Which kind of business financing fits the thing I actually need to pay for?
Summary
Buildings, land, and machinery with at least ten years of useful life fit SBA 504; working capital, inventory, or a mix of uses fit SBA 7(a) or an ordinary bank loan, because 504 cannot pay for those; a need under $50,000 fits an SBA Microloan. Those limits are the SBA's own program rules for US businesses, so the use of the money settles which door is open before any rate comparison starts. A sales-based advance sits outside this list because its price is not an annual rate.
Start with what the money will buy
Real estate or heavy equipment. SBA 504 is long-term, fixed-rate financing for buildings, land, and machinery with a remaining useful life of at least ten years. It comes only through Certified Development Companies, with 10-, 20-, and 25-year terms. It cannot pay for working capital or inventory, and it cannot fund speculation or rental real estate, so a business that needs a building and a cushion of operating cash is looking at two loans, not one.
A mix of uses, or buying a business. SBA 7(a) is the broad program. The SBA lists real estate, short- and long-term working capital, refinancing business debt, machinery and equipment, furniture and supplies, and full or partial changes of ownership, all under a $5 million ceiling. Loans made under SBA Express are capped at $500,000.
A small, specific need. Microloans go up to $50,000, and the average is about $13,000. They are made by nonprofit intermediaries funded by the SBA, run for up to seven years, and generally carry rates between 8% and 13%. They cannot pay off existing debt or buy real estate.
How a term loan compares with a line of credit for everyday cash needs is covered in the loan-versus-line guide.
Then look hard at who is lending
Settling the product does not settle the price. The Federal Reserve Banks' 2025 Small Business Credit Survey found that applicants for loans, lines, and cash advances went to large banks most often, then online lenders, then small banks. Online lenders are gaining: 29% of applicants sought financing there, up from 17% in the 2020 survey.
The outcomes were uneven. Among firms that borrowed from online lenders, 60% said the actual cost came in higher than they expected, close to double the 32% reported at large banks. Approval rates and the complaints behind those numbers, lender type by lender type, are laid out in the guide to choosing a lender.
Sales-based advances need a different yardstick
A merchant cash advance hands over a lump sum in exchange for a percentage of future sales or income, up to a ceiling. Its cost is the gap between what you receive and that ceiling, not an annual rate, so it has to be converted before it can sit in the same column as a loan quote. The factor rate page does that conversion.
Sources
- https://www.sba.gov/loans/
- https://www.sba.gov/loans/7a-loans/
- https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility
- https://www.sba.gov/loans/504-loans/
- https://www.sba.gov/loans/microloans/
- https://www.fedsmallbusiness.org/2026-report-on-employer-firms
- https://www.ecfr.gov/current/title-12/chapter-X/part-1002/subpart-B/section-1002.104
Related on this site
- Should a small business borrow a lump sum or open a line of credit?
- If the SBA doesn't lend the money, what makes a loan an SBA loan?
- Which kind of lender should a small business apply to first?
- You cannot compare a factor rate to an interest rate. Here is the arithmetic
- Where the money goes
- Cost tool