You may be eligible for several different kinds of loans. Each one offers different benefits.

Term Loan

A term loan is a monetary loan from a bank or other lending institution that is repaid with interest in regular payments over a set period of time.

Pros

  • Get cash upfront to invest in your business.
  • Typically higher borrowing amounts.
  • Fast funding if you use an online lender rather than a traditional bank; typically few days to a week versus up to several months.

Best for

  • Businesses looking to expand.
  • Borrowers who have good credit and a strong business and who don’t want to wait long for funding.

SBA Loan

A loan offered by banks or other lenders that are guaranteed by the Small Business Administration (a government agency). Repayment periods on SBA loans depend on how you plan to use the money. They range from seven years for working capital to 10 years for buying equipment and 25 years for real estate purchases.

Pros

  • Get cash upfront to invest in your business.
  • Typically higher borrowing amounts.
  • Fast funding if you use an online lender rather than a traditional bank; typically few days to a week versus up to several months.

Best for

  • Businesses looking to expand or refinance existing debts.
  • Strong-credit borrowers who can wait a long time for funding.

Business Lines of Credit

A business line of credit provides access to funds up to your credit limit. You can use the funds at your discretion, and you pay interest only on the money actually drawn.

Pros

  • Flexible way to borrow.
  • Some are unsecured, so no collateral required.

Best for

  • Short-term financing needs, managing cash flow or handling unexpected expenses.
  • Seasonal businesses.

Equipment Financing

Equipment loans help you buy equipment for your business. The loan term typically is aligned with the expected life span of the equipment, and the equipment serves as collateral for the loan.

Pros

  • You own the equipment and build equity in it.
  • You can get competitive rates if you have strong credit and business finances.

Best for

  • Businesses that want to own equipment outright.

Personal Loans

You may obtain a personal loan for business purposes. It’s an option for startups, as banks typically don’t lend to businesses with no operating history.

Approval for these loans is based solely on your personal credit score, so you’ll need good credit to qualify.

Pros

  • Startups and newer businesses can qualify.
  • Fast funding.

Best for

  • Startups and newer businesses with strong personal credit.
  • Borrowers willing to risk damaging their credit score.

Rollover as Business Start-up

ROBS allow you to roll over funds from a qualified retirement account (e.g., 401k or IRA) into a company you own. It is not considered borrowing from your retirement account. It allows entrepreneurs to use their business as the tax-deferred investment.

Pros

  • Allows you to use retirement monies for startup or business acquisition.
  • Can fund down payment for larger loan or fund the whole loan.

Best for

  • People wanting to buy a business that have large sums in retirement accounts.
  • People leaving corporate America for business ownership.
  • New buyers/business owners.