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There are many different types of small business loans. To help you find the right product for your company's needs, we created a list of the most common business financing options. You can learn more about each product by selecting an option below, or view our highest rated lender for each product if you already know the loan you are interested in.

Compare Small Business Loan Products

Business Term Loan

Term loans are traditional small business loans in which you receive a lump sum of cash and repay it in regular installments, with interest, over a set term. They come in varying loan amounts and can be used for a variety of purposes

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Business Line of Credit

A business line of credit is very similar to a credit card in that it lets you borrow money when you need to, up to a limit, and you only have to make payments (plus interest) on the amount you borrow.

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Invoice Factoring

With invoice factoring, you sell your unpaid invoices to a company in exchange for immediate access to 80% to 85% of your invoice amounts. Once the company receives payments, they pay you the remaining amount minus fees and interest.

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SBA Loan

SBA loans are business term loans that are backed by the federal government. Though these loans are harder to qualify for than traditional term loans, they typically come with low interest rates and flexible repayment terms.

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Equipment Financing

With equipment financing, you can borrow money to help pay for new vehicles, appliances, computers, or anything else your business needs. The equipment serves as collateral and you repay it in regular installments with interest.

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Merchant Cash Advance

With a merchant cash advance, you receive a lump sum of cash up front and repay it (plus a fee) via a daily or weekly withdrawal of a percentage of the credit card and debit card sales you make at your business.

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Invoice Financing

With invoice financing, you can receive money up front up to the total amount of your unpaid invoices. When you receive payment for your invoices, you repay the amount borrowed plus a factor fee of around 10% to 30%.

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Inventory Loans

Inventory loans are a group of small business financing options specifically designed to help businesses purchase inventory. The options include both long- and short-term loans as well as lines of credit.

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Working Capital Loans

Working capital loans are short-term loans designed to help you cover operational expenses such as paying employees and vendors. These loans may come as term loans, lines of credit, or something else.

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Small Business Loans FAQ

How Do I Qualify for a Small Business Loan?

The qualification requirements to get a small business loan depend on the lender, but lets take a look at some common criteria.

Credit Requirements

Most banks and credit unions will expect you to have excellent credit and will only lend to you if your credit is above 600 or 700. Online small business lenders are far more likely to lend to people who have personal credit scores that are below 600.

Business Age

Many lenders have requirements around how long you have been in business with the lowest cutoff often being 2 years. This is a requirement for some because lenders are wary of lending to companies without a track record. 

Revenue

Some small business lenders have requirements about how much revenue your company earns annually. This amount will vary lender to lender.

Number of Employees

Some lenders prefer to lend to companies that have a certain number of employees.

Ask the Expert

Zachary Lezberg

Founder of Small Business Expo

How Do I Get a Small Business Loan?

To apply for a small business loan, you need to have your personal information and your business information on hand.

You may also need to provide:

  • Personal and business bank statements
  • Balance and income statements
  • Personal and business tax returns
  • Resume of your business experience
  • Financial projections for your company
  • Drivers license
  • Business licenses
  • Business plan

Traditional banks will oftentimes require you to fill out a written application, although some allow you to apply online.

When you apply with an online small business lender, the application is often shorter and easier to complete and they require less information and fewer documents. Documents can be scanned and uploaded online, allowing for potentially quicker approval processes.

How Can I Improve My Chances of Approval for the Best Small Business Loans?

There are a lot of things that you can do in order to improve your chances of getting approved for the best small business loans.

Build Credit

Building your business credit is one way to improve your chances of approval. You can do this by taking out credit in your business’ name right after you start your business. While you’ll have to co-sign for a business credit card, having one will start the process of establishing your business credit history.

Create a Clear Business Plan

Another way to improve your chances of qualifying for small business loans is to have a clear business plan. Having all of your historic and projected financial information available to share with a potential lender can speed up the process. This makes you look professional and allows the lender to better understand your business’ needs and potential.

A good business plan can include:

  • Description of your company
  • Biographies of the management team
  • Analysis of your industry
  • Description of the service or product that you provide
  • Plan for your operations
  • Promotional and marketing strategy
  • SWOT analysis

Compare Your Options

Make sure to compare small business loans. If a traditional bank or credit union turn you down, it doesn’t mean you can’t get approved somewhere else. While online small business lenders are great options, remember that you’ll have to pay a premium in the form of higher interest rates if you have bad credit or present increased risk.

Ask the Expert

Deborah Sweeney

CEO of MyCorporation

Author: Jeff Gitlen

Jeff Gitlen writes about a wide range of finance topics including everything from student loans to credit cards to small business financing. Jeff's work has been featured on a number of sites including Bloomberg, CNBC, Forbes, Market Watch, and more.