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Find the right business loan for you

Looking for a business loan? It can be hard to know where to start. 

Rest assured there are several types of business loans out there that can help you reach your goals—no matter what kind of business you’re building, where you’re at in the process, or how much financing you need. 

This article will help you:

  1. Explore loan types and gain a deeper understanding of how they differ and who they benefit most.
  1. Determine the best business loan for your business.
  1. Unpack commonly used loan terms with our easy-to-use glossary so that you can make more informed decisions.

6 types of business loans explained

Want to learn more about the type of loan that makes sense for your business? Explore our quick glossary below:

Unsecured working capital loans

Unsecured working capital loans do not require the borrower to provide specific assets or collateral as security for the loan. Instead of relying on designated assets, the approval for this type of loan is typically based on the borrower’s creditworthiness, financial health, and ability to repay the loan.

Great for: 

Businesses with consistent cash flow and a strong credit profile, such as service-oriented organizations or technology companies. 

Real estate financing

Real estate financing exists so businesses can purchase, develop, or refinance properties intended for commercial use. This type of loan is often used for industrial facilities, hotels, retail stores, or other income-generating properties.

Great for: 

Businesses in the real estate development, construction, or property investment sectors—or businesses in industries that require substantial physical space, like hospitality or healthcare operations.

See also  Advantages and Disadvantages of Business Acquisition Loans

SBA loans

SBA loans are guaranteed by the U.S. Small Business Administration, so they often stand out as stable financing options with favorable terms for small businesses that support long-term growth. 

Great for:

Small businesses in proven industries, such as healthcare, professional services, or established retail companies.

Accounts receivable financing

There are several types of loans that fall under this category, but the main idea is the same: Rather than relying on credit assessments, lenders use the funds expected from clients as collateral for the loan. This enables you to maintain liquidity while obtaining additional funds to support your upcoming financial needs.

Great for: 

Industries with cyclical or seasonal demands, where temporary capital supplies are sufficient for operational needs. 

Lines of credit

Line of credit loans are flexible forms of financing that provide set credit limits a business can access as needed. This functions similar to a credit card, where the business can borrow, repay, and borrow again up to the approved credit limit. 

Great for: 

Businesses with dynamic and varying cash flow requirements, such as retail, seasonal services, or small enterprises.

Equipment financing

Equipment financing is designed for the acquisition of equipment or machinery. The equipment itself typically serves as collateral for the loan, making these loans secured, and providing businesses with the means to acquire necessary assets without compromising their working capital.

Great for: 

Businesses that depend heavily on specialized equipment, such as construction, manufacturing, farming, or transportation.

What type of loan is best for your business? 

These examples of business loans will help you determine what’s right for you.

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Are you an established business with strong credit?

If your business has a history of good credit, you can benefit from the loans that offer larger amounts at lower interest rates.

Best types of business loans to consider:
– SBA loans
Are you a business owner seeking flexibility?

If you value flexibility when it comes to managing your finances, you want a loan that will let you access funds as needed and on your terms.

Best types of business loans to consider:
– Lines of credit
Are you a small business?

If your small business doesn’t yet have assets for collateral, you’ll want to choose a loan type that provides quick access to funds without requiring significant assets as security.

Best types of business loans to consider:
– Unsecured working capital loans
Are you looking for short-term funding?

If your business relies on daily transactions (think retail or hospitality) and only needs short-term funding, you will most benefit from a financing option that lets you leverage outstanding invoices for immediate cash flow.

Best types of business loans to consider:
– Accounts receivable financing
Are you an equipment-heavy business?

If your business relies on equipment or heavy machinery, you need a specific type of loan that can help you acquire, maintain, and upgrade the assets necessary to operate.

Best types of business loans to consider:
– Equipment financing
Are you building a real estate venture?

If your business involves real estate, you can utilize industry-specific funding for purchasing, refinancing, or improving commercial properties.

Best types of business loans to consider:Real estate financing

Commonly used business loan terms

Not sure what all the jargon and acronyms mean? We’ve got you covered. Explore the business loan terms below for a fast and inside look at lending.

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Interest rate: The percentage that is charged by the loan provider on the principal amount as the cost of borrowing. 

Term: The period over which the loan is repaid. It can be short-term (typically less than one year) or long-term (several years).

Collateral: Assets or property that a borrower pledges to secure the loan. Collateral can be seized by the loan provider if the borrower fails to repay.

Unsecured loan: A loan that is not backed by collateral. Approval is based on the borrower’s creditworthiness.

Secured loan: A loan backed by collateral, providing the lender with a form of security in case of default.

Default: Failure to repay the loan as per the agreed-upon terms, leading to potential legal and financial consequences.

Working capital: The difference between a business’s current assets and current liabilities, representing its short-term operational liquidity.

Find the perfect business loan for you with 1West

We’re here to help you get your business off the ground as quickly and simply as possible.

You can get funded through 1West in as little as 24 hours by following three easy steps:

  1. Create an account
    Learn more about our loan products and see which ones are best for your business.

  2. Select a loan type
    Select the best type of loan for you based on your unique business needs. (Our product wizard can help you decide!)

  3. Apply and compare lenders
    Compare offers from our network of 50+ approved lenders. We can guide you to make sure you pick the best one.

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