A Beginner’s Guide to Understanding Your Options
If you’re looking for business funding, you may have already discovered that it’s not a one-size-fits-all situation. There are a lot of options—and it can be hard to know which one is best.
The good news? You don’t need to learn everything all at once.
In this guide, we’ll break down the 7 most common types of business funding, how each one works, and when it might be the right fit. Whether you’re a startup, a growing small business, or somewhere in between, this will help you make smarter funding decisions.
1. Term Loan
A term loan is the most traditional type of business funding. You borrow a lump sum and repay it over a set period (the “term”), with interest.
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Best for: businesses with good credit and steady revenue
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Loan size: $10,000 to $500,000+
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Pros: predictable payments, longer terms
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Cons: may require collateral or strong financials
📌 Think of this like a car loan—but for your business.
2. Business Credit Card
Business credit cards give you access to a revolving line of credit, which you can use as needed and repay monthly.
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Best for: managing day-to-day expenses and small purchases
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Limit: typically $1,000–$50,000
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Pros: fast access, 0% intro offers, builds business credit
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Cons: high interest after intro period, lower limits
📌 Bonus: Many new businesses qualify based on personal credit.
3. Line of Credit
A business line of credit works like a credit card but may offer higher limits and cash access. You only pay interest on what you use.
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Best for: businesses with seasonal revenue or cash flow gaps
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Limit: $10,000–$250,000
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Pros: flexible, reusable, interest only on funds used
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Cons: requires strong financials or history
📌 Great for keeping as a “just-in-case” safety net.
4. Merchant Cash Advance (MCA)
An MCA gives you a lump sum in exchange for a percentage of your future sales. It’s not technically a loan—but it’s a fast funding option.
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Best for: businesses with strong daily/weekly card sales
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Advance size: $5,000–$250,000+
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Pros: fast approvals, minimal paperwork
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Cons: higher costs, frequent payments
📌 Often used for short-term working capital needs.
5. Equipment Financing
This funding is used to purchase business equipment. The equipment itself often serves as collateral.
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Best for: contractors, service providers, and trades
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Loan size: matches the cost of equipment
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Pros: easier approval, builds assets
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Cons: limited to specific purchases
📌 Think trucks, machinery, salon chairs, tools, etc.
6. Invoice Financing or Factoring
You sell your unpaid invoices to a lender for a cash advance—useful if clients are slow to pay.
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Best for: B2B companies or service providers
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Advance size: based on invoice totals
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Pros: solves cash flow problems
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Cons: fees can add up
📌 Great for freelancers, agencies, or contractors with net-30 clients.
7. Credit Card Stacking (Unsecured Funding)
This strategy bundles multiple business credit cards (often with 0% intro APR) to build a pool of funding—no revenue or collateral required.
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Best for: startups with good personal credit
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Amount: $20,000–$150,000+
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Pros: fast approval, no business revenue needed
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Cons: requires 650+ credit and smart repayment
📌 Ideal for new businesses without a track record.
How to Choose the Right Funding Type
Ask yourself:
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How much do I really need?
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How fast do I need it?
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Do I have revenue or assets to show?
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What’s my personal credit score?
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How long do I want to repay?
Still unsure? That’s normal. Many business owners combine two types—like a credit card for everyday use and a short-term loan for larger purchases.
✅ Want Help Exploring Your Options?
Understanding the types of business funding is the first step. The next step is finding what’s available to you.
Download our Ultimate Business Funding Guide to dive deeper into each option and get the tools to prepare your business for funding.
Or Get Pre-qualified (below) and we’ll match you with funding types based on your business stage, credit profile, and goals.