10 Types of Business Loans

On February 25, 2026 By newsroom Topic: Debt Advice

Whether you're starting a business, expanding operations, or managing cash flow, there’s a loan tailored to meet your needs. Here's a breakdown of popular business loan types, their benefits, and ideal use cases:

1. Term Loans

What: Lump sum paid upfront, repaid with interest over a fixed period.
Pros:
Higher loan amounts.
Fast funding with online lenders (a few days).
Cons:
May require collateral or personal guarantees.
Costs can vary; online loans typically have higher interest rates than banks.
Best for:
Businesses with strong credit looking to expand or invest in growth.

2. SBA Loans (Small Business Administration)

What: Government-backed loans with favorable terms.
Pros:
Low interest rates.
Long repayment terms (up to 25 years for real estate).
Cons:
Difficult to qualify.
Lengthy application process.
Best for:
Established businesses with strong credit seeking expansion or refinancing.

3. Business Lines of Credit

What: Flexible credit up to a set limit; pay interest only on the amount used.
Pros:
Flexible borrowing.
Unsecured in many cases (no collateral).
Cons:
May include maintenance and draw fees.
Requires strong credit and revenue.
Best for:
Managing cash flow or covering short-term expenses.

4. Equipment Loans

What: Financing to purchase business equipment; the equipment serves as collateral.
Pros:
Builds equity in the equipment.
Competitive rates for businesses with strong finances.
Cons:
Down payment may be required.
Equipment may depreciate faster than the loan term.
Best for:
Businesses needing to purchase machinery or equipment outright.

5. Invoice Factoring

What: Sell unpaid invoices to a factoring company for immediate cash.
Pros:
Quick access to funds.
Easier approval than traditional loans.
Cons:
High costs.
Loss of control over invoice collection.
Best for:
Businesses with reliable customers and long payment cycles needing quick cash.

6. Invoice Financing

What: Use unpaid invoices as collateral to secure a cash advance.
Pros:
Fast cash.
Retain control over invoice collection.
Cons:
Costly compared to traditional options.
Still responsible for collecting payments.
Best for:
Businesses with outstanding invoices needing quick capital.

7. Merchant Cash Advances (MCA)

What: Receive a lump sum repaid via a percentage of daily credit/debit card sales.
Pros:
Fast access to funds.
No collateral required.
Cons:
Extremely high borrowing costs (up to 350%).
Frequent repayments may strain cash flow.
Best for:
Businesses with high credit card sales unable to secure traditional financing.

8. Personal Loans for Business

What: Use personal credit to secure funds for business purposes.
Pros:
Accessible for startups.
Quick approval process.
Cons:
Smaller loan amounts (up to $50,000).
High risk to personal credit.
Best for:
New businesses or startups with limited credit history.

9. Business Credit Cards

What: Revolving credit line for ongoing expenses.
Pros:
Earn rewards and cashback.
No collateral required.
Cons:
Higher variable interest rates.
Additional fees may apply.
Best for:
Financing routine expenses like travel, supplies, or utilities.

10. Microloans

What: Small loans (up to $50,000) offered by nonprofits and mission-driven lenders.
Pros:
Low interest rates.
Additional services like training and consulting.
Cons:
Small loan amounts.
Stringent eligibility requirements.
Best for:
Startups and businesses in underserved communities needing modest financing.

Choosing the Right Loan

Expansion Projects: Term loans, SBA loans.
Short-term Cash Flow: Lines of credit, invoice factoring/financing.
Equipment Purchases: Equipment loans.
Routine Expenses: Business credit cards.
Startups: Microloans, personal loans.

Select a loan that aligns with your business needs, creditworthiness, and repayment capacity to ensure sustainable growth.