HomeLoan Comparison and ReviewsQuick Comparison: Small Business Loan Types

Quick Comparison: Small Business Loan Types

June 3, 2024

Finding the right business loan can be a crucial step in ensuring the success and growth of your business. With various loan types available, each offering unique benefits and terms, it’s important to understand the differences to make an informed decision. Below is a comprehensive comparison of different business loan options, including their loan amounts, interest rates, repayment terms, eligibility requirements, and more.

LOANSB: Comparison Table

Loan Type Loan Amount ($) Interest Rates Repayment Terms Eligibility Requirements Funding Speed
Term Loan $5,000 – $5,000,000 4% – 12% 1 to 25 years 600+ credit score, $50,000 revenue, 1 year in business 2 to 10 days
Line of Credit $10,000 – $500,000 Prime + 1% to 5% Revolving 600+ credit score, $50,000 revenue, 6 months in business On-demand
SBA Loan $5,000 – $5,000,000 5% – 10% 5 to 25 years 680+ credit score, $100,000 revenue, 2 years in business 1 to 3 weeks
Equipment Financing $5,000 – $500,000 4% – 15% 1 to 7 years 600+ credit score, $50,000 revenue, 1 year in business 1 to 7 days
Invoice Financing Up to 100% of invoice value 1% – 3% per month 30 to 90 days Flexible, based on invoice value 24 to 48 hours
Merchant Cash Advance $5,000 – $500,000 Factor rate 1.1 – 1.5 3 to 18 months Flexible, $5,000 monthly credit card sales, 3 months in business 24 to 48 hours
Business Credit Card $1,000 – $100,000 10% – 25% Revolving 680+ credit score, $50,000 revenue, 6 months in business 7 to 10 days
Microloan $500 – $50,000 8% – 15% 6 months to 6 years Flexible, lower credit scores accepted, varies by lender 1 to 2 weeks
Startup Loan $5,000 – $100,000 7% – 30% 1 to 5 years 680+ credit score, detailed business plan required 1 to 3 weeks
Commercial Real Estate Loan $25,000 – $5,000,000 4% – 10% 5 to 25 years 680+ credit score, $100,000 revenue, 1 to 2 years in business 1 to 2 months
Franchise Loan $5,000 – $5,000,000 6% – 15% 5 to 15 years 650+ credit score, proof of franchise profitability 2 to 4 weeks
Working Capital Loan $5,000 – $500,000 7% – 30% 6 months to 3 years 600+ credit score, $50,000 revenue, 1 year in business 1 to 2 weeks
Trade Credit Varies by supplier, typically $1,000 – $100,000 Typically interest-free if paid within terms 30 to 90 days Varies by supplier, often based on business creditworthiness Immediate access to goods or services

Term Loan

Loan Type: Term Loan

Loan Amount: $5,000 – $5,000,000

Interest Rates:

  • Fixed: 4% – 12%
  • Variable: Typically tied to the prime rate plus a margin

Repayment Terms:

  • Short-term: 1 to 5 years
  • Long-term: 5 to 25 years
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 600, but higher scores (700+) receive better rates
  • Business Revenue: Varies by lender, typically at least $50,000 annually
  • Time in Business: Minimum of 1 year

Application Process:

  • Steps: Fill out application, provide financial statements, tax returns, business plan
  • Documentation: Business and personal credit reports, bank statements, financial projections
  • Approval Time: 1 week to 1 month

Funding Speed:

  • After approval, funds are typically available within 2 to 10 business days

Collateral Requirements:

  • Secured: May require business assets such as equipment, inventory, or real estate
  • Unsecured: Higher interest rates and stricter eligibility criteria

Use of Funds:

  • Flexible use for various business needs such as expansion, equipment purchase, working capital, etc.

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: May apply, typically 1% – 3% of the remaining balance
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: Usually offer lower interest rates but stricter requirements
  • Online Lenders: Faster approval and funding, often higher interest rates
  • Credit Unions: Competitive rates, member-focused services

Flexibility:

  • Moderate to High: Depending on the lender, borrowers may have options to adjust repayment schedules or refinance the loan

Line of Credit

Loan Type: Line of Credit

Loan Amount: $10,000 – $500,000

Interest Rates:

  • Fixed: Rare, mostly variable rates
  • Variable: Prime rate plus 1% to 5%

Repayment Terms:

  • Typically revolving, similar to a credit card
  • Payments are made based on the amount drawn
  • Interest-only payment options may be available

Eligibility Requirements:

  • Credit Score: Minimum 600, higher scores (680+) preferred
  • Business Revenue: Varies, but generally at least $50,000 annually
  • Time in Business: Minimum of 6 months to 1 year

Application Process:

  • Steps: Submit application, provide financial documents, review and approval
  • Documentation: Business and personal credit reports, bank statements, financial statements
  • Approval Time: 1 week to 1 month

Funding Speed:

  • Once approved, funds are available on-demand, similar to a credit card

Collateral Requirements:

  • Secured: May require assets such as inventory or receivables
  • Unsecured: Typically requires higher credit scores and stronger financials

Use of Funds:

  • Flexible use for ongoing business expenses, managing cash flow, unexpected costs

Fees and Charges:

  • Maintenance Fees: Monthly or annual fees may apply
  • Withdrawal Fees: Per-draw fees may apply
  • Interest on Drawn Amount: Only pay interest on the funds used
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: Often lower rates, more stringent requirements
  • Online Lenders: Quicker access, higher rates
  • Credit Unions: Competitive rates, member-focused services

Flexibility:

  • High: Funds can be accessed as needed, repayment terms can vary based on the drawn amount.

SBA Loan

Loan Type: SBA Loan

Loan Amount: $5,000 – $5,000,000

Interest Rates:

  • Fixed: 5% – 10%
  • Variable: Typically tied to the prime rate plus a margin

Repayment Terms:

  • Long-term: 5 to 25 years
  • Early repayment usually allowed without penalties

Eligibility Requirements:

  • Credit Score: Minimum 680, higher scores preferred
  • Business Revenue: Varies by program, typically at least $100,000 annually
  • Time in Business: Minimum of 2 years

Application Process:

  • Steps: Submit detailed application, provide financial statements, tax returns, business plan
  • Documentation: Business and personal credit reports, bank statements, financial projections, collateral documentation
  • Approval Time: 1 to 3 months

Funding Speed:

  • After approval, funds are typically available within 1 to 3 weeks

Collateral Requirements:

  • Secured: Required for loans over a certain amount, may include business assets and personal guarantees
  • Unsecured: Rare, usually requires strong financials

Use of Funds:

  • Flexible use for various business needs including real estate purchase, working capital, equipment purchase, debt refinancing

Fees and Charges:

  • Origination Fees: 0% – 3.5% of the loan amount
  • Prepayment Penalties: None for most SBA loans
  • Late Fees: Vary by lender

Lender Type:

  • SBA-approved lenders: Typically traditional banks and credit unions
  • Online Lenders: Some approved to offer SBA loans, may provide quicker service

Flexibility:

  • High: Long repayment terms and flexible use of funds, but more stringent application process

Equipment Financing

Loan Type: Equipment Financing

Loan Amount: $5,000 – $500,000

Interest Rates:

  • Fixed: 4% – 15%
  • Variable: Less common, rates tied to market index plus a margin

Repayment Terms:

  • Medium to Long-term: 1 to 7 years
  • Typically matched to the useful life of the equipment
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 600, higher scores (680+) receive better rates
  • Business Revenue: Varies by lender, typically at least $50,000 annually
  • Time in Business: Minimum of 1 year

Application Process:

  • Steps: Fill out application, provide financial statements, equipment details, and vendor information
  • Documentation: Business and personal credit reports, bank statements, quotes or invoices for the equipment
  • Approval Time: 2 days to 2 weeks

Funding Speed:

  • After approval, funds are typically available within 1 to 7 business days

Collateral Requirements:

  • Secured: The equipment being financed serves as collateral
  • Unsecured: Rare, usually requires strong financials

Use of Funds:

  • Restricted to purchasing or leasing business-related equipment

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: May apply, typically 1% – 3% of the remaining balance
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: Lower interest rates, more stringent requirements
  • Online Lenders: Faster approval and funding, higher interest rates
  • Specialized Equipment Financing Companies: Competitive rates, industry expertise

Flexibility:

  • Medium: Funds are restricted to equipment purchase, but repayment terms can be customized to match the equipment’s lifespan

Invoice Financing

Loan Type: Invoice Financing

Loan Amount: Up to 100% of the invoice value, typically ranging from $5,000 to $5,000,000

Interest Rates:

  • Fixed: Typically not applicable
  • Variable: 1% – 3% of the invoice value per month

Repayment Terms:

  • Short-term: Usually 30 to 90 days, matching the payment terms of the invoices
  • Early repayment options usually not applicable as repayment is tied to invoice payment

Eligibility Requirements:

  • Credit Score: Generally flexible, but better terms for higher scores
  • Business Revenue: Based on invoice amounts rather than overall revenue
  • Time in Business: Minimum of 3 months to 1 year

Application Process:

  • Steps: Submit application, provide invoices, and proof of business legitimacy
  • Documentation: Business and personal credit reports, bank statements, copies of invoices, customer creditworthiness
  • Approval Time: 1 to 7 days

Funding Speed:

  • Once approved, funds are typically available within 24 to 48 hours

Collateral Requirements:

  • Secured: The invoices themselves serve as collateral
  • Unsecured: Not applicable, as the financing is inherently secured by invoices

Use of Funds:

  • Flexible use for managing cash flow, covering operational expenses, and bridging gaps between invoice issuance and payment receipt

Fees and Charges:

  • Origination Fees: Typically none
  • Service Fees: 1% – 5% of the invoice value
  • Late Fees: Generally not applicable, as repayment is tied to invoice payment

Lender Type:

  • Specialized Invoice Financing Companies: Offer industry-specific expertise
  • Online Lenders: Provide faster service and more flexible terms

Flexibility:

  • High: Funds can be used flexibly, but tied to the value and terms of outstanding invoices

Merchant Cash Advance (MCA)

Loan Type: Merchant Cash Advance

Loan Amount: $5,000 – $500,000

Interest Rates:

  • Fixed: Typically not applicable
  • Factor Rate: 1.1 to 1.5 (e.g., for a $10,000 advance, you repay $11,000 to $15,000)

Repayment Terms:

  • Short-term: Typically 3 to 18 months
  • Repayment is made through a percentage of daily credit card sales or fixed daily/weekly withdrawals

Eligibility Requirements:

  • Credit Score: Flexible, often no minimum required
  • Business Revenue: Steady monthly credit card sales, typically at least $5,000 per month
  • Time in Business: Minimum of 3 months to 1 year

Application Process:

  • Steps: Submit application, provide proof of credit card sales and bank statements
  • Documentation: Minimal, usually just bank and credit card processing statements
  • Approval Time: 1 to 3 days

Funding Speed:

  • Once approved, funds are typically available within 24 to 48 hours

Collateral Requirements:

  • Secured: Not typically required, but personal guarantees may be needed
  • Unsecured: Yes, but based on future sales

Use of Funds:

  • Flexible use for various business needs, such as working capital, inventory purchase, and managing cash flow

Fees and Charges:

  • Origination Fees: 2% – 5% of the advance amount
  • Service Fees: Included in the factor rate
  • Late Fees: Vary by lender, often included in the factor rate

Lender Type:

  • MCA Companies: Specialize in providing cash advances based on credit card sales
  • Online Lenders: Provide faster service and more flexible terms

Flexibility:

  • High: Repayment adjusts with sales volume, but total repayment can be significantly higher than traditional loans

Business Credit Card

Loan Type: Business Credit Card

Loan Amount: Credit limit ranging from $1,000 to $100,000

Interest Rates:

  • Fixed: Typically not applicable
  • Variable: 10% – 25%, based on the prime rate plus a margin

Repayment Terms:

  • Revolving credit, minimum monthly payments required
  • Early repayment always allowed, no prepayment penalties

Eligibility Requirements:

  • Credit Score: Minimum 680, higher scores preferred for better rates and higher limits
  • Business Revenue: Varies, but generally at least $50,000 annually
  • Time in Business: Minimum of 6 months to 1 year

Application Process:

  • Steps: Fill out application, provide business and personal financial information
  • Documentation: Business and personal credit reports, bank statements
  • Approval Time: 1 to 2 weeks

Funding Speed:

  • Once approved, the card is usually mailed within 7 to 10 days

Collateral Requirements:

  • Unsecured: Based on creditworthiness
  • Secured: Some cards require a cash deposit (secured business credit cards)

Use of Funds:

  • Flexible use for various business expenses, including operational costs, travel, and small purchases

Fees and Charges:

  • Annual Fees: $0 – $500, depending on the card
  • Late Fees: $25 – $39
  • Foreign Transaction Fees: Typically 2% – 3% of the transaction amount

Lender Type:

  • Traditional Banks: Offer a range of business credit cards with varying benefits
  • Online Lenders: Some fintech companies offer business credit cards with innovative rewards programs
  • Credit Unions: Competitive rates, member-focused services

Flexibility:

  • High: Revolving credit allows for ongoing access to funds, repayment terms are flexible

Microloan

Loan Type: Microloan

Loan Amount: $500 – $50,000

Interest Rates:

  • Fixed: 8% – 15%
  • Variable: Less common, usually fixed rates

Repayment Terms:

  • Short to Medium-term: 6 months to 6 years
  • Early repayment often allowed, usually without penalties

Eligibility Requirements:

  • Credit Score: Flexible, often accommodating lower scores
  • Business Revenue: Varies, typically suited for smaller businesses or startups
  • Time in Business: Can be as little as a few months

Application Process:

  • Steps: Submit application, provide basic financial information and business plan
  • Documentation: Business and personal credit reports, bank statements, business plan
  • Approval Time: 1 to 4 weeks

Funding Speed:

  • After approval, funds are typically available within 1 to 2 weeks

Collateral Requirements:

  • Secured: May require some form of collateral, though often less stringent
  • Unsecured: Available, particularly for smaller amounts, but usually require strong business plans

Use of Funds:

  • Flexible use for working capital, inventory purchase, supplies, equipment, and other small business needs

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: Rarely applied
  • Late Fees: Vary by lender

Lender Type:

  • Nonprofit Organizations: Often offer microloans to support small businesses and startups
  • Community Banks: Provide microloans as part of community development programs
  • Online Lenders: Quick approval and funding, often with higher interest rates

Flexibility:

  • High: Ideal for small business needs with flexible use and reasonable repayment terms

Startup Loan

Loan Type: Startup Loan

Loan Amount: $5,000 – $100,000

Interest Rates:

  • Fixed: 7% – 30%
  • Variable: Typically tied to the prime rate plus a margin

Repayment Terms:

  • Medium-term: 1 to 5 years
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 680, higher scores preferred
  • Business Plan: Detailed business plan required
  • Time in Business: Typically not required, but some lenders may require proof of revenue generation

Application Process:

  • Steps: Submit application, provide a business plan, financial projections, and personal financial information
  • Documentation: Personal and business credit reports, bank statements, business plan
  • Approval Time: 2 weeks to 2 months

Funding Speed:

  • After approval, funds are typically available within 1 to 3 weeks

Collateral Requirements:

  • Secured: May require personal assets or business assets
  • Unsecured: Available, but usually requires a strong personal credit history

Use of Funds:

  • Flexible use for various startup expenses such as inventory, equipment, working capital, and operational costs

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: May apply
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: More stringent requirements, lower interest rates
  • Online Lenders: Faster approval, higher interest rates
  • Microloan Providers: Nonprofits and community lenders often offer startup loans

Flexibility:

  • Medium to High: Depending on the lender, funds can be used for a variety of startup needs

Commercial Real Estate Loan

Loan Type: Commercial Real Estate Loan

Loan Amount: $25,000 – $5,000,000

Interest Rates:

  • Fixed: 4% – 10%
  • Variable: Prime rate plus 1% to 5%

Repayment Terms:

  • Long-term: 5 to 25 years
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 680, higher scores preferred
  • Business Revenue: Varies by lender, typically at least $100,000 annually
  • Time in Business: Minimum of 1 to 2 years

Application Process:

  • Steps: Submit application, provide financial statements, property details, business plan
  • Documentation: Business and personal credit reports, bank statements, tax returns, property appraisals
  • Approval Time: 1 to 3 months

Funding Speed:

  • After approval, funds are typically available within 1 to 2 months

Collateral Requirements:

  • Secured: The property being financed serves as collateral
  • Unsecured: Not applicable, as the loan is inherently secured by real estate

Use of Funds:

  • Restricted to purchasing, refinancing, or renovating commercial property

Fees and Charges:

  • Origination Fees: 1% – 3% of the loan amount
  • Prepayment Penalties: Often apply
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: Lower interest rates, more stringent requirements
  • Credit Unions: Competitive rates, member-focused services
  • Online Lenders: Faster approval, higher interest rates

Flexibility:

  • Medium: Funds are restricted to real estate purposes, but repayment terms can be customized to suit business needs.

Franchise Loan

Loan Type: Franchise Loan

Loan Amount: $5,000 – $5,000,000

Interest Rates:

  • Fixed: 6% – 15%
  • Variable: Prime rate plus 1% to 5%

Repayment Terms:

  • Medium to Long-term: 5 to 15 years
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 650, higher scores preferred
  • Business Revenue: Varies by lender, often requires proof of franchise profitability
  • Time in Business: Typically not required for new franchises

Application Process:

  • Steps: Submit application, provide franchise agreement, financial projections, personal financial information
  • Documentation: Personal and business credit reports, bank statements, franchise agreement, business plan
  • Approval Time: 1 to 3 months

Funding Speed:

  • After approval, funds are typically available within 2 to 4 weeks

Collateral Requirements:

  • Secured: May require personal assets or the franchise itself as collateral
  • Unsecured: Available, but usually requires a strong personal credit history

Use of Funds:

  • Restricted to franchise-related expenses such as franchise fees, equipment, and initial working capital

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: May apply
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: More stringent requirements, lower interest rates
  • Online Lenders: Faster approval, higher interest rates
  • Franchise Financing Companies: Specialized lenders with experience in franchise loans

Flexibility:

  • Medium: Funds are restricted to franchise purposes, but repayment terms can be customized to suit business needs

Working Capital Loan

Loan Type: Working Capital Loan

Loan Amount: $5,000 – $500,000

Interest Rates:

  • Fixed: 7% – 30%
  • Variable: Typically tied to the prime rate plus a margin

Repayment Terms:

  • Short-term: 6 months to 3 years
  • Early repayment may be allowed but can include penalties

Eligibility Requirements:

  • Credit Score: Minimum 600, higher scores preferred
  • Business Revenue: Varies by lender, typically at least $50,000 annually
  • Time in Business: Minimum of 1 year

Application Process:

  • Steps: Submit application, provide financial statements, business plan, personal financial information
  • Documentation: Business and personal credit reports, bank statements, tax returns
  • Approval Time: 1 week to 1 month

Funding Speed:

  • After approval, funds are typically available within 1 to 2 weeks

Collateral Requirements:

  • Secured: May require business assets such as inventory or receivables
  • Unsecured: Available, but usually requires strong financials

Use of Funds:

  • Flexible use for various operational expenses, such as payroll, rent, and utilities

Fees and Charges:

  • Origination Fees: 1% – 5% of the loan amount
  • Prepayment Penalties: May apply
  • Late Fees: Vary by lender

Lender Type:

  • Traditional Banks: More stringent requirements, lower interest rates
  • Online Lenders: Faster approval, higher interest rates
  • Credit Unions: Competitive rates, member-focused services

Flexibility:

  • High: Funds can be used flexibly for various working capital needs, but repayment terms may be less flexible than lines of credit.

Trade Credit

Loan Type: Trade Credit

Loan Amount: Varies by supplier and business relationship, typically $1,000 – $100,000

Interest Rates:

  • Typically interest-free if paid within terms
  • Late payments may incur interest or penalties

Repayment Terms:

  • Short-term: 30 to 90 days, depending on supplier terms
  • Early repayment often incentivized with discounts

Eligibility Requirements:

  • Credit Score: Varies, often based on business creditworthiness and relationship with the supplier
  • Business Revenue: Varies, but generally at least $50,000 annually
  • Time in Business: Usually at least 1 year, but new businesses may qualify with strong personal credit or a solid business plan

Application Process:

  • Steps: Negotiate terms with suppliers, provide credit references and financial information
  • Documentation: Business and personal credit reports, bank statements, trade references
  • Approval Time: 1 week to 1 month, depending on supplier and relationship

Funding Speed:

  • Immediate access to goods or services upon approval, payment terms allow for delayed payment

Collateral Requirements:

  • Typically unsecured, but may require personal guarantees or a history of timely payments

Use of Funds:

  • Restricted to purchasing goods and services from suppliers, improving cash flow by delaying payment

Fees and Charges:

  • Late Fees: Vary by supplier, often a percentage of the overdue amount
  • Interest: May be charged on overdue balances
  • Early Payment Discounts: Often 1% – 2% discount for paying early

Lender Type:

  • Suppliers: Offer trade credit directly to businesses
  • Trade Finance Companies: Facilitate trade credit for businesses with limited supplier relationships

Flexibility:

  • High: Provides immediate access to goods and services with delayed payment, improving cash flow.

Selecting the best loan for your business depends on your specific needs, financial situation, and long-term goals. By understanding the different options available, you can choose the loan that best fits your business’s requirements and sets you on the path to success. Always consider consulting with a financial advisor to make the most informed decision.

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