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Financing guideSBA loans offer the best terms for most small businesses: longer terms (10-25 years), lower rates (prime + 2-3%), partial government guarantee. The application is the slow part.
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Financing guide
Small Business Loans Guide · File.Business

Small business loans. Where to find capital, what it costs.

Most small businesses do not need or qualify for venture capital. They need a loan or line of credit to fund growth, equipment, real estate, or working capital. This guide covers the full small-business financing landscape: SBA programs, traditional bank loans, online lenders, equipment-specific financing, invoice factoring, and lines of credit. Including what each costs, who qualifies, and how long the application actually takes.

Cap table tools Specialty attorneys Not legal advice
Key facts

Start here.

Key fact
SBA 7(a)

Most common SBA loan. Up to $5M. Use for working capital, expansion, equipment, real estate. 10-25 year terms. Prime + 2-4%.

Key fact
SBA 504

For real estate and major equipment only. Up to $5.5M. 10-25 year terms. Fixed rates.

Key fact
SBA Microloan

Up to $50k. For very small businesses and underserved markets.

Key fact
Online lenders

OnDeck, Bluevine, Funding Circle, Kabbage. Faster than SBA (days vs months) but higher rates (8-99% APR).

Key fact
Line of credit

Revolving credit. Pay interest only on what you draw. Useful for working capital fluctuations.

In depth

The full picture.

01

SBA 7(a) loan

The default SBA loan. Used for almost anything: working capital, debt refinance, equipment, real estate, business acquisition, expansion. Loan amounts $50k-$5M. Terms: 10 years (working capital), 25 years (real estate). Rates: Prime + 2.25% to 4.75%. SBA guarantees 75-85% of the loan to the lender, reducing lender risk. Application takes 60-120 days. Down payment: 10-30% typical.

02

SBA 504 loan

For real estate and large equipment only. Three-party structure: bank lender 50%, CDC (Certified Development Company) 40%, borrower 10%. Loan up to $5.5M ($5M for manufacturing). Fixed rates over 10-25 years. Best for asset-heavy purchases.

03

SBA Microloan

Up to $50k. Distributed through nonprofit intermediaries. Higher rates than 7(a) but accessible to newer or smaller businesses. Good for first-time borrowers.

04

Traditional bank business loan

Term loans from banks without SBA guarantee. Faster than SBA. Lower amounts typically. Better rates than online lenders. Requires strong credit, time in business (typically 2+ years), and revenue.

05

Business line of credit

Revolving credit. Like a credit card but with higher limits and lower rates. Draw what you need, pay interest only on the drawn amount. Useful for inventory purchases, seasonal cash flow, working capital. Banks, SBA Express, and online lenders all offer.

06

Online business lenders

OnDeck, Bluevine, Funding Circle, Kapitus, Credibly, others. Application in minutes. Decision in 1-3 days. Funding in days. Rates: 8-99% APR (effective). Much faster than SBA, much more expensive. Good for short-term needs.

07

Equipment financing

Loan or lease secured by the equipment itself. The equipment is collateral, reducing risk for the lender. Lower rates than unsecured business loans. Used for vehicles, machinery, technology.

08

Invoice factoring

Sell outstanding invoices to a factor for immediate cash (typically 70-90% of invoice value). Factor collects from the customer. Useful for cash flow when customers pay slowly. Effective rates 10-60% annualized.

09

Revenue-based financing

Repayment as percentage of monthly revenue. Total repayment is a multiple of borrowed amount (1.3-2x typical). Pipe, Capchase, Stenn, Founderpath for SaaS. Clearco for ecommerce.

10

Business credit cards

Useful for small ongoing expenses + travel. Building business credit history. Rewards. APR 18-28%. Limits typically $5k-$50k for new businesses.

FAQ

Common questions.

What credit score do I need for an SBA loan?
SBA 7(a) typically requires 680+ FICO. SBA Microloans accept lower scores (sometimes 620+). Online lenders accept down to 500 (at higher rates).
How long does SBA approval take?
60-120 days typical for SBA 7(a) loans. SBA Express loans (sub-$500k subset): 30-45 days. Online lenders: 1-7 days.
Do I need collateral for an SBA loan?
Generally yes for loans over $25k. SBA requires collateral up to the loan amount where available. For 7(a) loans, real estate or business assets typically pledged.
What is a personal guarantee?
Owners of 20%+ of the business must personally guarantee SBA loans. If the business defaults, the guarantor is personally liable for the unpaid balance.
Can I use an SBA loan to buy a business?
Yes. Business acquisition is an eligible 7(a) use. Down payment 10-15% typically. Seller often holds a note for some of the price.
What is the cheapest way to borrow for working capital?
SBA 7(a) for amounts over $50k (Prime + 2-4%). Line of credit for amounts under $50k or short-term needs. Avoid online lenders unless speed is essential.
Can I get a loan as a sole proprietor?
Yes, but most lenders prefer LLCs or corporations. Sole proprietors borrow personally, which exposes personal assets.
What is debt-to-income ratio for business loans?
Lenders look at debt service coverage ratio (DSCR): operating income ÷ total debt service. Most want 1.25x+ (income exceeds debt obligations by 25%+).
Do I need a business plan to get a loan?
For SBA: yes. For traditional bank: usually yes. For online lenders: typically no. We have a business plan template.

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This guide is educational. Funding decisions require professional advice from licensed attorneys and CPAs.

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