Small Business Loans: Types, Rates and How to Qualify
A plain breakdown of how small business loans work, what separates one type from another, and what lenders actually check before approving you.
Overview
What counts as a "small business loan"
"Small business loan" is a broad umbrella term that covers several very different products — a term loan, an SBA loan, a merchant cash advance, an equipment loan. They're grouped together because they all provide a lump sum of capital, but how you repay them, what they cost, and what they're best used for vary a lot.
The right type depends mostly on what you're financing and how predictable your revenue is. Below is a breakdown of the three most common structures, followed by typical rate ranges and where to go deeper by industry.
Main types of small business loans
Term Loans
A lump sum repaid over a fixed period with regular payments. Best for one-time investments like equipment, buildouts or expansion.
SBA Loans
Government-backed loans with longer terms and lower rates, but a slower, more document-heavy approval process.
Revenue-Based Loans
Repayment scales with your sales, common for seasonal businesses. Faster approval, but typically a higher effective cost.
Pros and cons of term loans (the most common type)
Pros
- Predictable fixed payments make budgeting straightforward
- Typically lower rates than short-term or revenue-based options
- Builds business credit history when repaid on time
Cons
- Slower approval than short-term or working capital products
- Often requires collateral or a personal guarantee
- Fixed payments can strain cash flow in slow months
Typical rates
Rate ranges by loan type
| Loan type | Typical rate | Typical term | Funding speed |
|---|---|---|---|
| Term loan | 7%–15% | 1–7 years | 2–10 days |
| SBA loan | 6%–11% | 5–25 years | 2–8 weeks |
| Equipment loan | 6.5%–11% | 2–7 years | 1–10 days |
| Revenue-based loan | 10%–35% (effective) | 3–18 months | 24 hours–5 days |
Ranges are indicative and vary by industry, credit profile and lender. See industry-specific pages below for real comparisons.
By industry
Compare loan options for your industry
Rates, typical loan sizes and the best-fit lenders vary a lot by industry. Each page below has a full lender comparison specific to that sector.
FAQ
Common questions
What credit score do I need for a small business loan?
It depends on the loan type. Term loans and SBA loans typically want 620+, while revenue-based and short-term products can approve scores as low as 550, usually at a higher cost.
How long does it take to get approved?
Term and equipment loans typically take 2–10 business days. SBA loans can take 2–8 weeks due to additional documentation. Revenue-based products can fund in as little as 24 hours.
Do I need collateral for a small business loan?
Equipment loans are usually secured by the equipment itself. Term and SBA loans often require collateral or a personal guarantee. Revenue-based loans are typically unsecured but cost more as a result.
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