Small Business Loan Types and What They Really Cost
Updated: October 2026. Rules and rates change; confirm with a professional or official source.
Choosing the wrong loan can be expensive. Common options:
Types
Term loans give a lump sum repaid over a set period. Lines of credit let you borrow as needed. SBA loans, such as the 7(a) program, are made by lenders and partly guaranteed by the Small Business Administration, often with longer terms but more paperwork. Equipment financing uses the equipment as collateral. Invoice financing advances cash against unpaid invoices.
Be careful with merchant cash advances
They often use a "factor rate," and the effective cost can be very high.
How to compare
Look at APR, fees, term, collateral, personal guarantees and prepayment penalties. Compare total cost, not just the monthly payment.
Try the business loan calculator.
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