Business capital is money you bring in from outside the till to pay for something your cash flow can’t cover yet. A second refrigerated van. Four pallets of inventory for a wholesale order that pays in 45 days. A deposit on a bigger kitchen. For a bakery, florist, caterer, or wholesaler that hands goods to customers itself, the question is rarely whether you need capital. It’s which kind, at what price, and when.
That matters more than it sounds, because the options are not interchangeable. A grant and a merchant cash advance both put money in the account; one is free and one can cost you half the profit on every order until it’s repaid. The right answer depends on what the money is for, how fast you need it, and how much of the business you’re willing to hand over.
This page walks the whole menu and what each option really costs. Where another piece of the picture goes deeper, it’s linked: the day-to-day structure of your business finances sits in its own guide, and so does how to find investors who believe in your business if the equity route is the one you’re weighing.
The Bottom Line
- Most small firms do look for outside money. 60% of firms applied for financing in the 12 months before the Federal Reserve’s 2025 Small Business Credit Survey (Fed Small Business, 2026 Report on Employer Firms).
- Partial approval is the normal outcome, not a rejection. 42% of applicants got the full amount they asked for, 36% got some or most of it, and 22% got nothing.
- Where you apply changes the odds. Applicants at small banks were the most likely to be fully approved, at 57%.
- Check the price before you sign, especially online. 60% of firms that borrowed from online lenders said the actual cost came in higher than they expected.
- Match the money to the job: inventory and orders want short-term, order-linked capital; vans and equipment want a term loan; a real step change in the business is the only case that justifies giving up equity.
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What business capital means when you deliver your own orders
Business capital is any funding you put to work in the business, and it comes in two basic flavors. Debt capital you borrow and repay with interest, and you keep full ownership. Equity capital you raise by selling a share of the business, and you repay nothing but you own less of what you built.
Running your own deliveries changes which flavor you reach for, because it changes what you’re buying. A business that ships its goods carries a category of cost most advice skips: vehicles, fuel, insurance, driver hours, and the working capital gap between sending a wholesale invoice and getting paid for it. Those are three separate funding problems hiding inside one word.
- Capacity — a van, a walk-in cooler, a second prep station. Large, one-time, lasts years.
- Working capital — inventory, payroll, fuel, the 30 to 45 days between delivering an order and being paid for it. Recurring, and it moves with your season.
- Growth bets — a new territory, a second location, a line you’ve never sold before. Uncertain, and the one case where outside owners can make sense.
Before you borrow for any of them, it helps to know which number you’re actually trying to move. Picking three financial goals that keep your local business growing first tends to shorten the conversation with a lender, because you can say what the money is for in one sentence.
Business capital options compared: cost, speed, and what you give up
Here is the whole menu on one page. Rates move with the prime rate and your own credit profile, so treat these as the shape of each option rather than a quote.
| Option | Typical cost | Speed | What you give up | Best for |
|---|---|---|---|---|
| SBA 7(a) loan | Roughly 10–15% max, tied to prime | Weeks to months | Paperwork, personal guarantee | Vehicles, build-outs, bigger expansion |
| SBA microloan | About 8–13% | Weeks | Paperwork | A first van, starter equipment |
| Bank term loan | Varies by credit | Weeks | Collateral, guarantee | Equipment with a long life |
| Business line of credit | Interest on what you draw | Days to weeks | A renewal review | Seasonal swings, payroll gaps |
| Purchase order financing | ~1.5–6% per 30 days | Days | Margin on that order | Big orders you can’t prefund |
| Invoice factoring | ~1–4% per invoice, monthly | Days | Margin, and customer contact | Slow-paying wholesale accounts |
| Merchant cash advance | Highest of the group | Hours to days | A cut of daily revenue | Genuine emergencies only |
| Grants | Free | Months | Time, and reporting | Equipment, hiring, local programs |
| Equity from investors | No repayment | Months | Ownership and some control | A real step change in the business |
Two columns deserve more weight than people give them. Speed is what tempts owners into the expensive end of this table, and what you give up is what they regret. An advance that funds tomorrow at a third of your margin is a bad trade for a van you could have financed in three weeks.
One more column that isn’t on the table: the tax treatment. Interest on business borrowing is generally deductible while loan principal is not, and equipment you buy with capital may be deductible differently again. That’s worth understanding before you choose, and how small business taxes work covers the structures and rates that decide it.
Debt capital: loans, credit lines, and SBA programs
Debt is the default answer for most local businesses, and usually the right one. You keep the whole company, the cost is knowable in advance, and the interest is generally deductible.
SBA loans are the cheapest serious money most small operations can get. The SBA doesn’t lend directly; it guarantees a portion of a bank’s loan, which is why a bank will approve amounts and terms it otherwise wouldn’t. The agency caps what lenders can charge: 7(a) maximum rates run in the region of 10% to 15% depending on loan size and whether the rate is fixed or variable, pegged to the daily prime rate (NerdWallet, October 2026; program terms at SBA). The trade is paperwork and time. Expect weeks, sometimes months.
SBA microloans cap at $50,000 with rates around 8% to 13%. That ceiling is a poor fit for a building and an excellent fit for a first delivery vehicle and the insurance to run it.
A bank term loan is the straightforward version: fixed sum, fixed schedule, usually secured against the thing you’re buying. For anything with a long working life (vehicles, refrigeration, ovens), matching a multi-year loan to a multi-year asset is the textbook move and it holds up in practice.
A line of credit is the one most delivery-heavy businesses underuse. You’re approved for a ceiling, you draw what you need, and you pay interest only on the drawn balance. For a business whose costs spike before revenue arrives, like flowers before Mother’s Day or catering staff before the invoice clears, that flexibility is worth more than a slightly lower rate on a lump sum you’d be paying interest on all year.
Merchant cash advances sit at the end of this list for a reason. An advance takes a fixed percentage of your daily card revenue until a set amount is repaid. It’s fast and it’s rarely quoted as an APR, which is precisely the problem: converted to one, the cost is usually far above every other row in the table above. The Fed’s survey found 60% of firms that borrowed from online lenders reported costs higher than they expected. Ask for the total dollar cost and the effective annual rate in writing before you sign anything.
Order-linked capital: purchase order financing and invoice factoring
If your cash problem is the gap between winning an order and being paid for it, the fix isn’t a term loan. It’s capital attached to the order itself.
Purchase order financing pays your supplier so you can fulfill an order you couldn’t otherwise afford to produce. A wholesaler lands a 300-case order from a regional grocery chain; PO financing buys the raw materials, the order ships, the financier is repaid from the proceeds. Fees commonly run about 1.5% to 6% per 30-day period (Bay Street Lending, 2026). Because it’s priced per cycle rather than per year, it’s only sane on orders with decent margin. Lenders in this space typically want gross margins above 20% to 25%, and below roughly 15% the fee eats the profit on the order entirely.
Invoice factoring sells an invoice you’ve already issued at a discount, so you get most of the cash now instead of in 45 days. Rates commonly fall in the 1% to 4% per month range depending on your customers’ creditworthiness and your volume (Crestmont Capital, 2026). It fits wholesale and B2B catering well, where the customers are solid but slow. The thing to check in the contract is whether the factor contacts your customers directly, and whether it’s recourse or non-recourse, meaning who eats the loss if the invoice is never paid.
Both are expensive annualized and cheap situationally. That’s the point: you’re renting money for 30 days, not borrowing it for five years.
Equity capital: when giving up ownership is worth it
Equity means selling part of the business for money you never repay. No monthly payment, no personal guarantee, and no getting it back.
For most local food, floral, and wholesale businesses, equity is the wrong tool for a van and the right tool for a real change in what the business is: a second location, a production facility, a product line that needs a year of runway before it earns. Investors are buying future growth, which means they’ll want a share of decisions along with their shares. Angel investors, equity crowdfunding platforms, and friends-and-family rounds all sit on this path at different sizes and formalities.
The practical questions are covered in the dedicated guide on finding investors for your business.
Capital you don’t repay: grants and local programs
Grants are the only free money on this page, which is why they’re competitive and slow. The sources that pay off are usually local rather than federal: city and county economic development offices, chambers of commerce, utility efficiency programs that will partly fund refrigeration or an electric vehicle, industry associations, and corporate small-business grant programs.
Two caveats. Most grants are restricted: the money must go to the specific equipment, hire, or project you applied for. And applications take real hours, so treat them as a background process you run while you fund the urgent thing another way, not as a plan for next month’s payroll.
What lenders look at before approving business capital
Underwriting for a small local business is less mysterious than it looks. Most lenders are checking five things:
- Time in business. Two years is the common threshold for traditional lenders. Under that, SBA microloans, CDFIs, and community lenders are the realistic doors.
- Revenue, and how steady it is. Consistency matters as much as size. A caterer with lumpy seasonal revenue should expect questions, and should bring the answers.
- Credit. Personal credit usually carries the decision for small amounts; business credit matters more as the number grows.
- Cash flow coverage. Can the business service the new payment out of existing operations, with room to spare? This is the number that actually decides it.
- Collateral and a personal guarantee. For equipment and vehicle loans, the asset itself is often the collateral. Most small-business lending expects a personal guarantee.
The single most useful preparation is clean books. Where an application stalls, it’s usually because the numbers the owner quotes and the numbers in the statements don’t match.
How to choose the right business capital for your stage
Work down these questions in order and the menu narrows fast.
- What is the money for? Capacity, working capital, or a growth bet. Match it: assets to term loans, gaps to credit lines or order-linked funding, step changes to equity. If the growth bet itself is still taking shape, work that out before the funding. There are growth strategies that move a local business to the next level that need no outside capital at all, and knowing which you’re pursuing changes what you should borrow.
- How fast do you need it? If the honest answer is “this week,” you’ll pay for the speed. If it’s “this quarter,” apply to a small bank or an SBA lender and keep the cost down.
- Can the business service the payment today? Not after the growth the money is supposed to produce. Today.
- What’s the total dollar cost, not the rate? Ask every lender for the all-in figure. Fees, origination, prepayment penalties.
- How much ownership and control are you prepared to give up? If the answer is none, equity is off the table and that’s a perfectly good place to land.
And remember what the Fed data says about outcomes: 36% of applicants got some or most of what they asked for. A partial approval is a normal result. Plan for it by knowing which part of your ask is the part you can’t do without.
Frequently asked questions
What are the four main types of business capital?
Debt capital (borrowed money repaid with interest), equity capital (money raised by selling ownership), working capital (the cash available for day-to-day operating needs), and fixed capital (money tied up in long-lived assets like vehicles, buildings, and equipment). Most small-business funding decisions are a choice between debt and equity to fund either working capital or fixed capital.
How much business capital can a small business actually get?
It depends far more on cash flow and time in business than on what you ask for. SBA microloans cap at $50,000. SBA 7(a) loans run far higher for qualifying borrowers. Across all applicants in the Federal Reserve’s 2025 survey, 42% received the full amount requested and 22% received none, so the realistic planning assumption is partial approval.
Is it better to get a loan or an investor for a local delivery business?
For vehicles, equipment, inventory, and seasonal gaps, a loan or credit line is almost always better: it’s cheaper, faster, and you keep the business. Investors make sense when you’re funding a step change that won’t pay back on a loan schedule: a second site, a production facility, a new market.
Can a business with bad credit still raise capital?
Yes, but the price changes. Order-linked options like invoice factoring and purchase order financing lean on your customers’ credit rather than yours, which makes them more accessible than a bank term loan. CDFIs and community lenders also underwrite differently from banks. Merchant cash advances are the easiest to get and the most expensive to carry.
How long does it take to get business capital?
Roughly: merchant cash advances in hours to days, factoring and PO financing in days, lines of credit and bank loans in weeks, SBA loans in weeks to months, grants and equity rounds in months. Build the timeline into the decision, because needing money in 48 hours removes every cheap option from the table.
Start with the job, not the lender
The mistake that costs local businesses the most isn’t picking the wrong lender. It’s starting with the lender at all. Decide what the money is buying, work out whether today’s cash flow can carry the payment, then pick the cheapest option that moves at the speed you need. Apply to a small bank or SBA lender if you have weeks, use order-linked capital if the problem is a payment gap, and leave the fast expensive money for genuine emergencies.
Then get the books in order before you apply. Clean statements turn a maybe into a yes more often than a better pitch does.
