10 Types of Business Loans (and Who Needs a PFS)

Here are the 10 types of business loans: the SBA 7(a) loan, the SBA 504 loan, the conventional bank term loan, the business line of credit, equipment financing, the commercial real estate loan, the SBA microloan, invoice factoring, the merchant cash advance, and the business credit card. Each one is defined by how it repays, what secures it, and whether your personal balance sheet stands behind it. That third question is the one borrowers underestimate, so every entry below states plainly whether a personal financial statement is part of the file.

The 10 types at a glance

Demand is broad and outcomes vary a lot by product. The Federal Reserve's 2025 Small Business Credit Survey found 38% of employer firms applied for a loan, line of credit, or merchant cash advance in the prior 12 months, and applicants at small banks were the most likely to be fully approved, at 57% (Federal Reserve Banks, 2026 Report on Employer Firms).

That spread is the practical argument for reading past the label. The product with the collateral attached clears underwriting most often; the unsecured revolving product clears it least often, even though it is the one firms apply for most.

1. SBA 7(a) loan — the general-purpose workhorse

The 7(a) is SBA's flagship program: a bank or credit union makes the loan, SBA guarantees a portion, and the proceeds can cover working capital, equipment, real estate, debt refinance, or a business acquisition. A single 7(a) loan is capped at $5 million, with an SBA guarantee of 85% on loans of $150,000 or less and 75% above that (SBA, 7(a) loans).

Pricing is negotiated but capped. SBA's maximum spread over the base rate steps down as the loan grows: base plus 6.5% at $50,000 or less, plus 6.0% from $50,001 to $250,000, plus 4.5% from $250,001 to $350,000, and plus 3.0% above $350,000 (SBA, 7(a) loans). Maturities run up to 10 years for most uses and up to 25 years when real estate secures the loan.

Every owner of 20% or more files SBA Form 413 and signs an unlimited full guaranty, per 13 CFR 120.160 as carried into SOP 50 10 8 (SBA, SOP 50 10). The same SOP requires a personal financial statement from every individual guaranteeing the loan, whatever their ownership percentage.

Who it's for: operating businesses that need one facility to cover several purposes, and buyers financing an acquisition.

Watch out for: the ownership chain. Indirect ownership counts, so a holding company at 30% pulls in the individuals who own 20% or more of that holdco. Full detail in our SBA 7(a) requirements checklist and the Form 413 walkthrough.

2. SBA 504 loan — fixed-rate money for owner-occupied assets

The 504 is a three-party structure for owner-users. SBA describes the typical project as a private-sector lender holding a senior lien for up to 50% of project cost, a Certified Development Company holding a junior lien for up to 40% behind a 100% SBA-guaranteed debenture, and a borrower contribution of at least 10% equity (SBA, become an SBA lender). The CDC debenture caps at $5 million for most projects, rising to $5.5 million for small manufacturers and qualifying energy projects, per 13 CFR 120.931. That cap binds the SBA's piece rather than your project: because the debenture is only about 40% of the stack, a $5 million debenture supports a project near $12.5 million. Maturities run 10, 20, and 25 years at a debenture rate pegged to an increment above the current market rate on 10-year Treasury issues (SBA, 504 loans).

The program changed materially this year. Effective July 4, 2026, SBA doubled the cumulative 7(a)/504 limit, so a borrower who takes a 7(a) loan first can now reach up to $5 million of 7(a) financing plus up to $5 million of 504 financing (SBA, May 18, 2026).

Form 413 applies here exactly as it does on a 7(a) — SBA lists 504 among the programs the form supports (SBA, Form 413).

Who it's for: owners buying or building the property their business occupies, and anyone who wants a long fixed rate on a capital asset.

Watch out for: the equity step-ups. A startup or a special-use property raises the injection above 10%. See SBA 504 requirements, the 7(a) vs 504 comparison, and the SBA loan calculator.

3. Conventional bank term loan — the lowest-friction bank product

A conventional term loan funds once as a lump sum and amortizes on a fixed schedule, typically over one to ten years, secured by business assets and guaranteed by the owners. No government guarantee is involved, so the bank carries the whole credit risk and underwrites accordingly.

That risk appetite is measurable. In the January 2026 Senior Loan Officer Opinion Survey, modest net shares of banks reported having tightened standards on commercial and industrial loans to firms of all sizes, and a modest net share reported tightening the maximum size of credit lines for small firms specifically (Federal Reserve, January 2026 SLOOS).

A closely held borrower should expect to hand over a personal financial statement, because the owners are guaranteeing the note and the bank is sizing the guarantee against real assets.

Who it's for: established businesses with two or more years of tax returns, a banking relationship, and a defined one-time use of funds.

Watch out for: covenants. Ongoing coverage tests and deposit-relationship requirements can trigger a technical default while payments are current.

4. Business line of credit — the product firms want most

A line of credit revolves. You are approved to a limit, draw what you need, repay, and draw again, and interest accrues only on the outstanding balance rather than the full limit. Most lines are annual facilities subject to renewal review.

It is also the most-applied-for product and one of the hardest to land. In the 2025 Small Business Credit Survey, 43% of applicants sought a line of credit — more than the 32% seeking a business loan or the 20% seeking an SBA loan — while only 45% were fully approved (deBanked, reporting 2025 SBCS data). The gap makes sense once you look at what backs a line: usually receivables and inventory that fluctuate, rather than a titled asset.

Bank lines on closely held companies generally carry a guarantee and a personal financial statement; online revolving products often substitute bank-transaction data.

Who it's for: businesses with recurring, variable needs — payroll timing, seasonal inventory builds, receivable lag.

Watch out for: annual re-underwriting. A line is a renewable promise, and a soft year can shrink or end it.

5. Equipment financing — the highest approval odds on the list

Equipment financing is a loan or lease secured by the asset it buys, with terms matched to the equipment's useful life, commonly two to seven years. Because the collateral is titled and resellable, this is the most accessible product in the survey data: 71% of applicants for an auto or equipment loan were fully approved, the highest rate of any category measured (deBanked, reporting 2025 SBCS data).

There is a tax dimension worth pricing in. Section 179 lets a business expense qualifying equipment in the year it is placed in service; for tax years beginning in 2026 the maximum deduction is $2,560,000, reduced dollar for dollar once total Section 179 property placed in service exceeds $4,090,000 (IRS Publication 946).

Personal financial statements typically appear only above a lender's size threshold — small tickets often clear on a one-page application, while larger facilities pull full personal financials and a guarantee.

Who it's for: businesses buying machinery, vehicles, or production equipment with a resale market.

Watch out for: term drift. Financing a five-year asset over seven years leaves you paying for equipment you have already replaced.

6. Commercial real estate loan — property as the primary collateral

A commercial mortgage is secured by the building rather than by the operating business. What the lender underwrites depends on who occupies it. On an investment property the test is the property's own cash flow — rent against debt service. On an owner-occupied building there may be no rent at all, so the lender underwrites the operating business and the owners' global cash flow instead, and the real estate serves as collateral rather than as the source of repayment. The common bank structure pairs a 5- to 10-year term with a 20- to 25-year amortization, leaving a balloon at maturity, with a loan-to-value cap generally in the 65–75% range and, on income property, a debt-service-coverage floor near 1.20x–1.25x.

Bank appetite here has held up better than on the C&I side. In the January 2026 SLOOS, banks reported generally unchanged standards and stronger demand for commercial real estate loans, with a modest net share easing standards on multifamily specifically (Federal Reserve, January 2026 SLOOS).

Recourse CRE deals require a personal financial statement from the guarantors, and even non-recourse agency lenders test sponsor net worth and liquidity.

Who it's for: owners buying their own building and investors acquiring income property.

Watch out for: the coverage test. Run the numbers before the application using our free DSCR calculator, then read what lenders check on a CRE loan and the full CRE loan type list.

7. SBA microloan — the entry point under $50,000

The microloan program routes SBA funds through intermediary nonprofit lenders, which relend to small businesses and certain nonprofit childcare centers. Loans are capped at $50,000 with maturities of no more than six years, and the rate is negotiated between the borrower and the intermediary (SBA, become an SBA lender).

Intermediaries generally pair the money with technical assistance, which is the part that distinguishes it from a small online term loan. The trade is process: an intermediary underwrites on its own timeline.

Documentation is set by the intermediary rather than by one national rule, and a personal financial statement is commonly part of the package. Note that SBA's own Form 413 page lists 7(a), 504, disaster loans, surety bond guarantees, and the 8(a) and women-owned certifications — microloans are not on that list, so ask your intermediary which statement it wants (SBA, Form 413).

Who it's for: newer businesses, sole proprietors, and borrowers below the size a bank will underwrite.

Watch out for: the cap. At $50,000 the microloan solves a working-capital gap rather than an expansion.

8. Invoice factoring — selling receivables, not borrowing

Factoring is the sale of unpaid B2B invoices to a third party at a discount. The factor advances a share of face value up front — commonly 80% to 95% — collects from your customer, deducts its fee, and remits the reserve. Fees are quoted per invoice per 30 days rather than as an APR, typically in the 1% to 5% range depending on debtor quality, volume, and whether the structure is recourse or non-recourse.

The underwriting question changes here. Because the factor is buying your customer's obligation, it underwrites your customer's credit, so a formal personal financial statement is rarely part of the file. Recourse structures still leave you liable to buy back an invoice your customer never pays.

Who it's for: B2B companies with creditworthy customers and long net terms — staffing, freight, manufacturing, government contracting.

Watch out for: the annualized cost. A 3% fee on a 30-day invoice is not 3% a year, and factoring an invoice that takes 90 days to clear compounds the arithmetic against you.

9. Merchant cash advance — speed at the highest price

A merchant cash advance is structured as a purchase of future receivables rather than a loan. The provider advances a lump sum, applies a factor rate — commonly quoted in the 1.10 to 1.50 range — and collects through a daily or weekly holdback, often 10% to 20% of card sales, until the purchased amount is repaid.

The product is neither new nor growing much: 12% of firms applied for one in the 2025 Small Business Credit Survey, and 48% of those were fully approved (deBanked, reporting 2025 SBCS data). Disclosure rules are tightening, though. As of March 2026, ten states require some form of commercial financing disclosure, and California's SB 362 now requires providers to express pricing as an APR and restricts loose use of the words "interest" and "rate" (Venable LLP, March 2026).

A formal personal financial statement is uncommon, though providers frequently take a performance guaranty from the owner.

Who it's for: card-heavy businesses with an urgent, short, self-liquidating need and no faster alternative.

Watch out for: term compression. A fixed factor rate collected faster than expected raises the effective cost, because early repayment earns no discount.

10. Business credit card — revolving float with a personal hook

A business card is unsecured revolving credit sized against the owner's personal credit profile as much as the company's. It is the fastest facility to open on this list and the most expensive of the bank-priced options to carry a balance on.

Cards do real work as a float instrument — covering the gap between paying a supplier and collecting from a customer — and they build a payment record. Issuers generally do not request a personal financial statement, and they generally do pull the owner's personal credit and require a personal guarantee, which is why card activity can show up in a later loan file.

Who it's for: every business, for short-cycle expenses paid off monthly.

Watch out for: balances that outlive the cycle. Carried card debt is typically the costliest borrowing on a conventional balance sheet, and it shows up as a liability on the statement your next lender reads. Read that against item 9 rather than in isolation: a carried card balance is still materially cheaper than a merchant cash advance, where the factor rates quoted above annualize into the high double digits once the remittance schedule is accounted for. Expensive on a conventional balance sheet is not the same as the most expensive money on this list.

How to choose the right type of business loan

Four questions settle the pick more reliably than a rate comparison.

Is the need one-time or recurring? A sized, one-time purchase — equipment, a building, an acquisition — belongs on a term product. Recurring, variable needs belong on a revolving one. Businesses that mismatch these end up terming out a line every couple of years, which is a sign the structure was wrong from the start.

What can secure it? Titled collateral buys you approval odds and a lower rate. The 71%-versus-45% approval gap between equipment loans and lines of credit is the same fact stated from the lender's side.

How fast do you need it? Speed is the most expensive feature on the menu. An SBA loan is measured in weeks, a bank term loan in weeks, an advance in hours — and the cost curve tracks that ordering almost perfectly.

Who signs? On any SBA loan the answer is decided by rule at 20% ownership. On conventional bank debt it is negotiated. If a guarantee-free structure is what you are chasing, read where PG-free business debt actually exists and what a personal guarantee commits you to before assuming it is on the table.

Which business loans require a personal financial statement

Seven of the ten products above will usually ask you to document your personal balance sheet: SBA 7(a) and 504 by rule, the conventional bank term loan, the bank line of credit, the commercial real estate loan, larger equipment facilities, and most microloans at the intermediary's discretion. Invoice factoring, merchant cash advances, and business credit cards generally do not.

What surprises most first-time borrowers is the timing rather than the requirement. SBA lenders want Form 413 with the application, before anyone has priced the deal. A bank asks at term sheet. An equipment lender may not ask at all until the ticket crosses its threshold, then asks for everything at once, usually on a deadline.

Borrowers who stall are usually the ones building the statement three separate times in three separate formats, each with slightly different numbers, because the request arrived at three different moments. The version that lands cleanly is one current statement, reconciled once, that can be re-dated and re-issued when the next lender asks. Form 413 carries a recency line on the form itself, so an old statement is a re-file rather than a rewrite.

The absence of a personal financial statement is also worth reading correctly. Factoring and advances skip it because they underwrite something else — your customer's credit, or your card volume — and that convenience is priced into the fee. It is a different underwriting basis, not a lighter one.

If you want the statement built once and kept current, StatementsReady generates a lender-ready personal financial statement in the current SBA Form 413 layout, with balances synced read-only through Plaid so the numbers reconcile before an underwriter checks them. For the document checklist that surrounds it, see documents needed for a business loan and the SBA Form 413 guide. More on the topic in Business Lending and SBA Lending.

FAQ

What are the main types of business loans?

The ten that cover almost every small-business financing need are the SBA 7(a) loan, the SBA 504 loan, the conventional bank term loan, the business line of credit, equipment financing, the commercial real estate loan, the SBA microloan, invoice factoring, the merchant cash advance, and the business credit card. They differ on three things that matter more than the label: how the money is repaid, what secures it, and whether your personal balance sheet stands behind the debt.

Which business loans require a personal financial statement?

The SBA 7(a) and 504 programs require SBA Form 413 from each owner of 20 percent or more, plus every general partner, managing LLC member, and required guarantor; SBA also uses the form for disaster loans, surety bond guarantees, and its 8(a) and women-owned certifications. Microloan documentation is set by the intermediary lender rather than by one national rule. Conventional bank term loans, business lines of credit, and commercial real estate loans on closely held companies almost always require a personal financial statement too, because the owners are guaranteeing the debt. Equipment lenders typically ask only above a dollar threshold. Invoice factoring, merchant cash advances, and business credit cards usually do not ask for a formal statement, though a card issuer will pull personal credit and an advance provider will often want a performance guaranty.

What is the easiest type of business loan to get?

By approval rate, equipment and vehicle loans are the most accessible: 71 percent of applicants in the Federal Reserve's 2025 Small Business Credit Survey were fully approved, against 55 percent for a mortgage, 48 percent for a merchant cash advance, and 45 percent for a business line of credit. The collateral is the reason — the lender can repossess and resell the asset. Easiest to qualify for and cheapest are different questions, and merchant cash advances sit at the expensive end of that gap.

Do all business loans require a personal guarantee?

No, but most small-business debt does. On SBA loans the rule is fixed: 13 CFR 120.160 requires an unlimited full guaranty from every individual owning 20 percent or more, and if no single owner reaches 20 percent, at least one owner still has to guarantee. Banks set their own guarantor thresholds deal by deal on conventional term loans and lines of credit. Guarantee-free business debt does exist at established companies with real corporate credit and asset-based structures, but it is rarer than the marketing suggests.

How much can you borrow with an SBA loan in 2026?

The 7(a) program caps a single loan at $5 million. The 504 caps its CDC debenture at $5 million for most projects, rising to $5.5 million for small manufacturers and qualifying energy projects — and because the debenture is only about 40 percent of the stack, total 504 project size can run well above that. As of July 4, 2026, SBA doubled the cumulative limit so an eligible borrower who takes a 7(a) loan first can access up to $5 million of 7(a) financing and up to $5 million of 504 financing, for $10 million of combined SBA-backed debt. SBA microloans are capped at $50,000.

What is the difference between a term loan and a line of credit?

A term loan funds once as a lump sum and amortizes over a fixed schedule, so interest accrues on the full principal from day one. A line of credit revolves: you draw what you need, repay, and draw again, and interest accrues only on the outstanding balance. Term loans suit one-time sized purchases such as equipment, real estate, or an acquisition. Lines suit recurring gaps such as payroll timing, seasonal inventory, and receivable lag. Many businesses carry both.

Are merchant cash advances regulated?

A merchant cash advance is structured as a purchase of future receivables rather than a loan, which historically kept it outside lending statutes. That is changing at the state level. As of March 2026, ten states — California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah, and Virginia — require some form of commercial financing disclosure, and several of them mandate an APR-equivalent figure so the cost can be compared with a term loan.

Next step

Pick the product that matches the shape of the need, then build the personal financial statement once so it is ready whenever the lender asks for it. Start with the personal financial statement template or the SBA Form 413 version, check your position with the net worth calculator, and see how the file comes together for a business loan application.