Capital One vs. Bank of America: Which small business lender is right for you?

Capital One and Bank of America are both major names in the traditional banking space. They both offer a variety of business products, including low-interest business loans, SBA loans, business credit cards and bank accounts.

Capital One may be your go-to choice for high-limit business lines of credit. You’ll need to be a business checking account customer to be considered for these or its other loans.

But Bank of America business loans might work best if you need a variety of options, including loans for startups and more established small businesses. That way you can start your business lending journey and continue it with the same lender in the future.

Capital One vs. Bank of America at a glance

Both Capital One and Bank of America offer a suite of business loan products, courtesy of their large footprint in the banking industry. Most major banks provide multiple business loan options.

Capital One business loan options include revolving and non-revolving lines of credit, real estate loans and four SBA loans. This lender provides generous loan sizes up to $5 million across most of its loans. But the lender doesn’t offer as much information on its website as other lenders, which can make it hard for you to shop around and compare.

Bank of America offers a few more conventional types of loans: business term loans, three lines of credit choices, equipment loans and SBA loans. Its loan sizes range from loan to loan, but it can fund nearly any amount for term and equipment loans if your business can support payments.

Capital One business loans

Capital One offers a variety of loans, including business lines of credit, real estate and investor real estate loans, multiple SBA loans and medical practice loans. Its business line of credit offers credit limits up to $5 million, unusually high considering the $250,000 limit on most lines of credit.

Capital One’s four SBA loan options are SBA 7(a), 504, Express loans or lines of credit. Most SBA lenders stick to the SBA 7(a) loan and 504 loan programs. It’s also a Preferred SBA lender, so it’s able to process SBA loans with efficiency. A spokesperson stated it doesn’t have a time in business requirement for SBA loans, which is a unique feature. Most lenders require at least two years.

But you have to go in person to apply for Capital One business loans. Given its over 700 locations in limited states, you’ll have to see if there’s a branch near you before choosing this lender.

Pros

• High loan amounts
• No revenue required for SBA loans
• Long payment terms

Cons

• Capital One account required
• In-person application
• Limited loan details on website

Bank of America business loans

Bank of America is known for its business loan options targeted to varying business communities. For example, small businesses may qualify for one of its business lines of credit tiered to different revenue levels: requiring $50,000, $100,000 or $250,000 in annual revenue. The lowest tier is a credit-building line of credit geared for startups that can put down a $1,000 deposit as security.

Otherwise, you can choose from an unsecured or secured term loan, SBA loans, equipment financing and more. With strong credit and financial health, businesses can qualify for low business loan interest rates, starting from 6 percent to 10 percent. But the major lender does charge $150 to $250 in annual fees for its lines of credit, and its longest payment timeline is five years for conventional term loans. Other traditional lenders provide longer repayment terms, such as seven or 10 years.

Pros

• Low starting interest rates
• Wide branch availability
• Business rewards program

Cons

• Needs strong credit
• Slow application process
• Extra loan fees charged

How to choose between Capital One and Bank of America

When choosing one of these bank lenders, both Capital One and Bank of America work well if you already have a banking relationship with them. Capital One requires a business checking account to apply, and you need to go in person to get the business loan process started. Existing Bank of America business customers get the chance to earn rewards and interest rate discounts on business loans.

But Bank of America offers more conventional business loan choices like term loans and various business lines of credit. Capital One business loans include lines of credit and equipment loans, but the lender also offers multiple real estate and SBA loan options. With Bank of America, small businesses across the U.S. are more likely to get face-to-face lending support because of the bank’s thousands of branch locations.

Choose Capital One if you have an existing relationship

Choosing Capital One makes sense if you already have or you’re willing to open a business checking account with the lender. It’s the first step to getting approved for its business loans. Once you have a checking account, you can talk directly with a business banker about the best lending options for you at one of over 750 locations.

Customers with an existing deposit account also get partnership interest rates. The exact rates aren’t disclosed, so you’ll need to ask a business banker what you qualify for. Count on borrowers with strong credit qualifying for the lowest business loan interest rates. While undisclosed, some traditional banks offer low interest rates starting around 5.5 percent.

Bank of America also offers interest rate discounts on business loans, discounting your interest rates by 0.25 percent to 0.75 percent over the life of the loan. But you have to keep a high balance in your Bank of America accounts to achieve preferred customer status.

Choose Bank of America for Preferred Rewards for Business program

Bank of America is one of the rare lenders that offers a Preferred Rewards for Business program. Its rewards are based on which preferred status you qualify for: Gold, Platinum or Platinum Honors.

To qualify, you need a Bank of America business deposit account. You also have to maintain an average daily balance across three months:

• Gold: $20,000 to $50,000
• Platinum: $50,000 to $100,000
• Platinum Honors: Over $100,000

Once you qualify, you can get waived business banking fees, higher rewards on qualifying business credit cards, higher savings account rates and more. For business loans, you can get discounts on interest rates. The discount is 0.25 percent with the rewards program’s Gold status, 0.5 percent with Platinum status and 0.75 percent with Platinum Honors.

Capital One does offer partnership rates for existing customers. But Bank of America’s total rewards and discounts could save you much more if you use its variety of products and services.

Choose Bank of America for credit building

Bank of America also provides an entry-level business line of credit for businesses that don’t quite qualify for its other loans. Startups with under two years in business and just $50,000 in annual revenue can get approved for the line of credit.

You can find similar requirements with online business loans, but it’s uncommon with traditional lenders that tend to keep lending criteria strict. You will need to put down a security deposit of $1,000, and the credit limit stops at $50,000.

By comparison, Capital One offers both revolving and non-revolving lines of credit with maximum limits up to $5 million. Most lines of credit are revolving, meaning that you can reuse the available credit as you pay back past loans. You do need at least two years in business to qualify with Capital One, not helpful for building business credit when you’re just starting out.

Business credit cards

Both Bank of America and Capital One offer attractive business credit cards to fit how your business spends. You might go with a Bank of America business credit card to get high cashback rewards. Its credit card lineup includes an option for high cashback rates on custom categories and one with unlimited cash back across all purchases.

Capital One business credit cards are ideal for business travel or if you have good or fair personal credit. It’s one of the few companies offering unsecured business credit cards for subprime borrowers, but with competitive offers like cash back, a 0-percent intro APR or no annual fee.

Alternatives

A direct competitor to Bank of America business loans is Wells Fargo. Like Bank of America, Wells Fargo offers multiple business lines of credit, including one that accepts startup businesses and offers credit limits up to $50,000. Wells Fargo is also ideal for SBA loans since it’s one of the top originators of SBA 7(a) loans. But this bank doesn’t offer the same variety of business loans as Bank of America.

For more options for fair or bad credit borrowers, you could look into Fundible, an online lender that offers term loans, business lines of credit, equipment financing, invoice financing and SBA loans. Most loans accept minimum personal credit scores in the 500 range, and it even works with scores as low as 450 in some cases. Its loans also offer a wide range of loan sizes from $5,000 to $10 million, though it varies by the loan.

SBA loans

Both Capital One and Bank of America offer SBA loans, an ideal choice if you’re looking to secure long repayment terms and favorable interest rates. The Small Business Administration guarantees a portion of the loan, making it possible for the lender to offer more favorable terms.

The SBA 7(a) loan program is popular for general working capital expenses. SBA 504 loans work best for buying equipment or constructing or renovating buildings. But lenders set their own minimum requirements for extending these loans, often preferring businesses with strong credit and industry experience.

Businesses at a disadvantage for meeting the standard criteria could look into SBA microloans, which offer up to $50,000 through nonprofit lenders. Similarly, nontraditional lenders like Community Development Financial Institutions (CDFIs) may also grant Community Advantage loans up to $350,000, focused on businesses in low-income areas or owned by minority business owners.

Bottom line

Capital One and Bank of America are both bank lenders that can support high borrowing amounts. But they help small businesses in different ways. Capital One centers on its variety of SBA and real estate loans, or high-dollar business lines of credit. Bank of America small business loans broaden the horizons through a wider range of conventional business loan types. Both offer standout business credit cards, though the company you choose will depend on your credit and the rewards categories you prefer.

Frequently asked questions

• What do banks look at when approving business loans?

  Like most lenders, banks want to see ample proof that you can repay the business loan, looking at your business revenue, its profitability and your personal and business credit history. Banks also look at how long your business has brought in revenue to gauge its stability. If your business has other debts, the bank may also consider how much net profit you have after debt payments to make sure you can handle new debt.

• Do banks require business plans for loans?

  Yes, many bank lenders require you to submit a business plan when applying for a business loan. The lender uses this plan to evaluate your business’s future profitability, important for determining your business’s risk and how likely you are to repay the loan. Not all lenders require a business plan, though, since past business performance can be a solid indicator of how your business will perform in the future.

• Does a business loan check your credit?

  Yes, most business loans require you to allow the lender to check your business credit history. In many cases, the lender will also look at your personal credit score. It does so particularly if you haven’t built enough business credit for the lender to assess your business’s ability to repay. But many business lenders do a soft credit check to prequalify for the loan so that it doesn’t affect your credit score.