Funding Circle vs. Wells Fargo: Which small business lender is right for you?

If you have strong credit, either Funding Circle or Wells Fargo could work well for you since both offer low starting interest rates. As a traditional bank, Wells Fargo offers more loan choices than Funding Circle to help businesses at different stages of growth, including one startup line of credit. But it’s focused heavily on lines of credit and SBA loans. On the other hand, Funding Circle is an online lender with a few loan options that can process loans quickly — in as little as 48 hours.

Let’s see what features Funding Circle or Wells Fargo business loans have to offer.

Funding Circle vs. Wells Fargo at a glance

Funding Circle and Wells Fargo both keep beginning interest rates low, offer long payment terms and have SBA loans. But otherwise, these lenders cater to two different borrowers.

Wells Fargo offers double the loan choices as Funding Circle. While many Wells Fargo business loans need strong credit, it does have an SBA-backed line of credit that accepts startup businesses without considering revenue. Funding Circle business loans accept fair credit and lower revenue than is likely required from Wells Fargo.

Funding Circle business loans

Funding Circle narrows down its business loan choices to term loans, business lines of credit and SBA 7(a) loans. It sticks to fairly standard loan sizes between $5,000 and $500,000, which can cover basic small business needs.

For an online lender, it starts with low interest rates, from 7.49 percent for term loans and 11.25 percent for SBA loans. It also accepts personal credit scores down to 650 and $50,000 in annual revenue.

Yet Funding Circle only works with businesses that have been running and generating revenue for two years and up. It also charges high origination fees of 4.49 percent to 8.49 percent, steeper than the usual 1 percent to 5 percent seen elsewhere.

Pros

• Funds within 48 hours
• Accepts low revenue
• Low starting interest rates

Cons

• High origination fees
• Not available to startups
• Limited SBA loan amounts

Wells Fargo business loans

Wells Fargo business loans center on its assortment of business lines of credit and SBA loans. The traditional bank offers three different lines of credit, each with standout features.

You can get a standard unsecured business line of credit, an SBA-backed line designed for startups or a secured line of credit serving high-revenue businesses. Some of its business lines of credit also come with a Mastercard, letting you spend directly from the available credit, a unique feature.

Wells Fargo also offers both SBA 7(a) and 504 loans, in addition to the already mentioned SBA line of credit. You can secure up to $5 million through the 7(a) loan program or up to $15 million through the SBA 504 program.

Pros

• Top SBA lender
• Long payment terms
• Startup loan option

Cons

• Few types of loans
• Lending requirements vary by loan

How to choose between Funding Circle and Wells Fargo

Funding Circle and Wells Fargo are both ideal for borrowers needing to stretch payments over a long time. For Funding Circle, its term loans let you choose payments up to seven years, while SBA loans go up to 10 years.

Wells Fargo offers a line of credit with five-year terms, unusually long for this type of loan. Its SBA real estate loans go up to 25 years.

But to help you choose between these lenders, Funding Circle is best for quick approvals of small to midsize loans. Wells Fargo gets points for offering several versions of the same loan type, serving different borrowers. And it’s one of the top originators of SBA loans in the U.S.

Choose Funding Circle for fast funding

Funding Circle streamlines the application process to let you apply within minutes. Because Funding Circle uses a soft pull of your personal credit, you don’t have to fear seeing a dip in your credit score.

Once you submit your documents, you get to talk directly to an account manager within 24 hours. You can receive funding within 48 hours if you’re approved. Traditional banks often take more time to approve loans due to heavier documentation or having to apply in person.

That time window is much shorter compared to Wells Fargo, which states that you could wait up to two weeks to hear an answer about its line of credit.

Choose Wells Fargo for SBA loans

As the fourth-largest SBA loan provider, Wells Fargo can offer up to $5 million for 7(a) loans or $15 million for SBA 504 loans to qualifying businesses. Wells Fargo has a proven track record as an SBA Preferred Lender. That status means it has the SBA’s stamp for processing loans efficiently and can bypass direct SBA approval in some cases.

On the other hand, Funding Circle helps small business owners apply for SBA 7(a) loans with its partner lenders. It doesn’t offer these loans directly, and it only lets you apply for loans up to $500,000. Funding Circle does mention that small business owners usually hear back within three weeks about their SBA loan decision. That timeline is shorter than the usual 30 to 90 days that SBA loan approvals usually take.

Alternatives

You might need fast funding on a different type of business loan not provided by either Funding Circle or Wells Fargo. In that case, you could try Fundible, an online lender that provides fast funding with many loan options.

For a traditional bank option, Bank of America also offers a variety of business loans including term loans, lines of credit, SBA loans and equipment financing. With thousands of U.S. branches, you have many opportunities to manage your banking and business loans in person. Bank of America provides three business lines of credit similar to Wells Fargo. But it includes a cash-secured line of credit built for startups without enough credit history for a traditional loan.

Finally, a business credit card could be an option if you could use the flexibility of accessing cash to get through a small cash shortage or cover a small expense. The best business credit card for you will offer rewards in one or several categories that you spend regularly, such as gas or online shopping.

SBA loans

Many SBA lenders offer SBA 7(a) or 504 loans, including Wells Fargo and Funding Circle. 7(a) loans work best for general loan purposes like working capital, while SBA 504 loans are used for equipment purchases or construction projects. Both loans offer loan sizes in the millions of dollars. Because of their attractive loan terms, interest rates and amounts, some lenders keep high minimum standards for approving the loans.

But other SBA lenders offer different SBA programs meant to help disadvantaged business owners. For example, the SBA microloan offers loans up to $50,000 through nonprofit lenders. Community Advantage loans are an extension of the 7(a) loan program. It offers up to $350,000 through several types of lenders, including Community Development Financial Institutions (CDFIs).

Bottom line

When choosing between Funding Circle or Wells Fargo, there are clear differences between these two lenders. Going with Funding Circle means an online lending experience with fast approvals. On the other end, with Wells Fargo, you get the benefit of in-person loan advisors if you live near one of its branches. Overall, Funding Circle business loans have slightly more lenient requirements to apply, especially in the area of revenue. But Wells Fargo excels at providing business lines of credit and SBA loans with an established and well-known lender.

Frequently asked questions

• Is it hard to get a business loan from Wells Fargo?

  It depends on the business loan. Wells Fargo’s small business loans come with different lending requirements for each. Some loans want to see a minimum personal credit score of 680 and at least two years in business. But it does offer an SBA-backed line of credit accepting startups — and with no minimum revenue required.

• What credit score is needed for a business loan?

  Credit score requirements can vary significantly by the type of lender or business loan you choose. Generally, traditional banks and credit unions keep a tighter rein on credit — wanting to see a personal credit score of at least 680. Online lenders might accept bad credit in the mid-500s.

• How does Funding Circle work?

  Funding Circle offers business loans either directly or through partner lenders. You can apply online in minutes by answering a few questions and uploading documents. Then, you’ll talk with a representative to finalize the type of loan and your application. Most loans get an approval decision within 48 hours.