Small Business Loan Options: SBA, Term Loans, and Lines of Credit
By BizCalculators Team · Last reviewed September 4, 2026
SBA 7(a) loans are the gold standard, offering up to $5 million with terms up to 10 years for working capital and 25 years for real estate, while term loans fund faster and lines of credit charge interest only on what you draw.
Overview of Business Loan Types
Small business owners have several financing options, each suited to different needs. The main categories are: SBA loans (government-backed, lower rates, more paperwork), conventional term loans (fixed amount, fixed term, fixed or variable rate), business lines of credit (flexible, pay interest only on what you use), equipment financing (secured by the equipment itself), invoice factoring (selling unpaid invoices for immediate cash), and merchant cash advances (expensive, based on future sales).
Compare offers by APR, not the headline rate. The annual percentage rate folds in origination fees and closing costs, which is where two seemingly identical quotes diverge. SBA 7(a) loans carry a guaranty fee that scales with the loan amount and term, and 504 loans fund real estate and heavy equipment through a different structure with a CDC. Also check how repayment is collected: daily or weekly remittance on merchant cash advances drains cash every day, while a monthly amortizing loan is easier to plan around.
SBA 7(a) Loans: The Gold Standard
SBA 7(a) loans are partially guaranteed by the Small Business Administration, which reduces lender risk and enables lower interest rates and longer repayment terms. Loan amounts go up to $5 million with terms up to 10 years for working capital and 25 years for real estate. The trade-off: extensive paperwork, strict eligibility requirements (good credit, demonstrated ability to repay, personal guarantee required), and processing times of 60-90 days.
The program has faster variants borrowers overlook. SBA Express caps at $500,000 with a 36-hour lender turnaround and lets the lender use its own credit decision, while streamlined small-loan variants cover smaller amounts with lighter documentation. Rates are variable and priced as a spread over the prime rate, with a maximum spread the SBA sets by loan size and term. Owners of 20% or more must personally guarantee, and the SBA does not lend directly — you apply through a participating lender.
Term Loans: Speed and Simplicity
Conventional term loans from banks or online lenders provide a lump sum repaid over a fixed term with fixed or variable interest. They're faster to get than SBA loans (sometimes within days from online lenders) but carry higher rates, especially for newer businesses. Terms typically range from 1-5 years for working capital and 5-25 years for commercial real estate. Online lenders like OnDeck and Funding Circle have more lenient qualification requirements but higher APRs.
Match the term to the life of what you buy. Equipment financing usually runs three to seven years and is secured by the equipment itself, which keeps the rate down; a commercial real estate loan typically wants 20 to 25 percent down and amortizes over 10 to 25 years, often with a balloon payment at the end that you must refinance. Watch prepayment penalties, common with online lenders, and confirm whether your rate is fixed or tied to a benchmark that can reset.
Business Lines of Credit: Flexibility When You Need It
A business line of credit works like a credit card for your business. You're approved for a maximum credit limit and can draw funds as needed, paying interest only on the amount you use. It's ideal for managing seasonal cash flow gaps, covering unexpected expenses, or taking advantage of time-sensitive opportunities. Rates are typically variable and higher than term loans. Secured lines (backed by collateral) offer better rates than unsecured lines.
Beware the fair-weather nature of lines. A bank can reduce, freeze, or decline to renew your line at its annual review, which often lands exactly when you need it most. Use a line for short-term working capital, not for equipment or leasehold improvements you will repay over years — that mismatch is how businesses get stuck permanently drawn. Many lines are sized as a formula, such as a percentage of eligible receivables, so the ceiling moves with your balance sheet. Draw it, repay it, and repeat.
How to Qualify for a Business Loan
Lenders evaluate: (1) Credit score — 680+ for SBA loans, 600+ for online lenders. (2) Time in business — 2+ years preferred, though startups can qualify for microloans. (3) Annual revenue — most lenders want to see $50,000+. (4) Debt service coverage ratio — your business's ability to cover loan payments from cash flow. (5) Collateral — many loans require personal guarantees or specific collateral. Strengthen these factors before applying to get the best rates.
Assemble the file before you apply: two to three years of business and personal tax returns, a year-to-date profit and loss statement and balance sheet, a debt schedule listing every obligation and its payment, and a short projection showing how the new payment fits. Be ready to explain large or unusual deposits, since lenders read bank statements closely. If your own numbers fall short, a co-signer with strong credit, additional collateral, or a smaller loan amount can carry the file through underwriting.
Frequently Asked Questions
What type of loan is best for a small business?
It depends on the need: SBA 7(a) loans offer the best rates and longest terms but take 60–90 days. Term loans fund quickly for established businesses. Lines of credit suit seasonal cash-flow gaps. Match the loan to the purpose — asset purchases to term loans, working capital to credit lines.
What credit score do I need for an SBA loan?
Most SBA lenders want a personal credit score of 680 or higher, and the SBA itself requires demonstrating ability to repay. Newer businesses may need collateral or a personal guarantee. Online lenders accept lower scores but charge higher rates and require less time in business.
How long does it take to get a small business loan?
Online lenders can fund within days. Traditional banks take 2–6 weeks. SBA loans take the longest — 60–90 days on average — because of the government paperwork and underwriting. Apply early, and prepare your financials in advance to shorten the timeline.
Can I get a business loan as a startup?
Yes, but options are more limited. Startups often qualify for SBA microloans (up to $50,000), equipment financing (secured by the equipment), merchant cash advances, or financing from online lenders. Many require a personal guarantee since the business lacks its own credit history.