A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest. There are a number of different types of business loans.

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.

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.

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.

Equipment loans

Equipment loans help you buy equipment for your business, sometimes including semi truck financing. (Business auto loans are available for cars, vans and light trucks.) 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.

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’d sell the invoices.

Invoice financing

Invoice financing is similar to invoice factoring, but instead of selling your unpaid invoices to a factoring company, you use the invoices as collateral to get a cash advance.

Merchant cash advances

You get a lump sum of cash upfront that you can use to finance your business. 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.

Personal loans

It is possible to use a personal loan for business purposes. It’s an option for startups, as banks typically don’t lend to businesses with no operating history.

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.

Microloan

Microloans are small loans — $50,000 or less — offered by nonprofit organizations and mission-based lenders.

These loans typically are available to startups, newer businesses and businesses in disadvantaged communities.