Bank Loans

• Bank loans come directly from lending institutions. They can take the form of lines of credit, where funds become available again for future borrowing once they are repaid, or structured loans for a specific amount and a designated purpose. Business lines of credit usually require a simple application, and the bank makes its decision based on the business's financial history. Structured bank loans usually require a formal application as well as a business plan, with detailed financial information and projections.
  
  

SBA Loans

• SBA loans are bank loans backed by the Small Business Administration, which lessens the risk for the lending institution by providing a financial guarantee. While the application for loans from individual bank loans may vary, the application process for SBA loans is standardized and the criteria are clear. SBA loans require collateral or demonstrated business track record, and interest rates can be lower than conventional bank loans because of the federal guarantee. Businesses often apply for SBA loans when purchasing business property.
  
  

Credit Cards

• Business credit cards are a source of unsecured credit for small business owners. They offer the advantage of being easier to procure than bank loans -- except during periods when credit markets are tight -- but their interest rates tend to be much higher than SBA loans or bank lines of credit. Unlike a bank or SBA loan, which requires you to pay back the principal according to a predetermined schedule, a business credit card enables you to merely pay the minimum monthly payment, which often includes only the finance charge. This provides you with increased flexibility during difficult periods, but increases the amount you pay for credit overall.
  
  

Personal Loans

• Many entrepreneurs finance their businesses by borrowing from friends or relatives. The terms of these arrangements can vary based on the relationship between the lender and the borrower, but they usually include relatively low interest rates because the lender has a personal stake in seeing the borrower's business succeed. Personal loans offer the advantage of being easier to procure than conventional bank loans, especially if you have damaged credit due to understandable circumstances such as medical debt. But they also pose the risk of complicating personal relationships.
  
  

Investor Loans

• Some small businesses accept loans from investors who ask for a share of equity, or ownership, in exchange for lending the money. This arrangement offers the advantage of flexible credit terms and no required collateral, but some entrepreneurs determine that shared ownership of their business is too steep a price to pay for working capital.