interest rate discounts and more.

Pros

• Variety of loan types
• Low rates for well-qualified applicants
• Rewards program for companies that also bank with Bank of America

Cons

• High eligibility requirements
• Applications can be slow
• Limited information available online

Wells Fargo business loans

Wells Fargo has a strong focus on business lines of credit. It has three different options, each tailored to different businesses. One focuses on newer companies, one on established businesses and the third on large companies producing at least $2 million in annual revenue.

The bank also offers other business bank accounts and services, including checking accounts and payroll services.

While its focus is on business lines of credit, Wells Fargo is also one of the largest SBA lenders in the United States. It even offers an SBA line of credit up to $50,000 for businesses under two years old. Wells Fargo SBA loans include:

• SBA 7(a)
• SBA 504 loans
• SBA business lines of credit

Pros

• Multiple lines of credit tailored to different businesses
• Major originator of SBA loans
• Rewards program for lines of credit

Cons

• Annual fees for lines of credit
• High credit score requirements
• Requires a personal guarantee

How to choose between Bank of America and Wells Fargo

If you bank with Bank of America or Wells Fargo, using that bank as your business lender is a natural choice. But if you don’t have a relationship with either bank, each meets slightly different needs.

Choose Bank of America for business loan variety

Bank of America offers more small business loans to businesses with good-to-excellent credit than many other lenders. You can get a term loan, several business lines of credit, equipment financing, commercial real estate loans or SBA loans. It also has a cash-secured business line of credit that can help business owners improve their business credit scores and qualify for affordable loans down the road.

By comparison, Wells Fargo simply offers business lines of credit and SBA loans. If you’re looking into a variety of different loans or want the option to use the same lender for different loans in the future, Bank of America is the better option.

Choose Wells Fargo for unsecured business lines of credit

Wells Fargo has three different lines of credit available to borrowers, two of which don’t require collateral. One is aimed at established businesses with two years of operating history, while the other is for newer companies that are just starting out.

Choose Bank of America for business credit cards

Bank of America business credit cards cover a variety of business needs. Business owners can choose between travel rewards cards, cash back cards and even a customizable rewards card that lets you choose from a selection of rewards categories.

While Bank of America offers some of the best business credit cards around, Wells Fargo isn’t accepting new applications for business cards. But the lender states new offerings are coming soon.

Alternatives

Wells Fargo and Bank of America are both banks and tend to focus on slightly more established companies rather than smaller or newer businesses.

A natural alternative to these bank business lenders is Chase. Chase is another large bank that offers various business services, including business loans and business credit cards. It offers unsecured term loans, SBA loans, commercial real estate financing and lines of credit.

Companies that have bad credit may want to consider online lenders. While banks tend to work with business owners with good-to-excellent credit and strong business financials, online lenders offer more accessible loans.

For example, Fundible and SMB Compass offer several loans, including lines of credit and term loans. SMB Compass has relaxed eligibility requirements for some loans, but if you have good-to-excellent credit, you can qualify for low-interest business loans comparable to bank lenders. Fundible is more accessible. It partners with other lenders and may approve borrowers with credit scores as low as 450.

SBA loans

Large banks like Wells Fargo and Bank of America prefer lending to established companies with strong credit, even when offering SBA-insured loans. But there are special SBA programs that are more accessible than the SBA loans found at traditional banks.

For example, SBA microloans are special loans for $50,000 or less and typically target underserved communities like veterans and women-owned businesses. The SBA maintains a list of microlenders that you can use to find one in your area.

You can also apply for an SBA loan through Community Advantage Lending Companies, which are Certified Development Centers, SBA microlenders or Community Development Financial Institutions that aim to serve disadvantaged business owners.

Bottom line

Bank of America and Wells Fargo are two large national banks offering business loans. Bank of America offers a wider variety of small business loans, including seven different loan options. These options are helpful if you’re considering multiple types of business loans or want to work with the same lender for multiple loans in the future.

Wells Fargo specializes in business lines of credit, offering options to both newer businesses and businesses with millions of dollars in revenue. Depending on which line of credit you choose, you may not even need collateral. Before settling on either lender, take the time to look at your other options. Compare rates and fees to try to find the best possible deal.

Frequently asked questions

• Do banks give loans to start a business?

  Yes, some banks offer loans to help newer businesses, but these are harder to qualify for than if you’re running an established company. Expect to pay higher rates and fees and offer a personal guarantee.

• What is an SBA loan?

  An SBA loan is insured by the U.S. Small Business Administration. This reduces lenders’ risk, letting them offer larger loans with longer repayment periods than traditional ones. The SBA has several loan programs and tries to help many businesses, including startups and business owners in low-income and underserved communities.

• How do you qualify for a business loan?

  Most lenders require a business plan and a business checking account to qualify for a business loan. But qualifying for a business loan also depends on your credit score, financial profile and the lender you apply with.
  If you have a long operating history, adequate business revenue, and a strong credit score, you may easily qualify for a business loan from banks, credit unions and online lenders. If you are a startup business or have limited revenue or bad credit, you’ll have to try and work with online lenders, many of which offer different types of bad credit business loans open to businesses that need relaxed eligibility requirements.
  If you struggle to access traditional financing, you may also want to try working with an SBA-approved lender. Many types of SBA loans can help different types of borrowers.