Understand what lenders look for, which loan type fits your situation, and what rates and terms to expect — then get connected with commercial lenders.
Business financing isn’t one product. A restaurant buying equipment, a contractor bridging a cash flow gap, and a developer acquiring a property all need commercial loans, but almost nothing about those three deals looks alike. Knowing which category you’re in before you start calling lenders saves weeks.
The main loan types
Term loans are the straightforward version — a lump sum repaid over a fixed period, usually one to ten years. Good for expansion, acquisitions, or any one-time investment with a clear payback.
SBA loans are partially guaranteed by the Small Business Administration, which lets lenders offer longer terms and lower rates than they otherwise would. The 7(a) program covers general business purposes up to $5 million. The 504 program is for real estate and major equipment. The tradeoff is paperwork and timeline — expect 30 to 90 days, sometimes longer.
Lines of credit work like a business credit card with better terms. You draw what you need, pay interest only on the balance, and the line replenishes as you repay. Built for managing uneven cash flow, not for funding a major purchase.
Equipment financing uses the equipment itself as collateral, which usually means easier approval and less emphasis on credit history. Terms typically match the useful life of the asset.
Commercial real estate loans fund property purchases or refinances. Longer terms, larger amounts, and lenders care heavily about the property’s income relative to the debt service.
Invoice factoring and merchant cash advances provide fast capital against receivables or future sales. Both are expensive. Factoring runs reasonable for short gaps. Merchant cash advances often carry effective rates well into the triple digits once you annualize them — treat those as a last resort.
What lenders actually evaluate
Time in business matters more than most owners expect. Under two years and your options narrow considerably regardless of how well you’re doing.
Annual revenue sets the ceiling on what you can borrow. Most lenders want to see consistent revenue, and many have minimums — often $100,000 to $250,000 annually for conventional products.
Personal credit score still factors in heavily for small business lending, even when the loan is in the business name. Under 650 limits you significantly. Over 700 opens most doors.
Debt service coverage ratio is the number that decides commercial deals. It compares your net operating income to your total debt payments. Most lenders want to see 1.25 or better, meaning you generate 25% more income than your obligations require.
Collateral and personal guarantees come up in nearly every small business loan. Expect to personally guarantee unless the business is substantial.
Rates and terms
Rates vary widely by product and borrower profile. SBA loans are typically the lowest cost option available to small businesses. Conventional term loans from banks come next. Online and alternative lenders charge more but approve faster and accept weaker profiles. Merchant cash advances sit at the far expensive end.
Watch for fees beyond the rate: origination, packaging, SBA guarantee fees, prepayment penalties, and annual maintenance on credit lines. The advertised rate rarely reflects total cost.
Ask specifically whether a prepayment penalty applies. On a loan you might refinance in three years, that single term can cost more than a difference in rate.
Getting prepared
Lenders will want two to three years of business tax returns, year-to-date profit and loss and balance sheet, personal financial statement, business bank statements for recent months, and a clear use-of-funds explanation.
Having those ready before you apply shortens the process substantially and signals you’re a serious borrower.
Getting matched with lenders
Tell us about your business and what you need financing for, and we’ll connect you with commercial lenders who work in your situation.
By submitting this form you agree to be contacted by commercial lenders regarding your financing request. This is not a loan application and no credit decision is made. Your information is not sold to third parties.