Small business loans come in more shapes than most owners expect, and the right one depends entirely on what you need the money for. A seasonal inventory buy, a delivery truck, a slow winter, a new espresso machine, these all call for different tools, even though they all get lumped together as “business loans.”
Nine types cover almost every situation: term loans, SBA loans, business lines of credit, equipment financing, invoice factoring, merchant cash advances, personal loans, business credit cards, and commercial real estate loans.
Meet Maria’s Kitchen, an illustrative example we’ll use throughout this article. It’s a restaurant supply business that’s been running about three years, with roughly $60,000 in monthly bank deposits. Maria needs $80,000 to stock inventory before her busy season, and she’s weighing which financing type fits best.
What are the different types of small business loans?
Some of these nine deliver a lump sum. Some let you draw money as you need it. One isn’t technically a loan at all. The table below shows how each behaves at a glance, then we’ll walk through each one.
Term and use matrix
Loan type | Typical term range | Typical use cases | Repayment structure |
|---|---|---|---|
Term loan / working capital loan | 6 months to a few years | Inventory, hiring, expansion | Fixed payment, daily or weekly |
SBA loan | Up to 25 years | Real estate, large expansion | Monthly payment |
Business line of credit | Revolving, often up to 24 months | Ongoing or variable costs | Pay on what you draw |
Equipment financing | Terms are often structured with the asset’s expected useful life in mind | Machinery, vehicles, tools | Monthly payment |
Invoice factoring | Tied to invoice cycle | Bridging unpaid receivables | Settled when customer pays |
Merchant cash advance | 3 to 24 months | Seasonal or uneven revenue needs | Fixed remittance, daily or weekly |
Personal loan | 1 to 7 years | Startups without business history | Monthly payment |
Business credit card | Revolving | Small recurring purchases | Monthly minimum |
Commercial real estate loan | Terms vary; SBA 504 loans offer 10-, 20-, and 25-year maturities | Buying or improving property | Monthly payment |
Funding speed and cost matrix
Loan type | Typical funding speed | Typical cost signal | Common fee types |
|---|---|---|---|
Working capital loan | In as fast as 4 hours¹ | Factor rate² | Origination |
SBA loan | Weeks | Interest rate | May include guaranty or packaging fees |
Business line of credit³ | A few days | Interest rate | Draw fee, maintenance |
Equipment financing | Varies | Interest rate | Documentation |
Invoice factoring | A few days | Factoring fee | Reserve, service fee |
Merchant cash advance | In as fast as 4 hours | Factor rate | Origination |
Personal loan | A few days | Interest rate (APR) | Origination |
Business credit card | Immediate on approval | Interest rate (APR) | Annual, late |
Commercial real estate loan | Weeks | Interest rate | Appraisal, closing |
How term loans work
A term loan is the one most people picture when they think “business loan.” You get a lump sum upfront, and you pay it back on a set schedule, short (up to about 18 months), medium (one to three years), or long (three years and up), depending on what you needed the money for in the first place. You’ll know the payment and the end date before you sign anything.
What a working capital loan covers
A working capital loan is a term loan built for the everyday stuff: inventory, payroll, an unexpected repair. With Credibly, it runs from $25,100 to $600,000, with 6 to 24 month terms, paid on a fixed daily or weekly schedule.¹
It’s priced with a factor rate, not compounding interest, a fixed multiplier set upfront, so your total cost is locked in from day one and doesn’t move no matter what happens after.
Key considerations:
- The payment amount is the same every time, no surprises
- Longer terms mean smaller individual payments, but a higher total cost
- There’s no benefit to paying it off faster unless your agreement specifically allows for it
Think about Maria’s $80,000 inventory need. Her deposits run steady at about $60,000 a month, and a fixed payment works cleanly for that kind of predictability. She knows exactly what leaves the account each week and can plan her busy season around it without guessing.
How SBA loans work
An SBA loan is funded by a private lender, not the government directly, and partly guaranteed by the U.S. Small Business Administration. That guarantee is what lowers the lender’s risk, which usually translates into longer terms and lower rates than a business could get on its own. The tradeoff is a slower, more paperwork-heavy process, this isn’t a same-week kind of loan.
The SBA 7(a) program tops out at $5 million, though the average loan is nowhere near that, about $477,000 based on SBA’s FY2025 reported volume. There’s also a small-dollar option through the SBA Microloan Program, capped at $50,000 with an average loan closer to $13,000.
How a business line of credit works
A business line of credit works a lot like a credit card. You can get approved for a limit, draw funds as needed, pay down the balance, and draw again without reapplying. Because interest only accrues on the amount you actually draw (not the total available limit), it’s ideal for managing short-term cash flow gaps or unexpected operational expenses.
We cover this product in a lot more depth elsewhere. If you want the full picture, see our comparison of a business line of credit versus a loan.
How equipment financing works
Equipment financing buys machinery, vehicles, or tools, and the equipment itself serves as collateral to secure the loan. Because the asset backs the loan, approval tends to move faster than other options on this list.
Terms are usually matched to how long the equipment is expected to last. Buy a delivery van meant to run seven years, and the financing term often runs close to that same seven years, so the payment stays tied to the actual value the van is delivering the whole time you’re paying for it.
How invoice factoring works in the broader market
Invoice factoring turns unpaid invoices into cash today instead of waiting on customers to pay.
How it works: a factoring company buys your accounts receivable and advances most of that value upfront, then sends you the rest, minus a fee, once your customer actually pays. That upfront share is called the advance rate, and it varies by agreement, invoice quality, and how creditworthy your customers are, not necessarily how creditworthy you are.
Key considerations:
- The requirements are about your customers’ credit, not just yours
- Not every invoice qualifies, factors often exclude ones that are already past due or disputed
- Expect to share an accounts receivable aging report and copies of the invoices themselves
How a merchant cash advance works
A merchant cash advance isn’t a loan; it’s the purchase of your future receivables. You receive an upfront lump sum in exchange for a portion of upcoming revenue, which is why payments are structured as “remittances” rather than debt service.
With a Merchant Cash Advance from Credibly, we size deals by reviewing your actual bank-statement revenue and applying a percentage to a good-faith estimate of your monthly deposits. That sets a fixed daily or weekly dollar amount, debited via ACH, locked in at approval. Amounts run from $5,000 to $600,000, terms from 3 to 24 months.
Picture Maria’s Kitchen with revenue that swings hard by season instead of holding steady—that’s exactly the situation an MCA fits better than a fixed loan. If a slow stretch hits and the fixed ACH debit exceeds her actual revenue percentage, reconciliation can adjust the remittance or return the overage the following month. Modification is also available proactively on both the MCA and working capital loan if her situation changes.
An MCA typically only involves a soft credit inquiry, which means applying won’t impact your credit score (though it’s worth confirming the inquiry type with your lender before applying).
How personal loans get used for business
Some owners fund a brand-new business with a personal loan, simply because the business itself is too young to qualify for anything on its own yet. You’re the borrower here, not the business, which means you’re personally on the hook for repayment regardless of how the business does.
It can work well for a startup with no revenue history at all. The tradeoff is that your business and personal finances get tangled together, something most owners want to untangle as soon as they’re able to.
How business credit cards fit in
A business credit card is revolving credit for the small, recurring stuff, not a stand-in for a big purchase. If Maria used a card to cover a small supply order between her larger inventory buys, she’d want to pay it off monthly rather than let a balance ride, that’s exactly the kind of short-term float a card is built for.
Carry a balance month to month, though, and the APR tends to run high. Used the way it’s meant to be used, as a bridge rather than a loan, it’s a genuinely practical everyday tool.
How commercial real estate loans work
A commercial real estate loan finances buying or improving the property your business actually operates from. Owner-occupied commercial property can sometimes qualify for SBA-backed financing, and SBA 504 loans in particular offer 10-, 20-, and 25-year terms.
Because the property itself secures the loan, lenders can stretch the term much further than they would for unsecured borrowing, which is what keeps the monthly payment manageable on what’s usually a large purchase.
Do banks or online providers approve more small business financing?
It depends more on your business profile and the specific product than on the channel alone, though the pattern is shifting. Banks still fund the largest loans at the lowest rates. Online providers approve faster and tend to be more flexible on credit.
Among employer firms that applied for a loan, line of credit, or cash advance, 29% sought financing at an online lender in the 2025 survey, up from 17% just five years earlier.
How to choose the right type of financing for your business
Start with cost versus return, not with the biggest number you can get approved for. If Maria borrows $80,000 for inventory she’ll sell through at a healthy margin during her busy season, the financing pays for itself. If the return doesn’t clearly beat what the money costs, that’s your signal to pause, not push forward.
From there, match the term to how long the need actually lasts, and match the payment to your real cash flow. A seasonal inventory buy that sells through in one busy stretch has no business carrying a five-year term. And because Maria’s deposits run steady, a fixed weekly payment suits her better than a structure built to flex with swinging revenue.
For a wider view of your capital choices, see our overview of sources of capital for your business.
How Credibly matches financing type to how your business actually runs
We read your bank statements to see how cash actually moves through your account, not just your credit score in isolation. Your deposit history carries real weight here, an owner with steady revenue and a thinner credit file can still qualify when the numbers tell a strong story.
For a working capital loan or MCA, we look for 550+ FICO, 6+ months in business, and $20,000 in average monthly deposits. A working capital loan suits a defined need with a firm payoff date. An MCA suits revenue that moves in cycles, since we size it directly from your real deposits at approval. Both are priced with a factor rate rather than compounding interest, and returning merchants may be eligible for better terms based on their track record with us.
If neither product fits, we can connect you to equipment financing, lines of credit, longer-term loans, and SBA loans through external funding partners.³
Frequently asked questions
Which type of business loan fits which business need?
The nine main types are term loans, SBA loans, business lines of credit, equipment financing, invoice factoring, merchant cash advances, personal loans, business credit cards, and commercial real estate loans. A merchant cash advance is the outlier, it isn’t a loan at all, it’s a purchase of future receivables. Your use case, timeline, and revenue pattern determine which one actually fits.
Which type of business financing funds the fastest?
Online financing generally funds fastest, working capital loans and merchant cash advances in particular, as shown in the funding speed table above. SBA and commercial real estate financing can take weeks, since underwriting often involves extra documentation, appraisals, or closing requirements that just take time to work through.
What is the average SBA 7(a) loan amount?
About $477,000 in FY2025, well under the $5 million ceiling. Those bigger 7(a) loans tend to fund real estate or major expansion rather than everyday working capital. The SBA’s Microloan Program, by contrast, caps out at $50,000 and averages closer to $13,000, a completely different scale for a completely different need.
What type of financing works for a business with fluctuating revenue?
A merchant cash advance tends to fit uneven revenue better than a fixed loan payment, since it’s sized from your real deposit history rather than a flat monthly obligation. Reconciliation can also soften a slow stretch by returning any overage the following month, something a rigid monthly payment simply can’t do.
What is the difference between a term loan and a merchant cash advance?
A term loan is borrowed money, repaid on a fixed schedule with a set end date. A merchant cash advance is a purchase of future receivables, satisfied through remittances rather than repaid, and it isn’t a loan at all. Term loans reward predictability. An MCA suits owners who want their financing tied to what their business is actually bringing in.
What credit profile do online lenders typically approve that banks don't?
Online lenders lean much more heavily on cash flow than credit score, which is why they can approve businesses with thinner credit files or lower scores that a bank would likely turn down. Banks can still offer larger amounts and lower rates to well-qualified borrowers, but they’re underwriting the credit file first and the cash flow second, the opposite order from how an online provider like Credibly reads a file.
See which financing fits your business
You don’t have to guess which of these options is right for you.
¹ Financing terms are based on a good-faith estimate and assume consistent monthly revenue. Actual time to satisfy the MCA may vary.
² Factor rates as low as 1.11.
³ Some products are made available through Credibly’s network of external funding partners. Partner product thresholds are set by the funding partner and apply to those products specifically.
Credibly merchant cash advances and working capital loans to merchants in California are provided by Retail Capital LLC. All other Credibly products in all other jurisdictions are provided by Credibly of Arizona LLC.
