How each structure actually works, what underwriting looks at, and the term most borrowers miss until it costs them.
SBA 7(a) Loan
commercialThe workhorse of federally guaranteed lending. The SBA guarantees 50–85% of the balance, so partner banks can lend to businesses that would fail a conventional credit box. Longest terms and lowest legal cost of capital available to a small business, in exchange for the heaviest paperwork.
- Cost
- 9.5%–11% APR (prime + 2.5–3%)
- Repayment
- Monthly, 7–25 yrs
- Collateral
- Usually required over $50k
- Speed
- 30–90 days
What underwriting wants
- –Two years of business and personal tax returns
- –Year-to-date P&L and balance sheet
- –Personal guarantee from every 20%+ owner
- –For-profit U.S. business inside SBA size standards
- –No delinquency on existing federal debt
Watch out: Packaging and closing costs run 2–3.75% in guarantee fees. Prepayment penalties apply in years 1–3 on terms of 15 years or more.
SBA 504 Loan
commercialA three-part structure: a bank funds 50%, a Certified Development Company funds 40% at a long-term fixed rate tied to Treasuries, and you put down 10%. The cheapest long-money in the market if you are buying a building you will occupy.
- Cost
- ~5.5%–6.5% fixed (CDC tranche)
- Repayment
- Monthly, 10/20/25 yrs
- Collateral
- The financed asset
- Speed
- 45–120 days
What underwriting wants
- –Owner-occupancy of 51%+ for existing buildings (60% new construction)
- –Tangible net worth under $20M
- –Average net income under $6.5M for the prior two years
- –10%–20% down payment
- –Job creation or public policy goal
Watch out: Cannot be used for working capital or inventory. Two closings, two sets of fees, and a slower clock than 7(a).
SBA Express
commercialSBA turnaround compressed to 36 hours for the agency's portion, with the lender using its own underwriting. You trade a lower guarantee (50%) and a higher rate for a decision measured in weeks instead of months.
- Cost
- 12%–14% APR (prime + 4.5–6.5%)
- Repayment
- Monthly or revolving, up to 10 yrs
- Collateral
- Often unsecured under $25k
- Speed
- 10–30 days
What underwriting wants
- –Same eligibility screen as 7(a)
- –Two years of returns, YTD financials
- –Personal guarantee from 20%+ owners
- –Clean business debt service coverage above 1.15x
Watch out: The rate premium over standard 7(a) is real — roughly 300 bps. Only worth it when timing genuinely drives the deal.
Conventional Term Loan
commercialA lump sum with a fixed amortization schedule. Simple, predictable, and the correct instrument whenever the use of funds has a known cost and a known payback — a build-out, a hire cohort, a marketing push with measurable CAC.
- Cost
- 8%–30% APR
- Repayment
- Monthly, 1–7 yrs
- Collateral
- Sometimes (blanket UCC common)
- Speed
- 3–14 days
What underwriting wants
- –12+ months of operating history
- –Six months of business bank statements
- –Annual revenue typically $100k+
- –No open bankruptcies; tax liens must be on a payment plan
Watch out: Online lenders quote in 'total payback' rather than APR. Always convert to APR before comparing against a bank term sheet.
Business Line of Credit
commercialApproved capacity you draw against and repay repeatedly, paying interest only on the outstanding balance. The single most useful instrument for seasonality, payroll timing, and inventory cycles — and the one businesses most often apply for too late.
- Cost
- 8%–30% APR on drawn balance
- Repayment
- Revolving, 12-mo renewable
- Collateral
- Secured or unsecured
- Speed
- 3–10 days
What underwriting wants
- –Six to twelve months of bank statements
- –Consistent monthly deposits
- –Minimum revenue commonly $10k/month
- –Personal guarantee typical
Watch out: Draw fees, maintenance fees, and annual renewal fees can add 2–5% to the effective cost even in months you never draw.
Equipment Financing
commercialThe asset secures the loan, so the equipment's resale value carries much of the credit decision. This is why a 560 FICO can finance a titled truck at rates a 700 FICO cannot get on an unsecured loan.
- Cost
- 7%–9% A-tier / 10%–18% B–C tier
- Repayment
- Monthly, 3–7 yrs
- Collateral
- The equipment itself
- Speed
- 3–10 days
What underwriting wants
- –Vendor quote or invoice for the asset
- –0%–20% down depending on tier
- –Three months of bank statements for smaller tickets
- –Application-only approvals common under $250k
Watch out: Section 179 and bonus depreciation can materially change after-tax cost — model the deal net of the deduction, not gross.
Commercial Real Estate Loan
commercialUnderwritten on the asset first and the sponsor second. Debt service coverage ratio and loan-to-value drive the entire quote; a 1.25x DSCR at 70% LTV is the conventional benchmark.
- Cost
- 8%–12% APR
- Repayment
- 15–25 yr amort, 5–10 yr balloon
- Collateral
- The property
- Speed
- 30–60 days
What underwriting wants
- –Appraisal and environmental review
- –Rent roll and operating statements for the property
- –20%–35% down payment
- –Personal financial statement and schedule of real estate owned
Watch out: The balloon is the risk, not the rate. Plan the refinance exit before you sign the note.
Asset-Based Lending
commercialA revolving facility sized to a borrowing base — typically 80–85% of eligible receivables plus 50% of inventory. Credit history matters far less than collateral quality, which makes it a genuine option for a business recovering from a bad year.
- Cost
- Prime + 2%–6%
- Repayment
- Revolving borrowing base
- Collateral
- A/R, inventory, equipment
- Speed
- 20–45 days
What underwriting wants
- –Aged A/R and A/P reports
- –Perpetual inventory reporting
- –Field examination and collateral audit
- –Monthly borrowing base certificates
Watch out: Reporting burden is heavy and ongoing. Audit fees, unused line fees, and lockbox control are standard.
Invoice Factoring
alternativeYou sell the invoice, not your credit. The factor underwrites your customer's ability to pay, which is why a six-month-old company invoicing a Fortune 500 buyer can fund faster than a ten-year-old company with thin credit.
- Cost
- 1%–5% per invoice
- Repayment
- When the customer pays
- Collateral
- The receivable
- Speed
- 24–72 hours
What underwriting wants
- –B2B or B2G invoices for delivered work
- –Creditworthy customers
- –No existing lien on receivables
- –Aged receivables report
Watch out: Recourse factoring puts the loss back on you if the customer never pays. Confirm recourse vs. non-recourse in writing.
Revenue-Based Financing
alternativeRepayment flexes with the top line: a slow month costs less, a strong month retires the balance faster. No fixed maturity, no equity dilution, and no personal collateral — but the total cost is well above bank debt.
- Cost
- 1.15–1.40 factor (≈25%–60% APR)
- Repayment
- Fixed % of monthly revenue
- Collateral
- None
- Speed
- 3–7 days
What underwriting wants
- –Six months of consistent revenue
- –Read-only connection to payment processor or accounting
- –Typically $15k+/month in revenue
- –Low churn for subscription models
Watch out: Factor rate is not APR. A 1.35 factor paid back in nine months is roughly a 70% APR — do the conversion.
Merchant Cash Advance
alternativeA purchase of future receivables, not a loan — which is why it sidesteps usury caps and clears in a day at a 500 credit score. It is the fastest and most expensive money on this page, and we will tell you plainly when you do not need it.
- Cost
- 1.20–1.50 factor (≈40%–100%+ APR)
- Repayment
- Daily or weekly ACH / card split
- Collateral
- None (UCC filing typical)
- Speed
- 24–48 hours
What underwriting wants
- –Three to six months of bank statements
- –$10k+ monthly deposits
- –Four or more months in business
- –No more than one or two open advances
Watch out: Stacking multiple advances is the single most common path to insolvency in small-business finance. Confession-of-judgment clauses still appear in some contracts — refuse them.
Short-Term Working Capital
alternativeA compressed term loan built for speed over price. Cheaper and better structured than an advance, faster and looser than a bank note — the middle rung most second-chance borrowers should aim for.
- Cost
- 9%–30% APR
- Repayment
- Weekly or monthly, 6–24 mo
- Collateral
- Usually unsecured
- Speed
- 1–5 days
What underwriting wants
- –Six months of bank statements
- –$8k+ in monthly deposits
- –Average daily balance above $1k
- –Fewer than three NSF days per month
Watch out: Weekly debits compound cash-flow pressure. Confirm the payment fits your worst historical week, not your average one.
Bridge Loan
alternativeExpensive money with a short fuse, priced on certainty of exit rather than borrower credit. Correct when a sale, refinance, or receivable is contracted and dated; wrong when the exit is a hope.
- Cost
- 11%–15% APR + 1–3 points
- Repayment
- Interest-only, 6–24 mo
- Collateral
- Real property or hard assets
- Speed
- 7–21 days
What underwriting wants
- –Documented takeout or exit strategy
- –Equity or collateral coverage
- –Appraisal or valuation of the pledged asset
- –Proof of ability to carry interest payments
Watch out: Extension fees are punitive. Budget for the exit landing 60 days later than you expect.
SBA Microloan / CDFI
alternativeMission-driven capital from nonprofit intermediaries and Community Development Financial Institutions. Small dollars, real underwriting help, and the most forgiving credit posture in regulated lending — often paired with free technical assistance.
- Cost
- 8%–13% APR
- Repayment
- Monthly, up to 6 yrs
- Collateral
- Often required, flexible
- Speed
- 14–45 days
What underwriting wants
- –Business plan and cash-flow projections
- –Personal guarantee, some collateral
- –Owner equity injection of 5%–20%
- –Willingness to complete lender training in some programs
Watch out: Caps at $50,000 and intermediaries lend within limited geographies. Availability varies more than price.
Purchase Order Financing
alternativeThe lender pays your supplier directly against a confirmed order from a creditworthy buyer. Designed for the specific failure mode of winning a contract larger than your balance sheet can deliver.
- Cost
- 1.8%–6% per 30 days
- Repayment
- On customer payment
- Collateral
- The purchase order
- Speed
- 5–14 days
What underwriting wants
- –Confirmed, non-cancellable purchase order
- –Finished goods (not work-in-progress) in most programs
- –Gross margin of 20%+ on the order
- –Verifiable supplier and end customer
Watch out: Only covers direct supplier cost. Pair it with factoring to convert the resulting invoice into cash.