The Ultimate Business Credit and Funding Toolkit

Learn what credit and funding options you have and how they work.

Business Credit Cards

Business credit cards are revolving lines of credit. You can draw from and repay the card as needed, as long as you make minimum monthly payments and don’t exceed the credit limit.

They are typically best used for financing ongoing expenses, such as travel, office supplies and utilities.

Pros:

Earn rewards on your purchases
No collateral required

Cons:

High cost, with a variable rate that may rise.
Extra fees may apply.

Best for:

Ongoing business expenses.

Business Lines of Credit

A business line of credit provides access to funds up to your credit limit, and you pay interest only on the money you’ve drawn. It can provide more flexibility than a term loan.

Pros:

Flexible way to borrow.
Typically unsecured, so no collateral required.

Cons:

May carry additional costs, such as maintenance fees and draw fees.
Strong revenue and credit 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, sometimes including semi truck financing, office equipment, stationery machinery, etc. An equipment loan's term typically is matched up with the expected life span of the equipment, and the equipment serves as collateral for the loan. Rates will depend on the value of the equipment and the strength of your business.

Pros:

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

Cons:

You may have to come up with a down payment.
Equipment can become outdated more quickly than the length of your financing.

Best for:

Businesses that want to own equipment outright.

Merchant Cash Advances

An MCA gives you lump sum of cash upfront that you can use to finance your business. Instead of making one fixed payment each month from a bank account as you would with a term loan, you make payments on a merchant cash advance either by withholding a percentage of your credit and debit card sales daily, or by fixed daily or weekly withdrawals from a bank account.

Pros:

Fast cash, usually easy to qualify for.
Unsecured financing so no collateral required.

Cons:

Very expensive borrowing costs - usually very high interest rates.
Frequent repayments can create cash flow problems.

Best for:

Businesses that have high and consistent credit card sales and can handle frequent repayments.
Businesses that can't get financing anywhere else and can't wait for capital.

SBA Loans

The Small Business Administration guarantees these loans, which are offered by banks and other lenders. 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:

Some of the lowest rates on the market with long repayment terms
Can borrow up to $5 Million.

Cons:

Hard to qualify.
Lengthy application process.

Best for:

Businesses looking to expand or refinance existing debts.
Borrowers with good credit who can wait a long time for funding.

Term Loans

A term loan is a common form of business financing. You get a lump sum of cash upfront, which you then repay with interest over a predetermined period. Online lenders offer term loans up to $1 million and can provide faster funding than banks that offer small-business loans.

Pros:

Typically allow you to borrow a higher amount than other types of loans.
Funding is fast if you use an alternative lender rather than a traditional bank; typically a few days to a week versus up to several months.

Cons:

May require a personal guarantee or collateral.
Costs can vary depending on the lender.

Best for:

Businesses looking to expand.
Borrowers who have good credit, good revenue, and who don’t want to wait long for funding.

Invoice Factoring

Let’s say your business has unpaid customer invoices, which are typically paid in 60 days. If you need cash now, you can get money for those unpaid invoices through invoice factoring. You would sell the invoices to a factoring company, which would be responsible for collecting from the customer when the invoice is due.

Pros:

Quick cash.
Easier to qualify for than other traditional funding options.

Cons:

Costly compared to other funding options.
You lose control over the collection of your invoices.

Best for:

Businesses with unpaid invoices that need fast cash.
Businesses with reliable customers on long payment terms

Common Business Loan Fees

Like many other types of loans, business loans usually involve fees besides interest. Most lenders typically charge these fees to cover the costs of verifying the borrower's information, filling out paperwork, and other loan-related expenses. The most common fees are the origination fee and the documentation fee but here are some more common ones:

Monthly administrative fees
Annual fees
Service or processing fees
Prepayment penalties
Late payment fees
Wire transfer fees

Always make sure to discuss the fees with your lender or loan broker to make sure you know exactly how much your funding is going to cost you.

Common Business Loan Qualifications

Knowing about the common qualifications for a small business loan can help you get ready as a business owner for when the time comes to apply for a business loan. Every lender's qualifications will be a little different and will also vary depending on the type of loan you're looking for. Some loan types are easy to qualify for but cost more and vice versa. But here is a list of the most common things lenders look at when applying for a business loan:

Business bank statements
Cash Flow
Credit scores (both business and/or personal)
Time in business
Business plan (more traditional banks, SBA, etc.)
Collateral

Request your own Custom Business Funding Plan below to learn more about the requirements you'll need to meet for the type of loan you're looking for.

Free Business Loan Calculator

Enter your loan details into the calculator to get an estimate of your monthly loan payment, as well as how much interest you would pay over the life of the loan.

Keep in mind that this is just an estimate. Your payment and loan costs can vary greatly depending on the type of loan you qualify for.

That's why we highly recommend requesting your own Custom Business Funding Plan below that will give you a personalized plan with loan options that are best suited for your business right now and what the terms and rates would be.