Match the funding to the need

The single biggest mistake small business owners make is applying for the first product they hear about rather than the one that fits. A merchant cash advance can carry a triple-digit effective APR — fine for a short-term emergency, ruinous as a growth vehicle. An SBA loan can save tens of thousands in interest — irrelevant if you need cash in 48 hours. Before you apply anywhere, nail down two things: what the money is for and how long you can wait.

Use the table below as a starting point, then read the section for each product you're considering. Lendspedia's business funding page covers the full range of products our lender network offers.

Funding type Best for Typical speed Notes
SBA loan Established businesses, major investments, lowest-cost capital 2–8 weeks Lowest rates; requires strong credit (650+), revenue history, and patience
Term loan Specific projects with a defined cost and ROI 1–5 business days Lump sum repaid over fixed schedule; online lenders faster than banks
Line of credit Cash-flow gaps, seasonal swings, ongoing working capital 1–3 business days Revolving; draw what you need, pay interest only on what you use
Equipment financing Purchasing machinery, vehicles, or technology 24–72 hours Equipment serves as collateral; can preserve other credit capacity
Merchant cash advance High-revenue businesses needing fast, short-term cash 24–48 hours High cost; repaid as a percentage of daily sales — not a loan

SBA loans

Small Business Administration loans are partially guaranteed by the federal government, which lets SBA-approved lenders offer lower interest rates and longer repayment terms than most conventional products. The SBA 7(a) loan — the most common type — can fund up to $5 million for working capital, equipment, real estate, or business acquisition. The SBA 504 program is structured specifically for fixed assets like commercial real estate and heavy equipment. SBA microloans go up to $50,000 and can work for startups and underserved borrowers.

The trade-off is time and paperwork. SBA underwriting is thorough: lenders verify two or more years of tax returns, financial statements, a business plan, and personal financial disclosures. Approval typically takes two to eight weeks, and funding can take longer. Most SBA lenders want at least two years in business, $100,000+ in annual revenue, and a 650+ personal credit score — though specific requirements vary by lender and loan type.

Best use case: You've been operating for at least two years, you have a specific large investment (expansion, equipment, acquisition) that will generate measurable return, and you have time to wait. SBA rates tend to be significantly lower than online lender rates, which compounds to a large savings over a 5–10 year term.

Term loans

A business term loan delivers a fixed lump sum up front, repaid over a set schedule — weekly, bi-weekly, or monthly — at a fixed or variable rate. Online term lenders typically complete underwriting in hours and fund within one to five business days, making them meaningfully faster than bank or SBA channels. The cost is higher than SBA, but lower than MCAs.

Term loans are well-suited for expenses with a defined price tag and a clear payback timeline: a renovation, a bulk inventory purchase, hiring ahead of a large contract, or refinancing higher-cost debt. Most online lenders want 6–12 months in business, $5,000–$10,000+ in monthly revenue, and a 600+ personal score. Loan amounts vary widely, from as little as $10,000 to over $500,000 with established online lenders.

Business lines of credit

A business line of credit works like a corporate credit card but at higher limits and often lower rates. You're approved for a maximum credit limit, then draw from it as needed. You pay interest only on the amount drawn, and as you repay the principal, the capacity revolves back — meaning you can draw again without reapplying. This structure makes it the most flexible of the three core products.

Lines of credit excel at smoothing cash flow: covering payroll during a slow month, bridging the gap between invoicing and payment, or handling unexpected costs. They are less cost-efficient for large, one-time purchases where a term loan's fixed structure is a better match. Qualification thresholds are similar to term loans — 6+ months in business, consistent revenue, and a 550–600+ personal score for online lenders.

Other options: equipment financing, MCAs, and invoice factoring

Equipment financing is a term loan specifically for purchasing hard assets — machinery, vehicles, computers, or restaurant equipment. The equipment itself serves as collateral, which often allows borrowers with less-than-perfect credit to qualify. Loan amounts typically match the purchase price (80–100% financing is common), and terms align with the useful life of the asset. Because the collateral is built in, approval can happen in 24–72 hours.

Merchant cash advances (MCAs) are not technically loans. A lender advances a lump sum in exchange for a fixed percentage of your future daily credit and debit card sales, plus a fee. Repayment happens automatically — there's no fixed payment date, which can feel flexible, but the effective cost (expressed as a factor rate) can be very high. MCAs are best reserved for short-term needs when speed is critical and other options aren't available. Compare the total payback amount, not just the advance amount.

Invoice factoring (also called accounts receivable financing) lets you sell outstanding invoices to a factoring company at a discount in exchange for immediate cash. This is most useful for B2B businesses with long net-30 or net-60 payment cycles and reliable commercial customers. It is not a loan and does not require strong personal credit — the creditworthiness of your customers matters more.

What lenders look for

Regardless of product type, most business lenders evaluate the same core factors. Understanding them helps you apply to the right lender at the right time — rather than accumulating hard inquiries on products you won't qualify for.

  • Time in business: 6 months is the minimum for most alternative lenders; 2 years for bank and SBA products. Earlier-stage businesses should explore SBA microloans, CDFIs, or alternative lenders who weight owner credit heavily.
  • Monthly revenue: Most online lenders want at least $5,000–$10,000 in monthly business revenue, verified through bank statements. Higher, more consistent revenue unlocks larger amounts and better rates.
  • Personal credit score: Alternative lenders often work with 550+. SBA and bank loans generally require 650+, with the best rates going to 700+. Your business credit profile (DUNS/Paydex, Experian Business) may also be reviewed for larger loans.
  • Cash flow and debt coverage: Lenders want to see that your business generates enough net cash flow to cover the new payment. A debt service coverage ratio (DSCR) above 1.25 is a common benchmark.
  • Purpose and use of funds: Some lenders restrict how funds can be used. SBA loans, for example, prohibit using proceeds to pay delinquent taxes or speculative investments.

Lendspedia uses a soft credit pull during matching — no score impact while you explore options. A hard inquiry only occurs when you formally apply with a lender, which you control. See our lender comparison guide for a deeper look at how to evaluate competing offers apples-to-apples.

Find business funding matched to your profile

Answer a few questions about your business and Lendspedia matches you with lenders in our verified network — SBA partners, online term lenders, and line-of-credit providers — competing for your deal. Free, with a soft credit pull only.

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Frequently asked questions

It depends on the product. Many online and alternative lenders work with personal credit scores as low as 550, particularly for merchant cash advances and revenue-based products. Bank term loans and SBA loans generally require a 650 or higher personal score, and the best SBA rates are typically reserved for borrowers with 700+. Your business credit profile and time in business also factor in.
Yes, though the options are more limited. Most conventional term loans and SBA 7(a) loans require at least 6–24 months of operating history and documented revenue. Startups may qualify for SBA microloans (up to $50,000), community development financial institution (CDFI) loans, or some alternative lenders who weigh the owner's personal credit and industry experience more heavily. Startup founders may also consider business credit cards or personal loans for very early-stage funding.
Speed varies widely by product. Merchant cash advances and some revenue-based lines of credit can fund in 24–72 hours after approval. Online term loans typically close in 1–5 business days. SBA loans run through a more thorough underwriting process and generally take 2–8 weeks from application to funding. If speed is critical, an alternative lender or line of credit is usually faster than an SBA or bank loan.
Not always. Many online lenders offer unsecured business loans and lines of credit based primarily on revenue and credit history — no specific asset pledge required. However, SBA 7(a) loans require lenders to take available collateral when loan amounts exceed certain thresholds, and bank term loans often require real estate, equipment, or other business assets as security. Equipment financing is inherently secured by the equipment being purchased.

This guide is for general educational purposes only and is not financial, legal, or tax advice. Rates, program terms, and eligibility requirements vary by lender and borrower profile and are subject to change. Always review the full loan agreement and consult a qualified advisor before borrowing.