Important: This page is for general education only, not legal, tax, or financial advice. Products, rates, and approvals vary by lender and your situation. MoneyChoice is not a lender.
What is a business loan?
A business loan is money your business borrows and pays back with interest (and sometimes fees), usually for a defined purpose. Revolving credit works like a limit you can reuse as you repay.
Lenders evaluate cash flow, credit history, time in business, collateral, and industry risk. Many products also require a personal guarantee, which means owners may be personally liable if the business cannot repay. Always read term sheets and disclosures.
What are the main types of business loans?
The most common categories are term loans, SBA-guaranteed loans, business lines of credit, equipment loans, invoice factoring/financing, merchant cash advances, and commercial real estate loans. “Alternative” products often trade speed and flexibility for different cost structures.
| Type | Best when you need… | Typical structure |
|---|---|---|
| Term loan | A known amount for a defined project or investment | Lump sum, fixed or variable rate, set repayment term |
| SBA loan | Lower-cost, longer-term capital with strong documentation tolerance | Government-guaranteed; originated by approved lenders |
| Line of credit | Ongoing or uneven cash flow, short-term gaps | Revolving limit; draw and repay repeatedly |
| Equipment financing | Machinery, vehicles, or titled assets | Asset as collateral; term aligned to useful life |
| Invoice factoring / financing | Cash while waiting on B2B invoices | Advance against receivables; fees by invoice or period |
| Merchant cash advance | Very fast capital; strong card or sales volume | Repaid from future sales; factor-style pricing common |
| Commercial real estate | Owner-occupied or investment property for the business | Long amortization; property as collateral |
What is a term loan, and who is it for?
A term loan gives a single disbursement you repay over months or years. It fits expansion, acquisitions, refinancing expensive debt, or other one-time uses when you can forecast payments.
Banks often offer the lowest rates to qualified borrowers but may require more paperwork and stronger financials. Online term loans may approve faster with shorter terms or higher costs. Compare APR or total cost of capital, prepayment penalties, and covenants—not only the monthly payment.
What is an SBA loan, and how is it different from a regular bank loan?
SBA loans are made by participating lenders; the SBA provides a guarantee so lenders can lend to smaller or riskier businesses under SBA rules. They are not grants—you still repay the lender.
Common SBA programs (high level)
- 7(a): General-purpose working capital, equipment, acquisitions, and refinancing in many cases—often the “default” SBA product people mean.
- 504: Major fixed assets and owner-occupied real estate; typically pairs a certified development company (CDC) piece with a lender piece.
- Microloan: Smaller amounts, often for newer or smaller businesses, through intermediary lenders.
- SBA Express: Streamlined review with lower maximum guarantee—can be faster than standard 7(a) in some cases.
Eligibility, caps, and fees change with SBA rules; your lender packages the application. If you see “SBA preferred lender” status, that usually indicates experience and delegated authority—not a guarantee of approval.
What is a business line of credit?
A revolving credit line you draw from as needed, pay interest on what you use, and borrow again after repayment—similar in concept to a credit card, often with higher limits and lower rates for qualified businesses.
Use cases include inventory builds, payroll bridges, seasonal swings, and short-term receivable gaps. Lines may be secured (e.g., receivables or assets) or unsecured; pricing and renewal terms differ widely.
What is invoice factoring versus invoice financing?
Factoring usually means you sell invoices to a third party; the customer pays the factor. Invoice financing often means you borrow against invoices while you still collect—structures and notice to customers vary.
Both address the same core problem: you delivered work but cash is tied up in AR. Cost depends on advance rate, discount/fee, concentration of customers, and industry.
What is a merchant cash advance (MCA)?
An MCA is a purchase of future sales at a discount, repaid from daily or weekly splits of card or bank revenue. It is typically fast but can be expensive; understand the factor or equivalent cost before accepting.
MCAs are common in retail, restaurants, and e-commerce with steady card volume. Because repayment tracks sales, cash flow can feel smoother in good weeks and tighter in slow periods. Regulators and industry groups have highlighted disclosure; compare options carefully.
What is equipment financing?
A loan or lease structured around a specific asset. The equipment often secures the deal, so approval can hinge on the asset value and useful life as much as on generic “business credit.”
Variations include equipment loans (you own at end), capital leases, and operating leases. Tax and accounting treatment differs by structure—your CPA should advise.
What other business capital options are common?
- Business credit cards: Convenience and rewards; usually not the cheapest way to fund large, long-term needs.
- Revenue-based financing: Repayment tied to monthly revenue; popular with SaaS and recurring-revenue models; terms vary by provider.
- Equity (angels, VC): Not a loan—you sell ownership. Fits high-growth companies that can justify dilution.
- Grants & competitions: Non-dilutive but competitive and often narrow eligibility; rarely a substitute for working capital planning.
- Trade credit: Supplier terms that act like short-term financing for inventory.
Who offers business loans and financing? (Market map)
U.S. businesses can work with several overlapping categories of providers. Names below are examples of well-known participants for orientation only—not endorsements, rankings, or guarantees of availability.
Traditional banks & credit unions
Relationship banking, deposit accounts, and lower headline rates for strong credits. Examples include national banks (e.g., JPMorgan Chase, Bank of America, Wells Fargo) and regional/community banks and credit unions.
SBA-focused and preferred lenders
Institutions that package high volumes of SBA-guaranteed credit. You may encounter names like Live Oak Bank, Huntington, Newtek, or regional banks with active SBA desks—availability depends on your state and profile.
Online direct lenders & fintechs
Digital application, fast decisions, and products tuned to smaller businesses. Examples include OnDeck, Bluevine, Fundbox and others; terms vary sharply by product.
Marketplaces & brokers
One application routed to multiple lenders or programs. Examples include Lendio, Biz2Credit, National Business Capital, United Capital Source, SmartBiz (often SBA-oriented). They may be compensated by partner lenders—ask how offers are ordered.
Embedded & platform financing
Capital offered inside payment or commerce platforms (e.g., PayPal Working Capital, Square Loans, Shopify Capital, Amazon Lending). Convenience is high; compare cost and exclusivity.
Cards & charge products
Business charge and credit lines from networks and banks (e.g., American Express Business products). Useful for spend management; separate from installment term debt.
How do marketplaces compare to applying directly?
Marketplace / broker pros: broader reach, less repetitive paperwork, sometimes faster first pass at multiple options. Direct lender pros: clarity on a single institution’s rules, potential relationship pricing if you bank there already. Many businesses do both over time: use a marketplace to benchmark, then negotiate or consolidate with a preferred lender.
How do I choose the right business loan?
Start from use of funds and repayment timing, then match to product type. Rank offers by total cost, covenants, speed, and flexibility—not monthly payment alone.
- Define the job: one-time project vs. revolving need vs. asset purchase vs. AR timing.
- Model cash flow: can you survive the repayment schedule in a slow month?
- Normalize cost: convert factor fees, discounts, and rates into comparable horizons (many lenders provide APR; for MCAs, ask for explanations).
- Read covenants: personal guarantee, UCC filings, prepayment penalties, and cross-default clauses.
- Verify counterparty: licensed lender or registered broker where applicable; check reviews and BBB cautiously alongside primary sources.
How does MoneyChoice help?
MoneyChoice is a matching service that helps you explore funding options across a large network of lenders and programs. It is not a bank and does not extend credit.
If you already know what you want, you can still use the flow to compare how different partners might respond to the same profile. See also our lender categories overview for how partner types differ.
Frequently asked questions
What is a business loan?
Borrowed capital for business use, repaid with interest/fees over time or accessed as revolving credit, often with underwriting on the business and sometimes a personal guarantee.
What is the difference between a term loan and a line of credit?
A term loan is a fixed lump sum and schedule; a line of credit is reusable up to a limit as you repay draws.
What is an SBA loan?
A loan originated by a participating lender with an SBA guarantee backing a portion of the lender’s exposure, subject to SBA program rules.
What is a merchant cash advance (MCA)?
A purchase of future receivables repaid from sales, typically fast but potentially costly; not the same as a term loan’s APR presentation.
What is invoice factoring?
Selling invoices at a discount to get immediate cash, common in B2B with long payment cycles.
Are online lenders faster than banks?
Often for smaller, automated products, but banks can be very competitive for mature businesses and SBA workflows.
What is a business loan marketplace?
A service that routes one application to multiple lenders or programs; compensation and ranking rules differ by platform.
Does MoneyChoice lend money?
No. MoneyChoice helps you explore options and may introduce you to third parties; it is not the lender.