From term loans to revenue-based financing to equity — there are more ways to fund a small business than most owners realize. Here is every option explained.
Small business financing comes in many forms -- from bank loans and SBA programs to alternative lenders, grants, and equity. Understanding the full landscape of options before you need capital helps you make the right choice when the moment arrives.
Debt Financing Options
SBA Loans
The SBA's flagship programs -- 7(a), 504, and Microloan -- offer the most competitive rates and terms available to small businesses. The SBA guarantees a portion of the loan, making lenders willing to approve businesses they'd otherwise decline. Best for: established businesses needing $50,000--$5 million at the best available rates.
Business Term Loans
Term loans provide a lump sum repaid over a fixed schedule. Banks offer terms up to 5--7 years; online lenders typically 1--5 years. Best for: specific one-time investments with clear ROI (equipment, expansion, hiring).
Business Lines of Credit
Lines of credit provide revolving access up to a set limit. Pay interest only on what you draw. Best for: managing recurring cash flow gaps, seasonal needs, unexpected expenses.
Equipment Financing
Equipment loans and leases are secured by the equipment being purchased. Best for: any significant equipment purchase where the asset has clear business value.
Invoice Financing and Factoring
Convert outstanding invoices to immediate cash. Best for: B2B businesses with slow-paying customers and healthy receivables.
Merchant Cash Advances
Advance against future credit card sales, repaid as a percentage of daily card receipts. Best for: businesses with strong card volume that need fast capital and can't qualify for traditional loans. Warning: very high effective APR.
Equity Financing Options
Angel Investors
Individual investors providing $25,000--$1 million in exchange for equity in your business. Best for: high-growth startups with significant market opportunity.
Venture Capital
Institutional investors providing $2 million+ for scalable businesses. Requires significant equity and board seat. Best for: tech startups with massive addressable markets.
Small Business Investment Companies (SBICs)
SBA-licensed private funds that provide equity and debt to small businesses. Less dilutive than pure venture capital.
Non-Dilutive Financing
Grants
Federal, state, and private grants -- free money with no repayment required. Competitive and often restrictive on use. SBIR/STTR grants for tech companies can reach $1.75 million.
Revenue-Based Financing
Repay as a percentage of monthly revenue until a multiple of the advance is paid. No equity dilution. Best for: profitable businesses with predictable monthly revenue.
Choosing the Right Option
The right financing depends on your stage, credit, revenue, speed needs, and risk tolerance. Use our business loan calculator to model debt financing options. Approvd helps you explore the full range of debt financing options with one application and no credit impact.
Frequently Asked Questions
What is the most common type of small business financing?
Business lines of credit and SBA loans are the most commonly used. MCAs are also widespread (though expensive). The "best" option depends heavily on your specific business profile.
Should I use debt or equity financing to grow my business?
Debt financing is almost always preferable if you can service it, because you retain full ownership. Equity financing makes sense when debt isn't accessible or your growth potential is high enough to justify sharing the upside.
The Financing Landscape Has Never Been More Diverse
Ten years ago, a small business owner who needed capital had essentially two choices: go to their local bank or use a credit card. Today, the small business financing ecosystem includes dozens of product types from hundreds of lenders, ranging from massive financial institutions to mission-driven CDFIs to algorithm-powered fintech platforms. This proliferation of options is genuinely good news — but navigating it requires understanding the key categories and how they differ.
Every financing option involves trade-offs between cost, speed, flexibility, amount, and eligibility requirements. The "best" option for your business depends on why you need capital, how quickly you need it, how strong your financials are, and what you're willing to pay. This overview maps the full landscape.
Debt Financing Options
Term Loans
The most straightforward form of business financing: you borrow a fixed amount and repay it over a set period with interest. Term loans range from short-term (6–24 months from online lenders) to long-term (3–10 years from banks and SBA). Interest rates vary enormously — from 6–9% for SBA loans to 20–45%+ for online short-term loans. Best for specific, one-time capital needs with a clear ROI.
Business Lines of Credit
A revolving credit facility that you draw from as needed and repay to restore availability. Lines of credit are ideal for managing cash flow variability, covering gaps between payables and receivables, or having a financial buffer for unexpected expenses. You only pay interest on amounts drawn, making lines of credit more cost-efficient than term loans for variable needs.
SBA Loans
SBA-guaranteed loans offer the best rates available to small businesses outside of conventional bank loans — but they come with more documentation, longer timelines, and stricter eligibility. The SBA 7(a) program (up to $5M) and SBA 504 program (for real estate and equipment) are the workhorses. If you qualify and have time, SBA loans are almost always the lowest-cost option.
Alternative Financing Options
Merchant Cash Advances
An advance against future credit/debit card sales, repaid via a daily percentage of card revenue. MCAs are the fastest and most accessible option — some fund within hours — but they're also the most expensive. Effective APRs often range from 40% to 350%. Use only for genuine short-term emergencies when other options aren't available.
Equipment Financing
Loans or leases where the equipment itself serves as collateral. Because the collateral is built-in, equipment financing is accessible even to newer businesses with limited credit history. Terms typically match the useful life of the equipment (3–7 years). Great for any tangible equipment purchase from vehicles to manufacturing machinery to restaurant equipment.
Revenue-Based Financing
Similar to MCAs but typically structured for non-retail businesses. You receive capital in exchange for a percentage of future gross revenue until a set multiple is repaid. Unlike MCAs, RBF providers often work with software, services, and subscription businesses that don't primarily process card payments.
Complete Comparison Matrix
| Option | Speed | Cost | Min. Requirements | Best For |
|---|---|---|---|---|
| Bank Term Loan | 2–4 weeks | Low (7–12%) | 2+ yrs, 680+ score | Established businesses |
| SBA 7(a) | 30–90 days | Low (9–12%) | 2+ yrs, 650+ score | Max amount at low cost |
| Online Term Loan | 1–5 days | Med (15–45%) | 6+ mos, 580+ score | Speed + accessibility |
| Line of Credit | 2–7 days | Med (10–35%) | 1+ yr, 600+ score | Ongoing flexibility |
| Equipment Loan | 1–3 days | Low-Med (6–25%) | 6+ mos, 550+ score | Equipment purchases |
| MCA | 24–48 hrs | Very High (40–350%) | 3+ mos, any score | Emergency only |
Find Your Best Option with Approvd
Approvd simplifies this complex landscape by matching your specific business profile with the most appropriate lenders across all major product categories. One application, multiple competing offers — find your best financing option in minutes.
Related Financing Product
Business Term Loans
Get a lump-sum business loan with fixed payments from $10K–5M.