Below are common financing structures used by San Diego entrepreneurs. Each option has distinct features, typical use cases, and application considerations.
SBA 7(a) Loan: Versatile, Widely Used
The Small Business Administration’s 7(a) program is among the most recognized options for U.S. small businesses. It’s designed for a broad range of purposes—working capital, refinancing certain debt, buying equipment, tenant improvements, and even business acquisition.
- Use cases: Working capital, partner buyout, acquisition, build-out, equipment
- Amortization: Often 7–10 years for working capital; longer for real estate
- Rate structure: Commonly tied to Prime with an allowable spread per SBA rules
- Collateral: May be required when available; varies by loan size
Learn more about how SBA loans work in this in-depth guide: SBA loan. For official program details, see the SBA’s 7(a) page: SBA 7(a) Loans.
SBA 504 Loan: Fixed Assets and Owner-Occupied Real Estate
San Diego companies purchasing heavy equipment or owner-occupied real estate sometimes look at the SBA 504 program. A typical 504 structure involves a bank (or other lender) plus a Certified Development Company (CDC), creating longer-term, fixed-rate financing for major fixed assets.
- Use cases: Commercial real estate, large equipment, facility improvements
- Potential benefits: Longer terms, often competitive, partially fixed rates
- Considerations: Primarily for fixed assets; operational expenses typically not covered
See the official program details: SBA 504 Loans.
SBA Express Loan: Faster Decisions, Smaller Amounts
If you need speed and a smaller loan amount, the SBA Express framework may offer quicker decision timelines than standard 7(a) loans. Terms and rates differ by lender and use case.
Explore how this option works: SBA Express loan.
Short Term Business Loan: Speed and Simplicity
Short-term financing typically serves urgent needs such as inventory purchases ahead of peak season, bridging a receivables gap, or a quick equipment fix. Terms can range from a few months up to two years. Repayment can be daily, weekly, or monthly.
- Use cases: Time-sensitive inventory, bridging seasonal gaps, quick repairs
- Considerations: Shorter durations can mean higher effective costs
- Pro tip: Compare offers using APR or total payback, not just factor rates
Review common features and risks: Short-Term Online Loan.
Traditional Term Loan for Small Business
Term loans offer a lump sum with a fixed repayment schedule. They’re commonly used for expansion, renovations, or refinancing shorter-term obligations into a predictable structure.
- Use cases: Growth projects, equipment, refinancing costlier debt
- Repayment: Monthly, over a defined term (e.g., 2–5+ years)
- Key metric: Debt Service Coverage Ratio (DSCR)
Get a deeper look at how term loans work: Term Loan and our expert guide to a term loan for small business.
Business Line of Credit: Flexible Working Capital
Lines of credit let you draw funds as needed up to a set limit, paying interest only on what you use. They’re popular for cyclical cash flow, payroll, and purchase orders.
- Use cases: Ongoing working capital, seasonality, short-term purchases
- Benefits: Flexibility, interest on drawn amount, revolving structure
- Considerations: Periodic reviews; may be unsecured or require collateral
Learn more: Business Line of Credit and our detailed guide on a business line of credit.
Equipment Financing and Leasing
From commercial kitchen appliances to CNC machines and vans, equipment financing spreads the cost over the asset’s useful life. Structures vary from loans to leases.
- Use cases: Vehicles, manufacturing equipment, medical devices, POS systems
- Advantages: Preserves cash, potential tax benefits (consult a CPA)
- Considerations: The equipment often serves as collateral
Explore options: Equipment Financing and our 2025 overview of equipment financing.
Invoice Factoring and Accounts Receivable Financing
If you sell B2B on net terms, factoring or A/R financing can accelerate cash flow by advancing funds against outstanding invoices.
- Use cases: Manufacturers, wholesalers, agencies with slow-paying clients
- Benefits: Tied to receivables rather than FICO alone
- Watch-outs: Fees, customer notification policies, recourse vs. non-recourse
Understand the mechanics: invoice factoring.
Merchant Cash Advance (MCA)
An MCA typically involves a purchase of future receivables, with remittances tied to daily sales. While speed and accessibility can be attractive, compare costs carefully and consider the impact on cash flow.
- Use cases: High card-volume businesses, time-sensitive needs
- Repayment: Daily/weekly remittances from sales
- Caution: Understand factor rates, holdbacks, and total payback
Get a full overview: merchant cash advance.
Revenue-Based Financing (RBF)
For certain tech, SaaS, or high-margin businesses, RBF ties payments to a percentage of monthly revenues until a predefined cap is reached. It’s neither debt nor equity in the traditional sense, and terms vary widely.
Learn the fundamentals: Revenue-Based Financing.
Microloans, CDFIs, and Credit Unions
Community Development Financial Institutions (CDFIs) and local credit unions often support early-stage or underserved businesses with smaller loans and advisory services. These can be particularly helpful if you’re building credit or need coaching alongside capital.
Find CDFIs via the U.S. Treasury’s directory: CDFI Fund.
