The small business financing industry has grown tremendously over the last several years. Entrepreneurs now have many types of business loans at their disposal, whether they are looking for working capital, want to buy a business, need equipment, or have another reason for getting a business loan.

The infographic below shows the main types of business financing and breaks them down according to the factors that are most important to small business owners. Primary among these are speed, cost, qualification requirements, and whether the loan is secured on unsecured. Later in the article, we provide a more in-depth summary of each type of business loan.

Don’t see the type of business loan that you need here? FitBiz Loans offers all major types of business financing. Complete a loan quote form to find the best fit for your business.

Types of Business Loans Summary

 

SBA Loans and Bank Loans

SBA loans and conventional bank loans are typically the least expensive way to borrow money for your business. The most popular types of SBA loans are general purpose 7(a) loans and commercial real estate 504/CDC loans. These loans are available to established businesses and startups. 

Pros:

• Low interest rates and long repayment terms mean low monthly payments.
• There are a variety of SBA loan programs to suit different businesses.

Cons:

• Can take a long time to get funded (especially with traditional banks).
• Long payment terms may not be suitable for those with short-term working capital needs.
• Banks generally prefer not to make loans for smaller sums of money (under $30k).
• It’s difficult to qualify for a bank or SBA loan.

Did you know? If your credit score is above 660 (check here for free), you’ve been in business for 2+ years, your business is profitable, and you need between $30k-$350k, you may qualify for a fast-tracked SBA 7(a) loan. Get prequalified in minutes with SmartBiz. Apply here.

 

Short Term Alternative Loans

SBA loans and bank loans have a lot of advantages, but speed and ease of qualifying are not among them. If you need a loan quickly or you’ve been rejected for bank loans, the best type of business loan may be a short term alternative loan. People with credit scores as low as 500 can get funded in as little as 1 business day as long as you have a business that’s been operating for at least one year and that generates at least $50K in annual revenues. These loans are costlier than bank and SBA loans, but since they are short term loans, they are paid back more quickly (in under 5 years), which means your out of pocket cost is lower.

Pros:

• Short terms mean you get out of debt faster.
• Fast source of funding
• Bad credit ok as long as you have a profitable business that’s been operating for at least 1 year

Cons:

• This is a costlier option.

Did you know? If your credit score is above 550 (check here for free), you’ve been in business for 1+ years, and generated revenue of $50k+ then you may qualify for a line of credit of up to $100k. Get prequalified with Kabbage. Apply here.

Equipment Financing

If you need equipment for your business, then you’re in luck! FitBiz Loans can help you get a range of equipment, from commercial ovens to trucks to airplanes! It’s generally not too difficult to qualify for equipment financing, even for a new business, because the equipment collateralizes the loan. For the same reason, rates are usually quite competitive. You have the option to structure your equipment lease to best suit your business needs.

Pros:

• Easy to qualify for
• Convenient 1-5 year terms
• Competitive interest rates

Cons:

• Newer businesses and business owners with bad credit may have to pay a higher interest rates.

If you have a credit score above 600 and at least a 5% down payment available, you may qualify for up to $100k in equipment financing from Smarter Finance USA. Apply here.

 

Invoice Financing

Yet another type of business loan is AR financing and invoice factoring, which is designed for businesses that have cash flow problems stemming from unpaid invoices. You can convert unpaid invoices into cash with invoice factoring. FitBiz Loans works with invoice factors that remain invisible in the financing process — they will not contact your customers, and your customers can continue to pay payments under your business’ name. Rates start as low as a 2.50 % one-time fee for a NET 30 invoice.

Pros:

• Factor 30, 60, or 90 day invoices
• Discrete factoring - no client contact
• Easy to qualify for (startups are eligible)
• Competitive rates

Cons:

• Available only for B2B or B2Government businesses that bill via invoice

Did you know? Invoice factoring can help businesses big and small. Need to borrow more than $25k? Visit BlueVine. Need to borrow less than $25k? Visit Fundbox.

 

Merchant Cash Advance

If your small business accepts credit card payments and is having trouble qualifying for other types of financing, then merchant cash advances may be a good option for you. Merchant cash advances give you a bulk sum of capital in exchange for a small share of your daily credit card payments. They are expensive, so FitBiz Loans doesn’t usually recommend them until we’ve explored less costly options for your business. However, they do have some positive attributes. For example, there is no fixed due date to pay back the advance, and you have the flexibility of paying back just a small amount at a time.

Pros:

• No fixed deadline to pay back the loan
• Pay a small share back every day.

Cons:

• Available only to businesses that do a large volume of credit card payments
• Can be expensive

 

Use Retirement Money

Instead of taking out a loan, why not consider a debt-free option? A Rollover for Business Startups (ROBS) lets you use retirement money in a 401(k), traditional IRA, or other eligible retirement account to start a business or buy a business, without any taxes or penalties. This can be a great option for people with at least $50,000 in a retirement account to put towards their business.

Pros:

• No debt and no interest payments
• No taxes or penalties.

Cons:

• Lots of tax and legal rules must be followed (contact us to set up a ROBS the right way)

 

Lots More… 

At FitBiz Loans, we offer all the major types of small business financing and will match you to the best options for your business goals. Here are some examples of the types of business loans we can arrange:

• SBA Loans (7a and 504)
• Business Acquisition Loans
• Commercial Real Estate Loans
• Equipment Financing
• Short Term Business Loans
• Fast Business Loans
• Franchise Financing
• Start Up Business Loans
• Invoice Factoring
• Merchant Cash Advance
• Business Line of Credit
• Rollover for Business Startups (using retirement funds)