Most owners don’t come to lending with a product in mind. They come with a problem: the walk-in cooler is failing, a wholesale account wants twice the volume, or payroll lands on Friday and the invoices that cover it won’t clear until the 30th. The product comes second.
That order matters, because the types of small business loans are not interchangeable. Each is built around a different shape of need, and picking the wrong shape is how a shop ends up paying merchant-cash-advance money for something an equipment loan would have covered at a fraction of the cost.
This page is the map. It covers what each loan type is, what it’s good for, roughly what it costs, and how the answer shifts when your money spends most of its life in three places: a van, a stockroom, and an unpaid invoice.
The Bottom Line
- There are really only six financing shapes worth knowing: SBA loans, term loans, lines of credit, equipment financing, invoice factoring, and merchant cash advances. Everything else is a variation.
- Cost spreads enormously by shape. Bank small-business loans averaged 6.8% to 11% in Q4 2025, while merchant cash advances can carry effective APRs of 40% to 350%.
- Match the term to the life of the thing you’re buying. A five-year oven belongs on multi-year money; a six-week inventory gap does not.
- If your problem is timing rather than capital, because revenue exists but arrives on Net-30, factoring or a line of credit fits better than a term loan.
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The main types of small business loans, side by side
Here is the whole field in one view. The rate columns are ranges reported for 2026 and early 2026, not quotes; what you’re actually offered depends on your credit file, revenue and collateral, which small business loan interest rates in 2026 covers in detail.
| Loan type | Best for | Typical cost | Speed |
|---|---|---|---|
| SBA 7(a) | Long-horizon needs: expansion, acquisition, working capital | ~10.25%–15.25% | Weeks to months |
| SBA 504 | Real estate and major fixed assets | Long-term fixed | Weeks to months |
| SBA microloan | Amounts up to $50,000, thinner files | Varies by intermediary | Weeks |
| Bank term loan | A defined one-time purchase | ~6.75%–14.75% | Days to weeks |
| Business line of credit | Recurring or unpredictable gaps | ~6.5%–28% APR | Days |
| Equipment financing | A specific machine, cooler or fixture | Varies; asset is collateral | Days to weeks |
| Invoice factoring | Slow-paying B2B accounts | ~1%–5% per 30 days | Days |
| Merchant cash advance | Last resort when speed is everything | 40%–350% effective APR | Hours to days |
Sources: NerdWallet, Lendio, business.com, eCapital, U.S. Small Business Administration, retrieved September 2026.
Two things jump out of that table. The cost spread between the top and bottom rows is an order of magnitude, not a few points. And speed is the thing you pay for. Every row that funds in hours costs more than the rows that take weeks.
What SBA loans cover and how long they take
SBA loans are the cheapest money most small shops can realistically reach, and the slowest. The SBA doesn’t lend directly; it guarantees a portion of a loan made by a bank or credit union, which is why the paperwork is heavier and the rates are better (U.S. Small Business Administration, retrieved September 2026).
Three programs cover almost every case:
- 7(a) is the general-purpose workhorse, up to $5 million, usable for working capital, equipment, refinancing, leasehold improvements or buying a business. Terms run to 10 years for working capital and 25 years for real estate, and loans under $50,000 no longer require collateral.
- 504 is for major fixed assets like buildings and heavy equipment, on long-term fixed-rate financing. If you’re buying the building your kitchen sits in, this is the program.
- Microloans cap at $50,000 and come through intermediary nonprofit lenders, which makes them the most reachable SBA product for a young business or a thin credit file.
The tradeoff is time and standards. Most SBA 7(a) lenders in 2026 look for a FICO around 680, two or more years in business, and a debt service coverage ratio of about 1.15 or better; SBA Express is more flexible near 650, and microloans go lower (Bay Street Lending, retrieved September 2026). An SBA application can run weeks to months, against a single day for some online lenders (Forbes Advisor, retrieved September 2026).
The practical rule: if you can see the need coming a quarter out, start an SBA application. If the cooler already failed, look further down this page.
Term loans versus a business line of credit
A term loan hands you a lump sum you repay on a fixed schedule. A line of credit gives you a ceiling you draw against and pay interest only on what’s outstanding. That single structural difference decides which one is cheaper for you, and it has nothing to do with the headline rate.
In 2026, term loan rates have been quoted around 6.75% to 14.75% and lines of credit around 6.5% to 28% APR (business.com, retrieved September 2026). On paper the term loan wins. In practice, a line used intermittently (drawn in the slow weeks, repaid when the wholesale invoices clear) often costs less over a year than a term loan accruing interest on the full balance every day, because you’re only paying for the days you’re actually short (Bay Street Lending, retrieved September 2026).
So the question isn’t which rate is lower. It’s whether your need is a single event or a recurring pattern:
- One event, known amount. A second delivery van, a kitchen build-out, buying out a partner: that’s term loan territory. You know the number, so borrow the number.
- A recurring gap. The four weeks every quarter when receivables lag payroll, or a seasonal stock build before the holidays: that’s line of credit territory. You don’t know the number, so buy access to a range.
Lines of credit, revolving or not, carry a maximum maturity of 10 years under SBA terms, so this is not permanent capital. It’s a buffer.
Equipment financing when the asset is the collateral
Equipment financing is the one product where the thing you’re buying secures the loan, which changes everything about who qualifies. Because the lender can repossess a $40,000 refrigeration unit, it cares less about your credit score than a cash-flow lender does.
This is the right product for anything you can point at: a deck oven, a blast chiller, display cases, a labeling line, a walk-in. There’s also a tax wrinkle that changes what it costs you. The 2026 Section 179 deduction limit is $2,560,000, with phase-out beginning at $4,090,000, and financed equipment qualifies for the full deduction in the year it’s placed in service, not spread across the payment schedule (Section179.org, retrieved September 2026). Commercial ovens, refrigeration, dishwashers and espresso machines all qualify (Elite Restaurant Equipment, retrieved September 2026).
That means a purchase financed in December can produce a first-year deduction far larger than the payments you’ve made on it. The timing is worth planning around, and the lease-versus-loan decision that sits underneath it is covered in equipment funding for coolers, ovens and packing lines.
Invoice factoring and merchant cash advances
These two get grouped together because both convert future money into present money, and both are priced as fees rather than interest. They are not equally sensible.
Invoice factoring sells your unpaid B2B invoices to a factor at a discount. Fees typically run 1% to 5% per 30 days (eCapital, retrieved September 2026). If you wholesale to grocers, restaurants or corporate catering clients on Net-30 or Net-60, this is aimed squarely at you: the money already exists, you’re just buying it forward. Approval leans on your customers’ creditworthiness more than your own.
Merchant cash advances buy a slice of your future card receipts. They’re priced with a factor rate, usually 1.1 to 1.5, applied to the amount advanced, which sounds mild until it’s annualized. Effective APRs of 40% to 350% are common, and the factor rate is the reason owners routinely miscalculate the cost (Wealthvieu, retrieved September 2026).
A merchant cash advance is the fastest and most accessible option if your credit is poor, and it is almost always the most expensive thing in the room. Treat it as triage, not financing.
What lenders check before approving a small business loan
Every type of small business loan is underwritten against roughly the same four things, weighted differently.
- Personal credit score. Banks and credit unions generally want 670 or higher. Bank of America’s stated minimum is 700 and Wells Fargo’s is 680, while some online lenders go considerably lower, with Fora Financial down to 570 (NerdWallet, retrieved September 2026).
- Time in business. Two years is the common bank threshold. Under two years, you’re looking at microloans, equipment financing, or online lenders.
- Revenue. OnDeck requires $100,000 in annual revenue for its line of credit; Bank of America’s minimum for secured business loans is $250,000 (NerdWallet, retrieved September 2026).
- Collateral or a personal guarantee. Equipment and real estate loans are self-collateralizing. Most unsecured products substitute a personal guarantee, which puts your own assets behind the debt.
The document pack is consistent across lenders: two to three years of business tax returns, three to six months of business bank statements, a year-to-date profit and loss statement, and usually a business plan (Bankrate, retrieved September 2026). Assembling it in the right order is most of the work, which is the subject of how to get a small business loan, step by step.
If your score is the problem rather than your revenue, the products that ignore it are a specific short list, and the sequence for presenting a damaged file is covered in how to get a small business loan with bad credit.
Which small business loan fits a shop that delivers?
Businesses that run their own deliveries have a cash-flow shape that standard lending advice doesn’t account for. Three things are true at once: a chunk of capital is parked in vehicles and cold storage, another chunk is parked in perishable stock, and a large share of revenue arrives on terms rather than at the point of sale.
That shape points at specific answers.
The fixed asset problem comes first. Coolers, ovens, packing tables and vans are depreciating assets with predictable lives. Finance them on money whose term roughly matches that life, and let the asset be the collateral. Paying for a ten-year walk-in out of a twelve-month working capital loan is how a profitable shop ends up cash-poor.
Then there’s the receivables problem. If you deliver wholesale on Net-30, your revenue is solid and your cash is late. That is a timing problem, and term debt is the wrong tool for it, because you’d be borrowing permanently to cover a gap that recurs. Factoring or a line of credit is the correct shape, and factoring in particular prices off your customers’ credit rather than yours.
The growth problem is the third. A new wholesale account usually costs money before it pays: more stock, more delivery days, sometimes another route. A line of credit sized to two or three weeks of operating expenses covers the ramp without committing you to years of payments for a contract that might not renew.
One thing to separate out: the cost of getting orders to customers is an operating expense, not a capital one, and it’s often financed by accident. Owners buy a second van and hire a driver to cover a delivery day that a route-based delivery platform could absorb without any borrowing at all. Metrobi provides multi-stop route optimization and lets businesses in food, floral, catering and wholesale work with the same drivers over time across major US cities. Before you finance a vehicle, price the alternative. Sometimes the cheapest loan is the one you don’t take.
Frequently asked questions
What is the easiest type of small business loan to get?
Equipment financing and invoice factoring are generally the most accessible, because both are secured by something other than your credit history: the equipment itself, or your customers’ unpaid invoices. Several products in this family, including factoring, equipment financing, revenue-based financing and microloans, accept personal FICO scores as low as 500 (Bankrate, retrieved September 2026).
How much can a small business borrow?
It depends on the product. SBA microloans cap at $50,000, SBA 7(a) loans reach $5 million, and most online lenders sit somewhere between $5,000 and $300,000. In practice the binding constraint is usually revenue rather than the program ceiling, since lenders size loans against your ability to service them.
Do I need collateral for a small business loan?
Not always. SBA 7(a) loans under $50,000 don’t require it, and unsecured term loans and lines of credit exist. But most lenders substitute a personal guarantee when there’s no collateral, which means your personal assets stand behind the loan even though the borrower is the business.
Is a loan or a line of credit better for seasonal inventory?
A line of credit, in most cases. Seasonal stock builds are recurring and variable. You draw before the peak and repay after it, paying interest only on the days you’re out of pocket. A term loan would have you paying interest year-round on money you only need for one quarter.
Where to start
The honest starting point isn’t a lender, it’s a sentence: what exactly is the money for, and how long will the thing it buys last? Answer that and the product picks itself. Long-lived asset, long-term money. Recurring gap, revolving credit. Late invoices, factoring. Emergency with no alternatives, and only then, an advance.
From here, the next step depends on which of those you landed on. If you know the product and need the process, work through the application sequence. If the number you’re worried about is the rate, start with what lenders are actually quoting in 2026. And if your credit file is the obstacle, that’s a different playbook with a different order of operations.
