What Are the Different Types of Small Business Loans That Exist Today?


On average, 20% of small businesses fail within their first year of existence. Unfortunately, this statistic doesn’t get better with time. By their fifth year in business, almost half of them fail.

Only about 33% make it to their 10th anniversary. These statistics can be discouraging if you’re planning to start a business. But your company doesn’t have to experience the same fate.

One of the main reasons for small business failure is a shortfall in working capital and funding. So what’s the key to surviving beyond a decade? Accessing one of the many types of small business loans available.

Ensuring a healthy cash flow will help you to avoid failure. Read on to find out some of the best small business loans available.

Term Loans

Term loans are quite common. They provide you with the cash you need which you then repay over a fixed period of time. Monthly payments are also fixed and include the principal balance with interest included.

You can use a term loan to purchase equipment or to manage daily expenses.

Merchant Cash Advances

With merchant cash advances you borrow a lump sum of cash based on your future sales. The financial institution will use your credit card sales as collateral. You can use these daily sales to repay it or you can make weekly payments via transfers from your bank account. 

Business Line of Credit

This allows you to access a revolving line of credit through your checking account. You can only spend up to the limit provided. After which you repay it, then you can withdraw money again.

You may not know your weekly or monthly cash flow needs. So, this gives you flexibility. Also, a business line of credit doesn’t usually require collateral.

SBA Loans

The Small Business Administration (SBA) is aware of the financial challenges that some companies may face. They provide SBA loans at lower interest rates than regular loans. This type of loan is government-backed and the associated fees are also nominal.

Despite the time it may take for approval, the requirements are usually more relaxed. These loans make smart business sense. They have lower down payments and extended repayment terms.

Equipment Loans

If your business requires heavy machinery or equipment, you’ll need capital. For businesses, that don’t have this, there’s the option of an equipment loan. You can use this type of loan toward:

  • Equipment
  • Vehicles
  • Machinery
  • Computers
  • Furniture

These items retain value, so the financial institution will use them as collateral.

Types of Small Business Loans to Keep You Up and Running

Business ownership can be challenging. It entails juggling many business functions to ensure your company is successful. This is even more difficult for smaller companies with limited resources. 

Often the inability to effectively manage your cash flow and lack of emergency funding can be detrimental. It’s a universal issue that many companies face.

There are many types of small business loans. They can help your business overcome this hurdle.

If you’re a business owner, it’s about finding a loan that will work best for your company’s needs. Get some more guidance on this and other related topics on our Business page.

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