Wells Fargo Review

Overview

Wells Fargo, the fourth-largest brick-and-mortar bank in the U.S., provides a limited selection of small business loan options despite its size. These include SBA 7(a) and SBA 504/CDC loans, an SBA line of credit, and conventional secured and unsecured lines of credit. While larger national banks typically offer a broader range of conventional and SBA lending products, Wells Fargo’s SBA options still provide more variety than what’s available from most online lenders.

 

 

Types of Loans

Prime Line – Secured Line of Credit

Prime Line is Wells Fargo’s secured business line of credit. This means you need to offer a collateral to access the credit line. Acceptable forms of collateral include non-real estate business assets, inventory, accounts receivable, and equipment. While it functions as a revolving credit line, it undergoes an annual review every 12 months for renewal.

Origination fee: 0.50%, charged both at the initial opening and annually at renewal.

No cash advance fees, offering cost savings compared to some other credit lines.

Business Line – Unsecured Line of Credit

The Business Line is the standard unsecured line of credit, requiring no collateral but mandating a personal guarantee. This guarantee must come from owners collectively holding at least 51% of the business, with each contributing owner having a minimum 25% ownership stake. To qualify, your business must have been operating for a minimum of two years.

Interest rates for the Business Line range from prime + 1.75% to prime + 9.75%. An annual fee also applies, varying by credit limit:

• $95 for credit lines between $10,000 and $25,000
• $175 for credit limits between $25,000 and $150,000

Additional costs include cash advance fees and late payment fees. The fees for cash advances on the Business Line depend on the method used:

• No fee: When using access checks, Bill Pay, online transfers, or telephone transfers.
• Greater of 3% or $10: For ATM or over-the-counter transactions.
• Greater of 4% or $10: For wire transfer advances, casino cash, or quasi-cash transactions.
• Late payment fees vary based on the situation – $25, $39, or $50, depending on the overdue amount and terms.

SBA Unsecured Line of Credit

If your business is less than two years old, Wells Fargo may offer access to an SBA unsecured line of credit. The credit limits for this SBA line are more modest, ranging from $5,000 to $50,000, and the interest rates are higher, ranging from prime + 4.50% to prime + 6.50%, based on your creditworthiness. However, there are no annual fees, and the line of credit is only subject to a review every five years, offering a less frequent review process than some other options.

SBA 504/CDC Loans

SBA 504 loans are designed for construction or real estate purposes. At Wells Fargo, these loans can be used for construction, purchasing equipment, or buying land or property. The borrowing limit depends on the specific use of the funds. Wells Fargo can back up to $10 million, with an additional $5 million available through a Certified Development Company. For small manufacturers or those involved in energy projects, you may be eligible for up to $5.5 million from the Certified Development Company.

SBA 504 loan rates are set by the SBA and are currently around 3.00%. The maximum loan terms are 10 years (120 months) for machinery or equipment purchases. However, if the funds are used for construction or other commercial real estate purposes, the term extends to 25 years (300 months). As with many SBA loans, you can expect to encounter SBA fees passed on to you as the borrower, though these fees are typically not disclosed until after the application is submitted.

SBA 7(a) Loans

SBA 7(a) loans are term loans with multiple purposes. Wells Fargo specifically highlights some common uses for its SBA 7(a) loans, including business acquisition, partner buy-outs, expanding to a new location, real estate purchases, and equipment purchases.

An SBA 7(a) loan has a maximum loan amount of $5,000,000. Loan terms can extend up to 300 months (25 years) if the funds are used for commercial real estate, or 120 months (10 years) for other purposes. Interest rates can be either fixed or variable, but they are subject to the SBA’s interest rate limits. The SBA charges fees to banks when issuing these loans, and it is likely that Wells Fargo will pass these fees on to you as the borrower, although the bank does not publicly disclose the specific fees for SBA products.

Healthcare Practice Loans

Wells Fargo offers a wide range of lending products tailored to meet the financing needs of healthcare practices. These products include term loans, working capital loans, lines of credit, equipment financing, SBA loans, business refinancing, and practice equity loans, providing comprehensive solutions for healthcare professionals.

Borrower Requirements

Wells Fargo provides some insight into its underwriting requirements, but it can be difficult to get a complete picture for any specific product. However, it does offer key details on what’s needed to qualify for a business loan or line of credit, which can give potential borrowers a better understanding of the process.

Secured Line of Credit

Wells Fargo does not disclose the minimum credit score requirements for this product, and while the exact time in business requirement is not specified, it is assumed to be at least two years, as applicants are asked to provide their past two years of business tax returns. The bank does mention that most qualifying businesses typically have annual sales between $2 million and $10 million.

Unsecured Line of Credit

To qualify for unsecured lines of credit, you generally need a credit score of at least 680. If your business has been operating for two years or more, you can apply for the Business Line product. However, if your business is newer, with fewer than two years of operation, the Small Business Advantage line of credit may be a better fit. Annual revenue requirements for these products are not disclosed by Wells Fargo.

SBA Loans

Wells Fargo does not publicly disclose many specific minimum requirements for SBA 7(a) and SBA 504/CDC loans, but you can start by reviewing the minimum credit standards set by the SBA, as these provide a general guideline. For SBA term loan borrowers, Wells Fargo does share some maximum limitations: your business’ net worth should be under $15 million, and your average net income must be below $5 million. These figures can help you determine if your business qualifies for an SBA loan through Wells Fargo.

How to Apply for a Loan?

You can apply for a Wells Fargo business line of credit either online or at a branch. However, online applications are only available for credit lines of $100,000 or less. During the application, you’ll need to provide basic business details, such as your business opening date, tax ID, number of owners, and gross annual revenue. Each owner must also submit a personal guarantee, along with their contact information and annual household income.

If applying for the Wells Fargo Prime Line of Credit, you’ll be required to submit two years of personal and business tax returns, a personal financial statement, and two years of company-prepared, year-end financial statements. Once all necessary information is submitted, the processing time typically takes a couple of weeks.

Customer Support

Customer service at Wells Fargo is available by phone seven days a week. While there is no online chat option, the customer service page provides all the necessary contact information. For account maintenance, you can reach Wells Fargo at 1-800-225-5935.

 

Bottom line

While Wells Fargo’s maximum credit line amounts for unsecured lines aren’t particularly high, its SBA options make it accessible even for businesses without a long operational history. Wells Fargo best suited for business owners seeking a relatively small unsecured line of credit. If you’re looking for a secured line of credit backed by collateral, Wells Fargo caters to businesses with annual revenues starting at $2,000,000. Wells Fargo also provides the most common SBA loan products. While the bank isn’t fully transparent about the SBA fees passed on to borrowers, this is a common practice among financial institutions, making it wise to compare options.