8 types of business loans

And how to choose the right one for your business's needs.

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The term business loan might bring to mind money that your company borrows and repays plus interest and fees over several years. But in reality, there are several types of business loans and financing. Which option is best for you depends on your business and its needs.

8 types of business loans

Loan typeBest for …How it worksTypical loan amountTypical cost
Term loanCovering a large, one-time expenseBorrow a lump sum and pay it back plus interest and fees in fixed installments, usually between 5 and 20 years.$5,000 to $5 million4% to 99% APRRead more
Line of creditWorking capitalGet access to a specific amount of funds, which your business draws from as needed.$5,000 to $5 million8% to 80% APRRead more
SBA loanLarge amounts of funding for nontraditional businesses and startupsApply for a term loan, line of credit, commercial loan and more, partly backed by the Small Business Administration (SBA).$5,000 to $5 millionUp to 10.25% APRRead more
Equipment financingBuying new equipmentBorrow up to 100% of your equipment cost and pay it back in installments, plus interest and fees. Your equipment is often used as collateral.85% to 100% of the equipment’s value8% to 30% APRRead more
Vehicle financingBuying a car, truck or other type of vehicleTake out a fixed-term loan to cover the cost of new vehicles for business use, usually using the vehicles as collateral.80% to 100% of the vehicle’s value8% to 30% APRRead more
Invoice factoringGetting an advance on unpaid invoicesSell your business’s unpaid invoices to a third party at a discount.80% to 95% of your invoices’ value up frontDiscount rate of 0.5% to 6% of your invoices’ valueRead more
Invoice financingBorrowing against unpaid invoicesTake out a term loan backed by your business’s unpaid invoices.80% of your invoices’ valueFee of 2% to 5% of your invoices’ valueRead more
Merchant cash advanceAccessing future revenue from consumer salesGet an advance on your future sales and pay it back plus a fee with a percentage of your daily revenue.$2,500 to $1 millionFee of 1.1 to 3 times your advance amountRead more

How can I choose the right type of business loan?

Ask yourself the following questions if you’re not sure what type of business loan is right for you:

Why does my business need a loan?

First, identify what your business needs to fund. Do you want to buy or lease real estate to make room for new hires? Do you need more equipment to up production? Are you looking for working capital to cover overhead costs? Use this to rule out lenders that don’t offer financing for that particular need.

How much do I need to borrow?

Calculate the total amount you need to borrow and use this to rule out types of loans with a typical range that doesn’t accommodate your needs. For example, if you just need a few thousand dollars, you might want to consider some term loans and microloans rather than an SBA loan.

Can’t predict the cost? You might want to consider a line of credit.

What type of loan can my business qualify for?

Some types of business loans are easier to qualify for than others. For example, merchant cash advances have a much higher approval rate than a traditional term loan. Some are also designed for specific industries. You likely won’t be able to qualify for invoice factoring if you’re in retail, since you likely don’t have a backlog of unpaid invoices from government organizations or other businesses.

What are my priorities?

Do you need money right away? Do you have the time and resources for a lengthy application? Is cost your top concern? List your top three priorities and use that criteria to pick your business loan type and start comparing lenders.

Compare business loans

Updated November 18th, 2019
Name Product Filter Values Min. Amount Max. Amount Requirements
$5,000
$500,000
Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
Customizable loans with no origination fee for business owners in a hurry.
$5,000
$500,000
600+ personal credit score, 1+ years in business, $100,000+ annual revenue
A leading online business lender offering flexible financing at competitive fixed rates.
$50,000
$1,000,000
2+ years in business, 620+ credit score, not a sole proprietorship or nonprofit, strong financial history
Financing for high-risk industries with transparent rates and terms.
$10,000
$5,000,000
Your company must have been in business for at least 6 months and have an annual revenue of at least $100,000.
Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
$500
$250,000
1+ years in business, $50,000+ annual revenue or $4,200+ monthly revenue over last 3 months
A simple, convenient online application could securely get the funds you need to grow your business.
Varies by lender and type of financing
Varies by lender and type of financing
Varies by lender, but many require good personal credit, minimum annual revenue and minimum time in business
Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
$500
$5,000,000
Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
Submit one simple application to potentially get offers from a network of over 75 legit business lenders.

Compare up to 4 providers

Bottom line

Term loans and lines of credit might be the most popular types of business financing. But they might not be the right option for your business. Considering your priorities and what you need to use the funds for can help you find the right type of financing for your business.

You can learn more about how it all works by reading our guide to business loans.

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