Business Funding: A Complete Guide to Financing Options for U.S. Businesses

Business term loans

A business term loan is a lump sum of capital repaid in fixed installments over a set term — typically one to five years. It's the most familiar form of business borrowing and the benchmark against which other products are usually compared.

• Qualification: generally requires solid credit, time in business, and demonstrated cash flow to support fixed payments.
• Speed: slower than MCAs — often days to weeks, faster through online lenders than banks.
• Repayment: fixed monthly payments of principal and interest.
• Cost: interest-based; usually cheaper than MCAs, more expensive than SBA loans.
• Best for: a defined, one-time investment like equipment, expansion, or a buyout.
• Disadvantages: harder to qualify for, and you pay interest on the full amount even if you only needed part of it.

Learn more about business term loans →

Lines of credit

A business line of credit is a revolving credit facility: you're approved for a maximum amount and draw only what you need, paying interest only on the outstanding balance. As you repay, the available credit replenishes.

• Qualification: requires creditworthiness and revenue; lenders want to see that you can handle flexible borrowing.
• Speed: once established, draws are often same-day.
• Repayment: flexible — you repay on your schedule up to the facility terms.
• Cost: interest on what you borrow only; typically cheaper than MCAs for short-term needs.
• Best for: uneven cash flow, bridging gaps before invoices pay, restocking inventory.
• Disadvantages: can be harder to qualify for than an MCA; some lines have maintenance fees or draw minimums.

Learn more about business lines of credit →

Merchant cash advances

A merchant cash advance (MCA) is a lump sum exchanged for a portion of future revenue, repaid through fixed daily or weekly debits. It's fast and accessible but among the most expensive forms of capital. We cover MCAs in depth in our dedicated merchant cash advance guide, including factor rates, rates, and a free MCA calculator.

• Qualification: light — a few months of bank statements and modest monthly revenue.
• Speed: one to two business days.
• Repayment: fixed daily or weekly ACH debits.
• Cost: factor-rate pricing that annualizes to a high APR-equivalent.
• Best for: urgent, short-term needs when cheaper options aren't available in time.
• Disadvantages: high cost and cash-flow strain; stacking risk.

Equipment financing

Equipment financing is a loan or lease used specifically to buy business equipment — vehicles, machinery, computers — where the equipment itself secures the financing.

• Qualification: easier than a general term loan because the equipment serves as collateral.
• Speed: moderate — typically faster than an unsecured bank loan.
• Repayment: fixed monthly payments over the equipment's useful life.
• Cost: moderate; secured financing is cheaper than unsecured.
• Best for: purchasing equipment that will generate revenue over time.
• Disadvantages: restricted to equipment; the asset can be repossessed if you default.

Learn more about equipment financing →

Invoice financing & factoring

Invoice financing lets you borrow against your outstanding invoices; factoring means selling those invoices to a third party (a factor) at a discount. Both turn unpaid invoices into immediate cash.

• Qualification: based mainly on your customers' creditworthiness, not yours.
• Speed: fast — often within days of invoicing.
• Repayment: the invoice (or your customer) pays the funder; no fixed schedule from you.
• Cost: a fee or discount on the invoice; varies by funder and by how long the invoice takes to pay.
• Best for: businesses with reliable B2B customers and slow-paying invoices.
• Disadvantages: with factoring, your customers may interact directly with the factor; fees can add up on slow payers.

Learn more about invoice financing →

SBA loans

SBA loans are partially guaranteed by the U.S. Small Business Administration, which reduces the lender's risk and unlocks some of the lowest-cost, longest-term financing available to small businesses. The trade-off is a rigorous application and a slow timeline.

• Qualification: the most demanding of these options — credit, time in business, financials, and SBA eligibility rules all apply.
• Speed: slow — often weeks to months.
• Repayment: fixed monthly payments with longer terms than conventional loans.
• Cost: among the lowest-cost options available.
• Best for: established businesses that can wait and want the cheapest long-term capital.
• Disadvantages: paperwork, slow funding, and strict eligibility; not a fit for urgent needs.

Learn more about SBA loans →

Working capital financing

Working capital financing isn't a single product — it's a purpose: funding day-to-day operations like payroll, rent, and inventory when cash is tied up or timing is off. It's often delivered as a line of credit, a short-term loan, an MCA, or an invoice advance.

• Qualification: depends on the underlying product chosen.
• Speed: ranges from days (MCA, line draw) to weeks (term loan).
• Repayment: matches the underlying product.
• Cost: varies widely — a line of credit is cheap, an MCA is expensive.
• Best for: bridging short-term operating gaps, not funding long-term assets.
• Disadvantages: using expensive working capital products to cover a structural shortfall deepens the problem.

Learn more about working capital financing →

Revenue-based financing

Revenue-based financing (RBF) provides a lump sum in exchange for a fixed percentage of future revenue until a set payback amount is reached. It resembles an MCA but is typically tied to a percentage of actual revenue rather than fixed debits, so payments rise and fall with sales.

• Qualification: based on revenue history more than credit.
• Speed: fast — typically days.
• Repayment: a percentage of revenue, so it flexes with your sales.
• Cost: a fixed payback multiple; generally high, similar to MCA territory.
• Best for: businesses with strong, variable revenue that want payments to flex.
• Disadvantages: high total cost; in a downturn, a percentage of revenue can still strain cash if the term extends.

RBF overlaps with the merchant cash advance category — see the MCA guide for the mechanics of revenue-linked repayment.

How to choose

Start with what the money is for and how fast you need it, then work backward to the product:

When you can wait and qualify, cheaper capital (SBA, term loan, line of credit) wins. When speed or access matters more than cost, the faster products earn their place — but go in with the cost quantified. If you're weighing an MCA against a loan or line, our MCA vs. business loan comparison and calculator can help.

This guide is editorial content produced by The Funding Times. It is educational and does not recommend any specific product or lender. Our editorial standards and corrections policy apply.