The 7 types of business funding—and how to choose the right one

When you need capital, the hardest part often isn't getting approved—it's figuring out which kind of funding you actually need. Pick the wrong product and you can end up paying more than necessary, or stuck with a structure that fights your cash flow instead of supporting it.

The good news: there are really only seven core products to understand. Once you know what each one is built for, the right choice usually becomes obvious. Let's walk through them.

Start with the goal, not the product

Before comparing rates, answer three questions: How much do you need? How fast? And how will you repay it? Your answers point straight at the right product. A one-time equipment purchase calls for something very different than smoothing out a seasonal cash dip.

The best funding isn't the cheapest on paper—it's the one whose repayment rhythm matches how your business actually earns.

The seven products, decoded

1. Line of credit. Revolving, draw-as-you-need capital. Best for ongoing or unpredictable needs—you only pay interest on what you use.
2. Short-term loan. A lump sum repaid over 3–18 months. Ideal for a specific, near-term need you want to clear quickly.
3. Long-term loan. Larger amounts over 1–5 years with lower monthly payments. Built for expansions and big bets.
4. Invoice factoring. Sell unpaid invoices for same-day cash. Perfect for B2B businesses with slow-paying customers.
5. Equipment financing. The equipment itself is collateral, which often means easier approval and better rates.
6. Merchant cash advance. An advance repaid as a slice of daily card sales—repayment flexes with revenue.
7. SBA loan. Government-backed, lowest rates, longest terms—at the cost of more paperwork and a longer wait.

Watch the true cost

Rates can be quoted as APR, factor rates, or simple fees—which makes apples-to-apples comparison tricky. Always ask for the total dollar cost of capital and the all-in payment schedule. A lower headline rate with hidden fees can easily cost more than a transparent, slightly higher one.

• Ask for total repayment in dollars, not just a percentage.
• Confirm whether there are origination, draw, or prepayment fees.
• Check how repayment timing lines up with your revenue cycle.

Match the structure to your cash flow

Fixed monthly payments bring predictability but can pinch during slow months. Sales-based repayment (like an MCA or factoring) breathes with your revenue but can be pricier. Neither is universally "better"—the right answer depends on how steady your income is.

Still not sure which fits? That's exactly what advisors are for. Tell us your goal and we'll point you to the product that makes the most sense—free, and with no hard credit check to start.