The 7 Types of Business Loans at a Glance
"Business loan" covers several very different products. Some are true loans with interest and a payoff schedule; others, like factoring and merchant cash advances, are technically purchases of your receivables. Here are the seven you will run into most, and what each one is for.
| Loan type | Best for | Typical term | Speed | Collateral |
|---|---|---|---|---|
| Term loan | One-time investments | Months to 10 years | Days to weeks | Sometimes |
| SBA loan | Low-cost, long-term capital | Up to 10 years (25 for real estate) | Weeks to months | Often |
| Line of credit | Recurring or unexpected gaps | Revolving | Days | Sometimes |
| Equipment financing | Machinery, vehicles, tech | Useful life of the equipment | Days | The equipment |
| Invoice factoring / A/R | Slow-paying customers | Until invoices are paid | Days | Your receivables |
| Merchant cash advance | Fast cash from steady sales | Months | As fast as 1-2 days | Future receivables |
| Commercial real estate | Buying or refinancing property | Up to 25+ years | Weeks to months | The property |
General ranges only. Terms, speed, and collateral requirements vary by lender and applicant.
1. Term Loans
A term loan gives you a lump sum that you repay, with interest, over a set period. Payments are usually fixed, which makes budgeting simple. Use one for a defined investment with a clear payback: an expansion, a renovation, or refinancing more expensive debt.
The main types of term loans differ by length, security, and lender:
| Type of term loan | How it works |
|---|---|
| Short-term | Usually under 2 years, often with weekly or daily payments; faster and easier to qualify for, but higher cost |
| Medium-term | Around 2 to 5 years with monthly payments; the most common structure for growth projects |
| Long-term | 5 to 10 years or more, typically from banks or SBA lenders, for larger investments |
| Secured vs. unsecured | Secured loans pledge collateral for better pricing; unsecured loans rely on revenue and a personal guarantee |
| Bank vs. online | Banks usually offer lower rates and slower approvals; online lenders trade higher cost for speed and flexibility |
Can you get a 7-year business loan? Usually from a bank or through the SBA; online lenders tend to offer shorter terms. See business term loans for requirements and how the application works.
2. SBA Loans
SBA loans are made by banks and other approved lenders and partly guaranteed by the U.S. Small Business Administration. The guarantee lets lenders offer longer terms and lower costs than they otherwise would. The main programs are 7(a) loans (up to $5 million, for most business purposes), 504 loans (for real estate and long-life equipment), and microloans (up to $50,000 through nonprofit lenders).
The trade-offs are paperwork and time: approvals commonly take weeks to months. Compare the two paths in SBA loan vs. bank loan, or see our SBA loans page.
3. Business Lines of Credit
A line of credit gives you a limit you can draw from as needed, repay, and draw again. You pay interest or fees only on what you use, which makes it a good fit for recurring cash-flow gaps, seasonal inventory, or emergencies. Lines can be secured or unsecured, and some require annual renewal.
See business line of credit requirements and how a line compares with a loan in line of credit vs. loan.
4. Equipment Financing
Equipment financing pays for machinery, vehicles, or technology, and the equipment itself secures the loan. Because the lender can recover the asset, it is often easier to qualify for than an unsecured loan. Terms usually match the equipment's useful life.
Equipment you buy may qualify for Section 179 expensing under IRS rules; ask your tax professional. See equipment financing and leasing vs. financing.
5. Invoice Factoring and Accounts Receivable Financing
If customers take 30 to 90 days to pay, invoice factoring and A/R financing turn unpaid invoices into cash now. With factoring you sell invoices at a discount; with A/R financing you borrow against them. Approval leans heavily on your customers' credit, which helps newer B2B businesses.
Compare the two in invoice factoring vs. A/R financing, or see accounts receivable financing.
6. Merchant Cash Advances
A merchant cash advance is not technically a loan. A funder buys a portion of your future sales for a lump sum today, and you repay a fixed amount through daily or weekly debits or a share of card sales. MCAs are fast and focus on revenue rather than credit, but they are one of the most expensive forms of business financing.
See how they are priced in MCA rates and factor rates, or start with our merchant cash advance page.
7. Commercial Real Estate Loans
Commercial real estate loans finance buying, building, or refinancing property your business uses or invests in. The property secures the loan, terms can run 20 years or more, and lenders expect a down payment and strong financials. SBA 504 loans are a common route for owner-occupied property.
See real estate financing for details.
How to Choose the Right Type
- Match the term to the use. Short-lived needs such as inventory or payroll fit short-term funding; long-lived assets fit long-term loans.
- Be honest about timing. If you can wait weeks, SBA and bank loans are usually cheapest. If you can't, faster options cost more.
- Compare total cost, not the payment. Use the business loan and MCA calculator to compare offers in dollars and estimated APR.
- Know what lenders check. Revenue, time in business, credit, existing debt, and bank statements matter for every type.
Not sure which type fits?
One 60-second form, soft check only. A specialist matches your business to the programs you are likely to qualify for.
Frequently Asked Questions
What are the 7 types of business loans?
The seven most common are term loans, SBA loans, business lines of credit, equipment financing, invoice factoring and accounts receivable financing, merchant cash advances, and commercial real estate loans.
What are the types of term loans?
Term loans are usually grouped by length (short-term under about 2 years, medium-term around 2 to 5 years, and long-term 5 years or more), by security (secured or unsecured), and by lender (bank, SBA, or online lender).
What is a 7-year business loan?
A loan repaid over 7 years, usually with fixed monthly payments. Terms that long typically come from banks or SBA lenders; SBA 7(a) loans can run up to 10 years for working capital and equipment and up to 25 years for real estate.
What is the easiest type of business loan to get?
Revenue-based options such as merchant cash advances and some short-term loans are generally easiest to qualify for, and equipment financing is easier because the equipment secures it. Easier approval usually means higher cost, and no legitimate lender guarantees approval.
Which type of business loan is cheapest?
For qualified borrowers, SBA and bank loans are usually the lowest cost, followed by other term loans and lines of credit. Merchant cash advances and short-term loans are typically the most expensive.