Start with why you need the money, then how soon, then what it will cost. Lenders weigh cash flow, credit, and what you can pledge as collateral. Read the fine print, especially any origination fee or prepayment penalty, which can add 0.5 to 3 percent to the tab. Pick the option you can live with when the payment hits your account.
1. Match speed to need
If timing is critical, fast business loans can cover a shortfall, though they usually cost more. Example: a Brooklyn café loses its espresso machine on Friday and needs $20,000 by Monday. An online lender that funds in 24 to 48 hours solves the problem at a higher APR than a bank. If the need isn’t urgent, waiting for a cheaper option can save thousands over 12 to 36 months.
2. SBA 7(a): versatile, lower cost, slower process
SBA 7(a) loans, guaranteed up to 85 percent on smaller amounts, suit working capital, refinancing, and expansions. Example: a Phoenix HVAC contractor seeking $300,000 through a bank like Wells Fargo can get a term up to 10 years, often prime plus a few points. Expect heavy documentation, including two years of business tax returns and IRS Form 4506-C, and about 4 to 8 weeks to fund.
3. SBA 504: real estate and big equipment
If you’re buying a building or a large machine, 504 splits the deal across a bank, a Certified Development Company, and your down payment. Example: a Cincinnati manufacturer buying a $1.2 million CNC mill might put 10 percent down, with 20 to 25-year fixed CDC financing on the remainder. Closing can take 6 to 10 weeks, which matters if the seller wants a fast escrow in Hamilton County.
4. Business line of credit: flexible, pay interest only on what you draw
A revolving line handles short-term gaps like payroll or winter inventory. Example: a Chicago retailer with a $150,000 line might pull $60,000 in October to stock coats, then pay it down by February as receipts roll in. Some banks require a 30-day clean-up each year, so read the covenant before winter arrives.
5. Term loan: fixed amount for a defined project
A term loan works for a single project, like buying one delivery van or funding a short campaign. For example, a Los Angeles wholesaler borrows $200,000 on a 36-month schedule to add two refrigerated trucks. Platforms such as Funding Circle or Lending Club often decide within a few days. Pricing tends to run higher than banks, though the process is usually quicker than an SBA package.
6. Equipment financing: let the gear secure the deal
Since the gear secures the note, approval is usually simpler and the down payment stays modest. For example, a Dallas dentist finances a $90,000 3D imaging unit over five years, with the machine itself as the lien. Vendors may tease 0 percent for a few months, then raise the rate, so walk through the amortization with your accountant in Quick Books before you sign.
7. Invoice financing or factoring: get paid before your customer does
If customers take 30 to 90 days to pay, you can pull cash forward against those invoices. Example: a New Jersey staffing firm factors $250,000 in invoices tied to a Fortune 500 client, gets 85 percent upfront, then settles the fee when the client pays. Financing keeps control of collections, while factoring usually shifts it to the provider, which your client may notice.
8. Merchant cash advance: speed and simplicity at a price
MCAs advance funds and take a cut of daily card sales, not a fixed monthly payment. Example: a Miami salon takes a $50,000 advance with a 1.35 factor, remitting 12 percent of daily Visa and Mastercard batches until $67,500 is repaid. The true APR often runs high, which makes it better for short bursts of need than long projects. Your bookkeeper will sigh, then reconcile batches line by line.
9. Microloans and community lenders: smaller checks, real help
Newer firms or thin files can look to CDFIs and SBA microloans, which usually range from $10,000 to $50,000. For example, an Austin food truck lands $35,000 from a local nonprofit along with coaching on permits and Texas sales tax. Rates often beat online alternatives, though you’ll trade speed for more paperwork than a swipe-and-sign app.
A smart pick starts with a tight use-of-funds statement, a realistic repayment plan, and a timeline. Gather bank statements, a current P&L, and your last two federal returns, then compare total dollar cost across options. If the loan matches the life of the asset and your cash flow between the 1st and the 15th, your future self will thank you quietly.