What is the most common type of business loan?

The SBA 7(a) loan is the most popular small business loan in the US, with the SBA guaranteeing over $27 billion in 7(a) loans in fiscal year 2025. For businesses that don't qualify for SBA loans, term loans from online lenders and business lines of credit are the most commonly used financing options.

What type of business loan is easiest to get?

Business lines of credit and merchant cash advances have the most flexible qualification requirements — some lenders approve businesses with as little as 6 months in operation and $10,000/month in revenue. Invoice financing and equipment financing are also accessible because the loan is secured by the asset (invoices or equipment), reducing lender risk. SBA loans are harder to qualify for but offer the best rates.

What type of business loan has the lowest interest rate?

SBA 7(a) and SBA 504 loans consistently offer the lowest rates available to small businesses — variable rates of 10.0%–12.5% in 2026, with fixed-rate SBA 504 loans for real estate running 6.5%–7.5%. Nonprofit CDFIs and microloan programs can also offer below-market rates. Online business term loans typically run 10%–30% APR, and merchant cash advances can reach 40%–150% effective APR.

Do I need collateral to get a business loan?

It depends on the loan type. SBA loans generally require collateral for amounts over $25,000 — typically business assets and sometimes personal assets. Equipment financing uses the equipment itself as collateral. Invoice financing uses unpaid invoices. Unsecured business loans and lines of credit from online lenders may not require specific collateral but typically require a personal guarantee, making you personally liable if the business defaults.

Types of Business Loans 2026 — Which One Is Right for Your Business?

There are more than 10 distinct types of business loans available in 2026, each designed for a different financial need. The right loan type depends on how much you need, how fast you need it, how long you’ve been in business, and what you plan to use the funds for. This guide covers every major loan type, what each costs, and which situations each one fits best.

Business Loan Types at a Glance

Loan Type	Best For	Typical APR	Speed to Fund
SBA 7(a) loan	Working capital, equipment, real estate	10.0%–12.5%	30–90 days
SBA 504 loan	Commercial real estate, heavy equipment	6.5%–7.5% (CDC portion)	30–90 days
SBA Express loan	Fast SBA funding up to $500K	11.5%–13.5%	36 hours to 30 days
SBA microloan	Startups, small capital needs	8%–13%	30–45 days
Business term loan	Large one-time expenses	8%–30%	1–5 days (online)
Short-term business loan	Immediate cash flow needs	20%–50%+	1–2 days
Business line of credit	Ongoing working capital	10%–40%	1–7 days
Equipment financing	Buying business equipment	5%–30%	1–3 days
Invoice financing	Unpaid B2B invoices	1%–5%/mo	1–2 days
Merchant cash advance	High-volume card sales businesses	40%–150%+ effective APR	1 day
Working capital loan	Short-term cash flow gaps	10%–40%	1–5 days
Business credit card	Small recurring purchases	15%–29% APR	Immediate

SBA Loans

The Small Business Administration guarantees loans made by approved lenders, reducing risk and allowing lenders to offer lower rates than conventional business loans.

SBA 7(a) loan: The flagship SBA product. Borrow up to $5 million for working capital, equipment, debt refinancing, or real estate. Variable rates tied to prime rate + a spread (currently 10.0%–12.5%). Best for established businesses with 2+ years operating history and 680+ credit score.

SBA 504 loan: Used specifically for major fixed assets — commercial real estate or heavy equipment. Funded through a bank (50%), a Certified Development Company (40%), and your down payment (10%). The CDC portion carries a fixed rate around 6.5%–7.5%. Maximum $5.5 million ($5.5M for manufacturers or certain energy projects).

SBA microloan: Up to $50,000 through nonprofit intermediary lenders. Average loan is about $14,000. Designed for startups and underserved entrepreneurs. Rates of 8%–13%.

Business Term Loans

A term loan gives you a lump sum you repay over a set period with regular payments. Short-term loans run 3–24 months at higher rates; long-term loans run 3–10 years at lower rates.

Best for: One-time investments — expansion, renovation, inventory purchase
Banks/credit unions: Stricter qualification (700+ credit, 2+ years in business); lower rates (8%–15%)
Online lenders (Kabbage, Bluevine, Fundbox): Faster, more flexible; higher rates (15%–30%)

Business Line of Credit

Like a business credit card but with much higher limits (typically $10,000–$250,000). You draw funds as needed and only pay interest on what you use. Revolving — as you repay, the credit becomes available again.

Best for: Seasonal businesses, unpredictable cash flow, ongoing working capital
Secured LOC: Backed by assets; lower rates (10%–20%)
Unsecured LOC: No collateral; higher rates (15%–40%); common from online lenders

Equipment Financing

The equipment you’re buying serves as collateral. This structure lets lenders approve businesses with shorter histories and lower credit scores because the loan is secured by something tangible.

Best for: Vehicles, machinery, restaurant equipment, medical equipment, technology
Loan-to-value: Typically 80%–100% of equipment value
Rates: 5%–30% depending on credit and equipment type
Term: Usually matches equipment’s useful life (3–7 years)

Invoice Financing and Factoring

If your business invoices other businesses (B2B) and those invoices sit unpaid for 30–90 days, invoice financing lets you borrow against them immediately.

Invoice financing (lending): You borrow against invoices, collect from customers yourself, repay lender
Invoice factoring (selling): You sell invoices to a factoring company at a discount (1%–5% per month); they collect directly from your customer

Merchant Cash Advance

A lender advances you a lump sum in exchange for a percentage of your future daily credit/debit card sales. Repayment is automatic — a fixed percentage is deducted daily until repaid.

Best for: Restaurants, retailers with high card volume and urgent needs
Cost: Factor rates of 1.1–1.5 (borrow $100K, repay $110K–$150K)
Effective APR: Often 40%–150%+ — the most expensive business financing available
No fixed repayment date: Slower sales months = slower repayment; faster months = faster repayment

How to Choose the Right Loan Type

If you need…	Consider…
The lowest possible rate and can wait	SBA 7(a) or 504
Cash in 24–48 hours	Online term loan or line of credit
To buy a specific piece of equipment	Equipment financing
To unlock cash from outstanding invoices	Invoice financing
A reusable credit source	Business line of credit
You’re a startup with little history	SBA microloan, equipment financing, or MCAs

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy