Get to Know Your Business Financing Options

by Gerri Detweiler

Navigating the different business financing options can be confusing. There are over 44 different types! We review the most common choices, so you can find the best fit for your business needs. Whichever route you go, building strong business credit and making sure your personal credit is in shape will let you access the right amount of capital at the best rates. In the Federal Reserve’s 2019 Small Business Credit Survey, businesses relied on their owner’s personal credit scores (at least in some part) to access capital. But most lenders are going to look at overall financial health as well and the bar is high. Just 45% of owners with excellent financial health had successfully raised funding from different bank lenders, a Federal Reserve Bank of Chicago study found in 2014.

Business financing basics: Debt vs. Equity

Financing your small business falls into two categories: debt and equity. Financing through debt is a business loan. It happens when a business gets money from a lender to be used as working capital or capital expenses. Loans are secured by assets, this means a lender can take assets away if you don’t repay the loan.

Equity financing is where a business offers a percentage of the company, known as shares, in exchange for money.

Business financing options

Financing Types Loan Amounts Interest Rates Repayment Terms Turnaround Time Credit Criteria

SBA Loans

$50,000 –
$5 million
6% – 13% 5 – 25 years 30 days – 6 months Usually requires a minimum business credit score (FICO SBSS)

Traditional Bank Loans

$250,000 + 5% – 10% 1 – 20 years 2 – 4 months Usually requires strong personal and/or business credit scores

Online Loans

$25,000 – $500,000 7% – 30% 1 – 5 years 2 – 7 days Less important, but still a main factor


$500 – $50,000 8% – 15% 1 -5 years 1 – 3+ months Less important, but still a main factor

Merchant Cash Advance

$200 – $250,000 15% – 150% 3 – 12 months 1 – 7 days Not required

Cash Flow Loans

$200 – $100,000 25% – 90% 6 – 12 months Minutes – 3 days Less important, but still a factor

Business Credit Cards

$250 – $25,000 13% 25% 30 days 1 – 3 weeks Personal and/or business credit are a main factor.

Vendor Financing

$1,000 –
0 – 36% 10 – 120 days Hours to weeks Usually requires good business credit scores

Business financing approval factors

Approval for business financing goes beyond credit scores. Lenders may ask to see:

  1. Personal tax returns
  2. Business tax returns
  3. Last ~6 months of business bank statements
  4. Business plan
  5. Financial projections

Having these documents before you start your financing search will make the process smoother.

Determining how much business financing you need

A lender may also ask for a detailed list of why you need the funding and how it will be used. You’ll want this list to be specific. Are you seeking funds for expansion? Are you refinancing a loan? Are you purchasing assets in anticipation of busy season?

While it’s tempting to seek as much money as you can get your hands on, you only want to ask for as much as you need. Create a detailed list of the items you’ll purchase and the estimated cost. Will you be hiring employees like many small businesses currently are? Document the projected cost to hire and how much the employee will be paid. Are you purchasing equipment? Research what equipment and an average cost to acquire that equipment. Figuring out how much you need—and how long of a repayment term you need—will be easier after you’ve updated your financial projections to estimate how much you need and when you’ll be able to pay it back.

10 Types of Business Financing: 10 Minute Overview

This article was updated on October 18, 2019.

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About Author

Gerri Detweiler

Gerri Detweiler

Credit expert Gerri Detweiler is education director for Nav. She has more than three decades of experience in consumer credit education, has been interviewed in more than 3500 news stories, and answered over 10,000 credit questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.