You’ll find a wide range of funding products available across banks, credit unions, online finance companies, and community-focused programs. Below are common options and how they’re generally used.
SBA 7(a) Loan: Flexible, Broad Use of Funds
The SBA 7(a) loan program is one of the most recognized options for U.S. small businesses. It’s issued by participating lenders and partially guaranteed by the U.S. Small Business Administration. Proceeds can typically be used for working capital, equipment, inventory, real estate (owner-occupied), and even business acquisitions.
- Typical use cases: Working capital, equipment purchases, partner buyouts, business acquisitions.
- General features: Longer terms than many conventional loans; competitive rates based on Prime plus a spread; full documentation.
- What lenders may review: Time in business, cash flow, credit, collateral, and management experience.
Learn the fundamentals in this comprehensive resource: SBA loan guide (requirements, rates, lenders). You can also see official program details at the SBA 7(a) program page.
SBA Express Loan: Faster Timelines
Compared with standard 7(a), SBA Express typically offers faster turnarounds and smaller loan amounts. It’s often considered by businesses needing quicker access to working capital or smaller equipment purchases.
Get a quick primer: SBA Express loan guide.
Term Loan: Predictable Payments
Conventional term loans provide a lump sum with fixed or variable interest, repaid over a set period (often 2–10 years, depending on use and lender). They’re suitable for equipment, buildouts, or funding a major project with a clear ROI.
- Strengths: Predictable amortization and payments; may offer competitive rates.
- Considerations: More documentation; underwriting may require collateral and strong financials.
Explore how term loans work: Term Loan overview and a practical guide to a term loan for small business.
Business Line of Credit: Flexible Working Capital
A business line of credit sets a credit limit you can draw on as needed. You pay interest only on what you use. Many firms use lines of credit to manage receivable cycles, unexpected expenses, or seasonality.
- Strengths: Pay interest only on drawn funds; reuseable as you repay.
- Considerations: Variable rates; periodic reviews; may require financials and reporting.
Learn more: Business Line of Credit and an in-depth business line of credit guide.
Short-Term Business Loan: Speed and Simplicity
Short-term business loans (often 3–18 months) emphasize speed and streamlined documentation. They may be used for quick inventory buys, bridging a short cash flow gap, or taking advantage of a time-sensitive opportunity.
- Strengths: Faster decisions; simpler paperwork.
- Considerations: Higher cost of capital; frequent payments; best used for projects with clear, near-term ROI.
Compare general features here: Short-Term Online Loan.
Equipment Financing and Leasing
Equipment financing is secured by the equipment being purchased, which can make approvals more accessible than unsecured credit for asset-heavy businesses. Terms generally match the useful life of the asset.
- Best for: Construction, manufacturing, agriculture, transportation, healthcare, restaurants.
- Common terms: 2–7 years; fixed payments; potential tax advantages (consult a tax professional).
Dive deeper: Equipment Financing and our full equipment financing guide.
Invoice Factoring and Receivables Financing
Invoice factoring involves selling unpaid invoices at a discount to improve cash flow. It can be useful if your customers pay on net-30 to net-90 terms and you need capital sooner.
- Strengths: Converts receivables into working capital; underwriting emphasizes your customers’ credit.
- Considerations: Discount fees; customer notification in many factoring arrangements.
Learn the details: invoice factoring guide.
Merchant Cash Advance (MCA): Card-Sales-Driven Funding
An MCA advances funds and collects a percentage of your daily card sales until the obligation is repaid. It is not a loan, and the cost is reflected in a factor rate rather than an APR. This option is used when speed and simplicity are prioritized.
- Strengths: Fast access; approval may rely on sales volume rather than traditional credit metrics.
- Considerations: Typically higher cost; daily or frequent remittances impact cash flow.
Understand the structure and risks: merchant cash advance guide.
Revenue-Based Financing
With revenue-based financing, repayments are tied to a percentage of monthly revenue. It’s often used by SaaS, e-commerce, and subscription businesses with predictable revenue streams.
Compare how it works: Revenue-Based Financing overview.
Acquisition and Expansion Loans
Businesses pursuing a buyout or adding a new location may consider SBA 7(a), conventional term loans, or a combined structure. Underwriting tends to focus on historical performance, projected cash flow, and management capability.
See scenarios and tips: business acquisition loans guide.
