What are the four types of business loans you can apply for (1)
May 8, 2024

Expanding a business takes money. Business loans provide financing to grow over time rather than paying large costs upfront. These loans lend higher amounts and offer multi-year repayment plans tailored to business needs.

Each corporation loan has outstanding qualities to weigh. Interest rates can be specified or variable. Payment structures fit business cash flow like interest-only periods, balloon payments, or deferred principal. Terms range from months to over 25 years for real estate investments. Fees vary by lender from 1-5% of the loan.

Do a thorough investigation to find the best financing match. Compare rate quotes from multiple lenders. And get preapproved before shopping around and timing applications for optimal leverage.

Top 4 types of corporate loans

Several loan types can provide financing to help small businesses launch and grow. Understanding the difference in options is vital to picking the best match.

Here are the most common business loans available:

Loan TypeTypical Eligibility CriteriaCredit Score Requirement
Business Loans2+ years in business, steady revenue700+
Small Business Loans1+ years in business, consistent revenue650+
Start-up Business LoansBusiness plan, no minimum operation time, personal credit600+
Business Loan for Bad CreditLess than perfect credit, might require collateralVaries, sometimes 500+

Small Business Loans

One route is SBA small business loans. The SBA, or Small Business Association, is a government agency supporting entrepreneurs. They partner with various banks to provide low-cost financing.

The benefits of SBA loans are that they offer lower interest rates compared to alternatives, making debt service more affordable for business owners. They may also provide longer repayment terms, up to 10 years or more. A more comprehensive range of uses is also permitted, from working capital to equipment purchases.

Traditional Bank Loans

Traditional bank loans are also commonly used to fund small companies. From national banks to regional credit unions, many lenders issue commercial loans.

Bank loan rates may be higher compared to SBA options, with shorter 3-5-year payback schedules. However, credit standards can be more flexible in some instances. This allows funding for startups or niche industries potentially denied elsewhere.

Start-up Business Loans

Credit Score Requirement600+
Typical Interest RatesVaries, often higher
Collateral RequiredMay be required
Usage RestrictionsUsually for start-up costs
Approval TimeVaries by lender
Lender TypesSpecialty lenders, crowdfunding

Launching a start-up requires capital. Beyond personal savings, entrepreneurs can raise money through a couple of start-up business loans, including bootstrapping and venture capital funding.


Bootstrapping means self-funding your venture. This approach builds the business step-by-step as internal cash flows allow. Tactics like reinvesting profits back in, slow office growth, and founder sacrifices help preserve cash.

Challenges you may face include slow expansion and limited funding for significant expenses like manufacturing. Some founders enjoy the scrappy nature, while others find it restricting.

Venture Capital Investment

Venture capital firms provide equity funding to start-ups perceived as high-growth. VCs typically invest other people’s money, injecting larger sums like millions. They gain partial company ownership and often board seats.

This cash infusion fuels faster expansion. In exchange, founders cede some control and company upside. VCs also impose growth pressure and exit timeline requirements. An IPO or company sale within 3-5 years is common.

Business Loans for Bad Credit

Credit Score RequirementVaries, sometimes as low as 500
Typical Interest RatesTypically higher rates
Collateral RequiredOften required
Usage RestrictionsFewer restrictions, but strategic use advised
Approval Time1-4 weeks
Lender TypesAlternative lenders, online platforms

What if you want to start a business but have bad credit? There are still a couple of business loans for bad credit you can apply for:

Secured Loans

Secured loans require collateral. This is a property like real estate or equipment the lender can seize if you don’t pay. By securing the debt, lenders reduce their risk. Even people with low scores may qualify for these.

Secured loans may offer lower rates. The downside is failing your collateral if you default. Make sure your business venture or revenue stream will let you repay the loan. Then, you get to keep both your collateral and your business.

Merchant Cash Advances

This option provides money upfront based on a percent of future credit card sales. Daily card income would then get split with the lender until the advance is paid off.

Because payments come from sales, the risk for lenders is lower. Thus bad credit is sometimes accepted. Approval can be quick too.

Business Credit Lines

Business credit lines provide revolving access to capital for companies. They work similarly to personal credit cards. Below, we explain the key features of this financing choice.

Flexible Revolving Credit

Like a credit card, business lines give a maximum limit that can be tapped as needed. Funds get “revolved” or reused as you make payments. Interest charges apply only to outstanding monthly balances, not the full limit.

Companies use credit lines to bridge money flow openings or fund growth opportunities. Having funds available beats waiting on traditional loan approvals. Since no set payoff date exists, flexibility is high.


Comprehend why you desire a loan and how much you seek to borrow. Make a budget for costs and expenses. See how much cash you can pay each month. Then, find loans that match well. If big surprises come later, a loan that worked before may now cause money struggles. Being clear upfront prevents problems down the road.

Every loan brings with its own create of rules. This legal fine print is important to understand before signing. Ask the lender questions if unsure. Key things to review are the interest rate, fees, and penalties. Also, check the loan term, payment due dates, and the total amount you’ll repay over the full year.

Loans vary a lot, so shop around for your best match. Weigh options based on your situation, financial life, and budget. A loan with low rates but stiff penalties may not be a good pick if money is tight. One with higher rates yet more flexibility could work better. Make an informed choice that fits your needs while knowing all the details upfront.

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