US business loans

There are many types of small business loan. Popular options include:

SBA loans

An SBA loan is a loan that is issued and partially backed by the US Small Business Administration (SBA). The SBA helps small businesses gain access to the capital they need to start, grow, and expand their operations. SBA loans typically come with competitive interest rates and long repayment terms, with some loans specifically designed to support minorities and groups who traditionally encounter difficulty obtaining regular business financing.

Popular SBA loans include:

SBA 7(a) Loans                   

The most common type of SBA loan, providing up to $5 million in funding with repayment terms of up to 25 years. These loans are 85% backed by the US government, which reduces the risk for lenders. However, strict eligibility criteria apply, collateral or a personal guarantee is usually required and the approval process could take several months.

SBA Express Loans:

Designed for faster approval, offering up to $500,000 with an approval decision typically made within 36 hours. Express loans are 50% backed by the U.S. government, which increases the risk for lenders and may result in higher interest rates and fees. The same eligibility criteria usually applies.

SBA Microloans

Available through nonprofit and community-based lenders, offering up to $50,000 with more relaxed eligibility requirements. They can be a good fit for businesses and start-ups who need smaller amounts of funding or who may struggle to qualify for other financing options. Collateral or a personal guarantee may be required.

Term loans

With a business term loan, you receive a single, lump-sum cash injection which you pay back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years. Instalments may be weekly, monthly or quarterly depending on the type of business you operate.

Some term loans may be unsecured, so you do not provide collateral to protect the lender if you default. Other term loans – typically for larger sums or for riskier businesses – may require security. This means you pledge assets such as property, vehicles or machinery to protect the lender from loss. If your business defaults on the loan, the lender can seize these assets and sell them to recover their money. 

Interest rates on unsecured term loans tend to be higher and the amount you can borrow will usually be smaller than you may find with loans where you provide collateral.

Business line of credit

A business line of credit, also known as a revolving line of credit, is a loan that functions like a high-value credit card. Businesses can withdraw cash as they need it, when they need it up to the limit of their borrowing. You may repay the line with regular instalment payments or with irregular payments from received income and you can withdraw the repaid cash again if needed. Unlike term loans, with a line of credit you only pay interest on the sums you have withdrawn, not the whole loan total. This can significantly reduce your borrowing costs.

Equipment finance

Equipment finance falls into two classes – loans to buy the equipment, and leases that are long-term equipment rental agreements:

Equipment loan 

You borrow a sum of cash to buy the equipment and then repay it over time. Interest charges and fees are added to the principal amount you borrow, while the lender retains a lien on the machinery during the term of the loan. At contract end you’ve paid off the loan and you own the equipment outright.

Equipment lease 

With a lease, you’re not buying the equipment, you’re entering into a long-term rental agreement. Depending on the type of lease you choose, (finance lease or operating lease), you may have the option to buy the machinery at contract end for a pre-agreed sum, (which could be as low as $1 but is typically the residual value of the machine – which means what it’s worth in used condition).

Because you’re not repaying the whole cost of the equipment, leasing usually requires lower monthly payments than a business loan. You may also pay a smaller down payment – perhaps equal to only one or two months repayment instalments.

If you choose not to buy the machinery at the end of the lease, (or you have chosen an operating lease that typically forbids it), the equipment goes back to the lender. You would then need to take out a new lease and obtain new machinery. (Which could allow you to obtain more modern and up to date equipment).

Some lessors (lenders) may give you the option to extend the lease if you prefer to keep the machinery but do not wish to pay the residual. 

Commercial real estate

Commercial real estate loans can be used to buy, construct, or develop business property and land. Popular loans include:

Commercial mortgages

Use a commercial mortgage to buy land or existing property over an agreement term of up to 25 years. 

Commercial bridge loan

Commercial bridge loans are flexible, short-term loans that organizations can use to cover a temporary shortfall in funding. Bridge loans can ‘bridge the gap’ between selling one property and buying another, or cover construction and renovation costs. 

Construction loan

Use a construction loan to cover the cost or new-builds or the redevelopment or refurbishment of an existing commercial property.