Small Business Financing and Payment Options Compared

How the main ways to fund a business or take payments differ in cost structure and risk.

This table compares types of financing and payment options by how they work, who they suit and what to watch for. It does not list provider prices, because rates and fees vary by lender, credit profile, industry and date. Use it to decide which category to explore, then collect written quotes and run them through the loan calculator or the fee calculator.

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Option	How it works	Good for	Watch out for
Term loan	Fixed amount repaid in regular installments with interest over a set term.	Planned purchases and expansion with predictable cash flow.	Origination fees, personal guarantees, prepayment penalties and collateral requirements.
SBA-backed loan	Loan from a participating lender with a partial federal guarantee under SBA programs.	Borrowers who meet SBA rules and can wait through a longer application.	Paperwork volume, timing, guarantee fees and eligibility rules that change by program.
Business line of credit	Revolving credit you draw on and repay as needed, paying interest on the balance.	Uneven cash flow and short-term working capital.	Variable rates, draw or maintenance fees and renewal terms.
Equipment financing	Loan or lease secured by the equipment being bought.	Vehicles, machines and tools that keep value.	Lease buyout terms, total cost versus buying and the equipment as collateral.
Invoice financing or factoring	Advance against unpaid invoices, repaid when customers pay.	Businesses with slow-paying commercial customers.	Fees that compound over time and customer notification in some arrangements.
Merchant cash advance	Lump sum repaid from a share of daily sales or fixed daily debits at a factor rate.	Rarely a first choice; sometimes a last resort for fast cash.	Very high effective cost, daily repayments and confusing factor-rate pricing.
Business credit card	Revolving card with a credit limit, often with rewards.	Small recurring purchases paid off monthly.	High interest on carried balances and personal liability terms.
Flat-rate payment processing	One percentage plus a fixed fee on every card payment.	New or low-volume businesses that want simple pricing.	Can cost more than other pricing models as volume grows.
Interchange-plus processing	Card network costs passed through plus a stated markup.	Higher-volume businesses that want transparent pricing.	Monthly minimums, statement fees and contract length.

Rates and eligibility rules change, so verify current details with the lender or provider. Official sources include the U.S. Small Business Administration, the Consumer Financial Protection Bureau and the Federal Trade Commission. This page is educational and is not financial or legal advice.