11 Types of Business Loans: Which Option is Right for You?

Choosing the right business loan starts with understanding your options. From term loans and SBA financing to invoice factoring and credit cards, each type of business loan offers unique benefits, costs, and eligibility criteria.

This guide breaks down 11 of the most common types of business loans to help you find the best fit for your company’s size, stage, and financial goals. The hard part usually isn’t finding financing — it’s matching the right type of business loan to what your business actually needs, whether that’s steady cash flow, a major equipment purchase, or long-term growth. Before you commit, it helps to compare business loan providers side by side so you can see rates and terms in one place.

The main business loan types differ most in how much you can borrow, what they cost, how fast they fund, and the situations they suit best. Use this table as a quick scan, then read the section on each type below for the full picture.

Costs and amounts vary by lender, credit profile, and current rates, so treat these as starting ranges rather than quotes.

A term loan is a traditional business loan where you borrow a lump sum and repay it over a fixed period. Amounts and pricing vary by lender and credit profile; banks often price at prime plus a margin, while many online lenders quote risk-based APRs that can span from the low-teens upward once fees are included. Terms commonly run 1 to 5 years (longer at some banks). Term loans may be secured or unsecured and often require a personal guarantee and/or a lien on the borrower's assets. Approval typically considers your business credit, revenue, time in business, and overall financial health.

Great for: Term loans are suitable for established businesses with strong credit and steady revenue that need substantial capital for long-term investments.

A line of credit allows you to borrow money as needed, up to a predetermined limit. You only pay interest on what you use, and once you repay, you can borrow again. Banks often review these yearly, while online lenders may want faster repayment, usually 6–12 months. Costs and approval times vary depending on the lender.

Great for: Line of credit loans are suitable for businesses that need flexible, ongoing access to funds to manage cash flow, cover short-term expenses, or handle unexpected costs.

SBA loans are government-backed loans, ranging from $5,000 to $5 million, designed to help small businesses secure affordable financing. Although provided by commercial banks and online lenders, the SBA’s backing allows for lower APRs and longer repayment terms, making these loans more accessible. SBA loans can be used for various business purposes, but the application process is lengthy and detailed. There are several types of SBA loans: Microloans, offering up to $50,000 for new businesses, SBA 7(a) loans for general business needs, and CDC/504 loans for major asset purchases like equipment or real estate.

SBA 7(a) and microloan rates are pegged to the prime rate — 6.75% as of mid-2026, per the Federal Reserve — plus a lender spread, which puts effective rates at roughly 9.75%–13.25% for 7(a) loans (prime plus 3.0% to 6.5%) and 8%–13% for microloans. CDC/504 rates work differently: they’re tied to an increment above the 10-year U.S. Treasury rate rather than the prime rate. As of July 2026, eligible borrowers can also combine 7(a) and 504 loans for up to $10 million in total financing, according to the SBA.

Great for: SBA loans are suitable for small businesses seeking affordable, long-term financing for major investments or general business purposes, provided they are patient with the lengthy application process.

Invoice factoring lets you turn unpaid invoices into quick cash by selling them to a factoring company. You typically receive 70%–90% of the invoice upfront, and the remaining amount (minus fees) is paid once the customer settles the balance. The factoring company often notifies your customer and collects payment on your behalf. Fees are typically 1%–5% per month. Since approval depends more on your customers’ credit than your own, it can be easier to qualify than a traditional loan.

Great for: Invoice factoring is suitable for businesses that need quick cash flow, especially those with unpaid invoices and lower credit scores.

Although regular business loans can be used to purchase equipment, a dedicated equipment financing loan uses the items you buy as collateral against the loan. This lowers the average APR rates to 8%-30% and makes the loan open to businesses with poor credit ratings. You can use your equipment even while you are paying off the loan. Loan amounts depend on the value of the equipment, up to 100% of the item's cost, and funding typically takes a couple of days to process. Loan terms can be as long as ten years, although they typically do not extend beyond that.

Great for: Equipment financing loans are ideal for businesses that require acquiring essential equipment, machinery, or technology without tying up large amounts of capital, particularly in industries such as manufacturing, construction, healthcare, or transportation.

Invoice financing is a type of business loan where a company uses its unpaid invoices as collateral to secure a loan or credit line. Unlike invoice factoring, where you sell your invoices to a factoring company, invoice financing allows you to retain control of collecting payments from your clients. Fees for invoice financing typically range from 3% to 5% of the invoice value, with additional weekly fees (often around 1%) until the client pays. Approval for invoice financing is generally quick, sometimes within 24-48 hours, making it a fast way to improve cash flow without waiting for client payments.

Great for: Invoice financing can be beneficial for businesses that require rapid access to cash while maintaining control over their customer relationships and payment collections. It can work for companies with reliable clients who are slow to pay, such as those in industries like manufacturing, wholesale, or services. Businesses with outstanding invoices that are waiting for customer payments, but have a strong sales pipeline and cash flow constraints, can benefit from this option.

A merchant cash advance (MCA) provides you with quick cash upfront in exchange for a share of your future sales. It’s not a loan and can be expensive, as repayment occurs daily or weekly through card sales or bank debits. MCAs are not loans; they use factor rates (often 1.2–1.5) rather than interest rates, which can result in a high effective cost. Approval is fast with little paperwork, but the high cost can strain cash flow.

Great for: Merchant cash advances (MCAs) are ideal for businesses with high, consistent credit or debit card sales, such as retail stores, restaurants, or e-commerce companies, that require quick access to cash. They work for businesses that may not qualify for traditional loans and are exploring a business loan with bad credit, or that lack collateral but have strong daily sales.

Personal loans for business are unsecured loans based on your personal credit history, not your company’s finances. Loan amounts typically range from about $1,000 to $100,000, with APRs anywhere from 6% to 36%, depending on your credit. Some lenders restrict business use, while others permit it; therefore, it’s essential to review the terms carefully. Funding is usually faster than a traditional business loan, but you’re personally responsible for repayment, which puts your own assets at risk.

Great for: Personal loans for businesses can be beneficial for new or small businesses that lack established credit histories and require quick funding. They're also suitable for entrepreneurs who prefer not to go through the lengthy process of traditional business loan applications.

Business credit cards provide owners with a revolving line of credit for everyday purchases, including supplies, travel, and inventory. Many cards offer a 0% introductory APR for 6–18 months, after which rates typically range from 17% to 29% or higher, depending on the card and your credit profile. Annual fees range from $0 to over $500 for premium cards with added perks. Some cards also have no preset spending limit, with available credit adjusting based on your income and payment history. To avoid costly interest, it’s best to pay the balance in full each month.

Great for: Business credit cards are ideal for small business owners who require access to short-term credit for everyday expenses, such as supplies, travel, or inventory, and want the convenience of paying off balances over time.

Microloans are small loans designed to provide up to $50,000 for startups, small businesses, or underrepresented entrepreneurs. Microloans are typically offered by nonprofit organizations or government-backed programs, such as the SBA, with interest rates ranging from 8% to 13%. Repayment terms typically range from 1 to 7 years. Fees are often lower than traditional loans, and approval is relatively easy, with a focus on helping businesses with limited credit histories or fewer collateral options. It’s important to note that funds from an SBA microloan cannot be used to settle existing debts or to buy real estate.

Great for: Microloans are suitable for startups, small businesses, and entrepreneurs who need a small amount of capital to grow, especially those who may not qualify for traditional loans due to limited credit or limited experience.

Commercial real estate loans finance the purchase, renovation, or construction of business properties. Loan amounts range from $250,000 to several million dollars, with terms typically between 5 and 10 years and longer amortization periods. Interest rates vary with the prime rate (6.75% as of mid-2026) and the borrower’s credit, commonly running from around 6% to 12% or more. Fees may include origination fees, appraisal fees, and closing costs. These loans require extensive documentation and typically take several weeks or even months to approve.

Great for: Commercial real estate loans are suitable for established businesses seeking to purchase or develop property for their operations or refinance existing real estate loans.

The difference comes down to collateral: a secured business loan is backed by an asset, while an unsecured one is not. Secured loans use collateral such as equipment, commercial real estate, or unpaid invoices, which lowers the lender’s risk. That often means lower rates, larger amounts, and longer terms — but the lender can seize the pledged asset if you default. Unsecured business loans don’t require specific collateral, so they tend to fund faster and suit borrowers without major assets to pledge. In exchange, they usually carry higher rates and lower limits, and most still require a personal guarantee that puts your own assets on the line. Term loans and SBA loans are commonly secured, while personal loans for business and many merchant cash advances are typically unsecured. Which one fits depends on the types of collateral you can offer and how much rate you’re willing to trade for speed.

Business loan types tend to line up with company size, from large enterprises down to brand-new startups. Here’s how the 11 options generally sort out:

• Term Loans – Useful for large businesses needing substantial capital for long-term investments.

• Commercial Real Estate Loans – Suitable for established businesses looking to purchase or develop property.

• SBA Loans – Appropriate for small to medium-sized businesses seeking affordable, long-term financing for major investments.

• Equipment Loans – Ideal for small to medium-sized businesses that need to purchase expensive machinery or technology.

• Line of Credit – Beneficial for small to medium-sized businesses needing flexible, ongoing access to cash for short-term expenses.

• Invoice Financing – Suitable for small to medium-sized businesses with reliable clients and slow payments.

• Invoice Factoring – Ideal for small businesses requiring immediate cash flow, particularly when dealing with unpaid invoices.

• Merchant Cash Advances (MCAs) – Suitable for small businesses with high daily sales but poor credit.

• Personal Loans for Business – Useful for small or new businesses that lack established credit histories.

• Business Credit Cards – Beneficial for small businesses needing short-term credit for everyday expenses.

• Microloans – Appropriate for startups and very small businesses needing small amounts of capital for growth.

Start by matching the loan to the problem you’re solving, then compare the shortlist on rate, term, and funding speed. If the challenge is uneven cash flow or short-term expenses, a business line of credit gives you flexible, reusable funding. For a long-term investment like expansion or refinancing, a term loan or an SBA loan offers larger amounts and longer repayment. Buying machinery or vehicles points to an equipment loan, since the asset itself serves as collateral. And if you need money fast or have weaker credit, invoice factoring or a merchant cash advance can bridge the gap, though at a higher cost. Weighing a line of credit against a term loan is a common starting point for balancing short-term flexibility against long-term stability.

The best business loan for your company depends on factors such as your credit score, revenue, time in business, and your specific funding goals. Whether you need flexible cash flow with a line of credit, affordable long-term funding through an SBA loan, or fast capital via invoice factoring or a merchant cash advance, there’s a loan option to match your needs.

Once you’ve narrowed the field, take a few concrete steps. First, line up rates, terms, and funding speed for the types on your shortlist, then read our in-depth reviews of individual lenders to see how they handle service, fees, and approvals. Finally, when you’ve picked a direction, follow our walkthrough on how to apply for a small business loan to prepare your documents and improve your approval odds.

1. What are the main types of business loans?

There are many types of business loans, including term loans, SBA loans, lines of credit, invoice factoring, equipment financing, and business credit cards. Each suits different needs depending on your business stage and goals.

2. Which business loan is best for a new business?

New businesses often benefit from microloans, business credit cards, SBA microloans, or personal loans for business. These have lower requirements and faster funding than traditional term loans.

3. What’s the difference between term loans and lines of credit?

Term loans provide a lump sum upfront with fixed payments over time. Lines of credit allow you to borrow as needed up to a specified limit, with flexible repayment terms and interest only on the amount you use.

4. Can I get a business loan with bad credit?

Yes. Options like equipment financing, merchant cash advances, invoice factoring, or microloans may be available to businesses with lower credit scores or limited credit history.

5. Are SBA loans hard to get?

SBA loans are more accessible than traditional bank loans, but they require strong documentation and a good credit history. The approval process can take several weeks, but the rates and terms are favorable.

6. What’s the difference between a secured and unsecured business loan?

The main difference is collateral. A secured business loan is backed by an asset like equipment, real estate, or invoices, which usually means lower rates and higher limits but puts that asset at risk. An unsecured loan requires no specific collateral, funds faster, and often relies on a personal guarantee, though it typically carries higher rates and lower limits.

7. What credit score do you need for a business loan?

It depends on the loan type. SBA loans and traditional term loans generally expect stronger personal and business credit, while merchant cash advances, invoice factoring, and some microloans are more lenient and weigh factors like sales volume or customer creditworthiness. In general, higher scores unlock lower rates and larger amounts across every category.

This article draws on primary, official sources rather than proprietary BestMoney research. We reviewed the U.S. Small Business Administration’s program pages for its 7(a), 504, and microloan products, along with the SBA’s July 2026 announcement expanding the combined 7(a)+504 borrowing limit to $10 million. Interest-rate context comes from the Federal Reserve’s H.15 release, which publishes the prime rate that SBA and many commercial loans are priced against. Loan amounts, fees, and funding timelines reflect current norms across each lending category; because rates move with the prime rate, we describe ranges rather than fixed figures and recommend confirming current terms directly with any lender.

• U.S. Small Business Administration — 7(a) loans program page

• U.S. Small Business Administration — CDC/504 loans program page

• U.S. Small Business Administration — Microloans program page

• U.S. Small Business Administration — “Small Businesses Now Eligible for $10 Million in SBA Financing” (July 7, 2026)

• Federal Reserve — Selected Interest Rates (H.15), prime rate