Business Loan And Working Capital

The Most Common Types of Business Loans

Let’s jump right into it.

When you’re looking at the different types of business loans, what are the most common types of financing you’ll come across?

Here’s an overview of the general types of business loans in the market.

Term Loans

A term loan is a lump sum loan that you’ll pay back, plus interest, over a set term. You can score low-cost, long-term loans from a bank or online lenders.

 

Short-Term Loans

Short-term loans are like regular term loans, but you’ll pay them back over shorter terms. Alternative lenders offer a smaller amount of financing with short-term loans with 3- to 18-month terms.

 

SBA Loans

SBA loans are low-cost, flexible term loans that are secured by the Small Business Administration. Both traditional banks and online lenders offer SBA loans.

 

Business Lines of Credit

Both traditional banks and online lenders offer revolving lines of credit that you can tap into whenever you want or need to for your business.

 

Equipment Financing

Use an equipment loan to finance up to 100% of the cost of your business’s new or used equipment and machinery. The best part? The equipment itself acts as collateral.

 

Invoice Financing

Invoice financing companies offer fast cash based on your business’s outstanding invoices. You’ll be advanced usually 85% of your outstanding invoice, and charged a factor fee each week the invoice goes unpaid.

 

Merchant Cash Advances

Merchant capital companies advance you fast cash that you’ll pay back with a portion of your business’s daily credit and debit card sales. Merchant cash advances can be a good option if you have poor credit, but they tend to be the most expensive financing option on the market.

 

Business Credit Cards

While not technically a small business loan, you can use a business credit card to finance a business. You’ll separate your business and personal finances, build business credit, and earn valuable rewards and cash back on your purchases.

The Government Can Give You a Hand, Too

Ever heard of an SBA loan? A lot of small business owners know this type of loan, but very few actually understand how it works.

In short, an SBA loan is not a loan from the SBA—it is a loan that is partially guaranteed by the government, eliminating some risk and encouraging more lenders to make loans to small businesses.

It’s a great product for small businesses, as outside of a traditional bank loan, it is the cheapest small business loan type on the market.