Every type of business loan, explained

How do you choose a business loan?

Start with what will repay the money, not with the product name. Lenders underwrite the source of repayment, so match the product to it. Steady profit points to a cash flow loan. Fast growth without profit points to financing tied to sales. Slow paying customers point to invoices. A purchase points to the asset itself. Our guide to getting a business loan walks through this.

Which loans are repaid from operating cash flow?

The classic loans: term loans, SBA loans, lines of credit, real estate loans, acquisition and franchise loans. The lender reads your tax returns and asks whether profit covers the payment with room to spare, usually a DSCR of 1.25 or better. They are the cheapest money, typically 6% to 30% APR, and the slowest to close. Most banks decline businesses under two years old.

Which financing is repaid from future revenue?

A merchant cash advance, revenue based financing and most short term loans are repaid as a slice of sales, daily, weekly or monthly. Approval depends on revenue volume rather than profit or credit, so they are the easiest to get and the most expensive: a factor rate of 1.1 to 1.5 often means 40% to over 100% APR. Use them for a short gap with a clear return, never for ongoing losses.

Which financing is repaid from invoices and assets?

Invoice factoring and invoice financing advance 70% to 90% of what your customers owe you. Purchase order financing pays your supplier for a confirmed order. Equipment financing, leasing, inventory financing and asset based lending borrow against something the lender can sell if you stop paying, so they approve younger businesses and weaker credit.

Which financing is repaid from program proceeds or equity?

In Canada, SR&ED and grant financing advances money against a tax credit refund or a signed grant, and the program repays the lender. Venture debt sits beside an equity round and is repaid from the next raise or from revenue. Apply for any product here, or ask your AI assistant to apply for you through our MCP server. One application reaches a lender in every category.