1) Secured Business Loan
A secured business loan uses collateral—such as equipment, inventory, accounts receivable, or real estate—to reduce lender risk. For credit-challenged companies, collateral can open doors to larger limits and lower pricing than unsecured options.
- Typical uses: Expansion, inventory, working capital, refinancing higher-cost debt.
- Amounts: Often $25,000–$2,000,000+, depending on collateral value and advance rates.
- Rates/fees: Wide range based on asset quality and lien position; collateralized deals are generally cheaper than unsecured cash-flow loans.
- Time to fund: Days to weeks; appraisals or UCC filings may be required.
Pros: Better pricing potential; larger amounts. Cons: Collateral at risk, potential liens, more documentation. Learn more about structured term options: Term Loan.
2) Merchant Cash Advance (MCA)
A merchant cash advance provides funds upfront in exchange for a percentage of future sales or fixed daily/weekly payments. Underwriting centers on revenue consistency rather than perfect credit, which is why it’s a frequent choice for businesses with low scores.
- Typical uses: Inventory, seasonal cash flow gaps, short-term projects.
- Amounts: Commonly $10,000–$400,000 for established revenue profiles.
- Cost structure: Often a factor rate (e.g., 1.35), not an APR; effective APRs can be high.
- Time to fund: Sometimes 24–72 hours after approval.
Pros: Fast, credit-flexible, revenue-focused. Cons: Higher cost, frequent repayments, potential stacking risks if multiple advances are layered. For a full breakdown, read: merchant cash advance and the Investopedia overview.
3) Revenue-Based Financing (RBF)
Revenue-based financing sets repayments as a fixed percentage of monthly revenue until a capped amount is paid back. It’s similar to an MCA in repayment dynamics but often designed for recurring-revenue or fast-growing firms.
- Typical uses: Marketing campaigns, product launches, growth investments tied to revenue.
- Amounts: Vary widely; commonly aligned with a multiple of monthly revenue.
- Cost: Fixed payback cap; cost rises if growth slows because it takes longer to repay.
Pros: Payments flex with revenue. Cons: Can become expensive if growth underperforms. Explore Revenue-Based Financing.
4) Business Line of Credit
A business line of credit gives revolving access to capital. Draw only what you need, repay, and reuse. Credit standards vary; some providers accommodate lower scores if revenue is strong and the business is stable.
- Typical uses: Payroll smoothing, surprise repairs, bridging receivables.
- Limits: Often $10,000–$250,000+ for established firms.
- Rates: Typically interest-based; fees may apply per draw.
Pros: Pay interest only on draws; flexibility. Cons: Lower limits for subprime profiles; rates may be higher than bank LOCs. See our detailed guide: business line of credit and funding overview: Business Line of Credit.
5) Equipment Financing & Leasing
Equipment financing is secured by the equipment itself, which can reduce credit sensitivity. Many lenders consider the asset’s resale value, useful life, and your revenue trend alongside credit.
- Typical uses: Trucks, machinery, technology, medical devices, construction equipment.
- Amounts: Often $25,000–$1,000,000+ depending on the asset.
- Rates/terms: Competitive compared with unsecured options; terms often 2–6 years.
Pros: Collateral-driven; preserve cash. Cons: May require down payments and insurance. Deep dive: equipment financing and Equipment Financing.
6) Invoice Factoring
Invoice factoring converts receivables into immediate cash. The factor buys your invoices (often 70–95% advance) and collects from your customer. Approval leans on the credit of your customers and your AR quality more than your personal credit.
- Typical uses: Manufacturers, logistics, staffing, B2B firms with net-30/60/90 terms.
- Amounts: Linked to AR size and concentration; can scale with sales.
- Cost: Discount fees often 1–4% per 30 days, plus possible service fees.
Pros: Scales with growth, lighter credit focus. Cons: Customer notification, fees increase with longer pay cycles. Learn more: invoice factoring and Investopedia: Factoring.
7) SBA Microloan
The SBA microloan program uses nonprofit intermediaries to offer smaller loans, often paired with business coaching. While credit is considered, these community lenders may be more flexible than banks, especially for strong operators working to rebuild credit.
- Typical uses: Working capital, inventory, equipment.
- Amounts: Up to $50,000; average sizes tend to be smaller.
- Rates/terms: Competitive fixed rates; terms up to 6 years are common.
Pros: Supportive intermediaries, coaching resources. Cons: Smaller loan sizes; documentation required. For broader SBA context: SBA loan and Investopedia: SBA Microloan.
8) SBA Express and 7(a) When Credit Improves
If your credit is trending upward and revenue is strong, consider SBA Express or standard 7(a) loans for longer terms and lower rates than most online options. These programs generally require more documentation and stronger credit profiles than MCAs or factoring.
Learn more: SBA Express loan.
