Business Loans Guide

Small businesses have more financing options than ever. The right choice depends on how much you need, how fast you need it, your credit profile, and what you'll use the money for.

SBA Loans

Government-guaranteed loans through banks. Best terms but slowest process.

SBA 7(a): Up to $5M. For working capital, equipment, real estate, debt refinancing, or business acquisition. Rates: prime + 2.25-4.75% (2026: ~10-12.5%). Terms: up to 10 years (equipment) or 25 years (real estate). SBA guarantee: 85% for loans up to $150k, 75% for larger loans. Requires: 2 years in business, good credit (680+), collateral, personal guarantee. No prepayment penalty after 3 years for 15+ year terms.

SBA 504: For fixed assets (real estate, major equipment). Up to $5M. Structure: 50% bank loan, 40% CDC loan (SBA-backed), 10% down payment. Fixed rate. Longer terms (20-25 years). Must create or retain jobs (or meet community development goals).

SBA Microloan: Up to $50k through nonprofit intermediaries. Rates: 8-13%. Can be easier to qualify for than 7(a).

Business Term Loans

Lump sum repaid with interest over a fixed term. Banks ($25k-$5M, 6-10% APR, need 680+ credit). Online lenders/Fintech (OnDeck, Kabbage, Fundbox: $5k-$500k, 10-40% APR, easier qualification). Best for: one-time purchases (equipment, expansion, acquisition).

Business Line of Credit

Revolving credit — draw, repay, redraw. Only pay interest on what you use. Secured (backed by assets) or unsecured. Banks: $10k-$1M, 7-12% APR. Online: $1k-$250k, 10-30% APR. Best for: cash flow gaps, inventory purchases, seasonal businesses.

Invoice Factoring

Sell unpaid invoices to a factor at a discount (2-5% per month). Advance rate: 80-90% of invoice value. No personal guarantee required (the invoice is collateral). Best for: B2B businesses with slow-paying clients. Cost can be high but it's fast. Not a loan — so no debt on your balance sheet.

Equipment Financing

The equipment itself serves as collateral. Rates: 6-25% depending on equipment type and your credit. Terms match equipment life (3-10 years). Best for: purchasing vehicles, machinery, computers, medical equipment. Section 179 deduction can offset the cost in year 1.

Merchant Cash Advance (MCA)

Advance against future credit card sales. Repaid as a fixed percentage of daily card sales. Factor rate: 1.1-1.5 (e.g., borrow $10k, repay $11k-$15k). Very expensive. Effective APR: 30-200%+. Best for: short-term needs when no other option exists. MCA is not a loan (no interest rate per se — uses factor rate), so usury laws in some states don't apply. Can create a debt trap if renewal rates are high.

Comparison

Type	Amount	APR	Term	Speed	Credit
SBA 7(a)	$50k-$5M	10-12.5%	10-25yr	2-4 months	680+
Term Loan (Bank)	$25k-$5M	6-10%	1-25yr	1-4 weeks	680+
Line of Credit	$5k-$1M	7-30%	Revolving	1-2 weeks	620+
Invoice Factoring	$10k-$5M	2-5%/month	30-90 days	1-3 days	Any*
Equipment Financing	$5k-$5M	6-25%	3-10yr	1-3 weeks	620+
MCA	$5k-$500k	30-200%	3-18 months	1-3 days	500+

* Invoice factoring relies on your client's credit, not yours.