Small business financing at a glance
| Type | Typical amounts | Cost snapshot | Best suited to |
|---|---|---|---|
| SBA 7(a) | Up to $5 million | Variable rate capped at prime + 3%–6.5%, plus an upfront guaranty fee | Established firms needing working capital, equipment, real estate or an acquisition |
| SBA 504 | CDC portion up to $5 million ($5.5 million for some projects) | Fixed rate tied to the 10-year Treasury; fees about 3% | Buying or building property or long-life equipment |
| SBA microloan | Up to $50,000 (average about $13,000) | Generally 8%–13% | Startups and very small businesses |
| Bank or online term loan | Up to $100,000–$500,000 at lenders listed below | From about 7% at banks to 35%+ online | One-time costs with a clear payback |
| Line of credit | Up to $150,000–$250,000 at lenders listed below | From about 8.75% to 36%+ | Uneven cash flow, short-term gaps |
| Equipment financing | Up to the equipment's cost | Roughly 4%–45% APR | Machinery, vehicles, technology |
| Invoice factoring | Up to about 90% of invoice value upfront | 1%–5% of invoice value per month | B2B firms waiting on slow-paying customers |
| Merchant cash advance | Based on card sales | Factor rates of 1.1–1.5; effective APR 40%–350% | Last resort |
Source: SBA.gov program pages; NerdWallet business loan, equipment financing, factoring and merchant cash advance guides (2025–2026). Rates are published starting points, not quotes.
SBA loans
The SBA doesn't usually lend directly. It guarantees part of a loan made by a bank or other lender, which lets lenders approve borrowers they might otherwise turn down. To qualify, a business generally must operate for profit in the US, meet SBA size standards, be creditworthy and be unable to get credit on reasonable terms elsewhere.
New ownership rule: Since March 1, 2026, every direct and indirect owner of a 7(a) or 504 applicant must be a US citizen or US national living primarily in the US. Businesses with any owner who is a green-card holder no longer qualify.
SBA 7(a) loans
The 7(a) is the SBA's main program. Loans go up to $5 million, and SBA Express loans up to $500,000. Terms are generally up to 10 years, or up to 25 years for real estate. The SBA guarantees 85% of loans of $150,000 or less and 75% of larger loans.
| Loan amount | Maximum variable rate | Max with prime at 7% |
|---|---|---|
| $50,000 or less | Prime + 6.5% | 13.5% |
| $50,001–$250,000 | Prime + 6.0% | 13.0% |
| $250,001–$350,000 | Prime + 4.5% | 11.5% |
| Over $350,000 | Prime + 3.0% | 10.0% |
Source: SBA, 7(a) terms, conditions and eligibility; Wall Street Journal prime rate of 7% as reported by Bankrate (Oct. 6, 2026).
Fees for loans approved from October 1, 2026: The upfront guaranty fee is a percentage of the guaranteed portion: 2% for loans of $150,000 or less, 3% for $150,001–$700,000, and 3.5% (rising to 3.75% on the guaranteed amount above $1 million) for larger loans. On a $500,000 loan with a 75% guarantee, that's 3% of $375,000, or $11,250. Lenders can pass this fee to you, and it's often financed into the loan. The fee is waived on loans of $700,000 or less to manufacturers, certain food supply-chain businesses and businesses in rural areas.
Prepayment penalty: On loans of 15 years or longer, paying off 25% or more in the first three years triggers a fee of 5% in year one, 3% in year two and 1% in year three.
One more restriction worth knowing: since April 2025, SBA loan proceeds can't be used to pay off merchant cash advances.
SBA 504 loans
504 loans are for fixed assets: buying, building or renovating property, or long-life equipment. A typical deal splits the cost three ways: up to 50% from a private lender, up to 40% from a Certified Development Company (backed by the SBA), and at least 10% from you. The CDC portion generally runs up to $5 million, or up to $5.5 million for some projects such as small manufacturers, has a fixed rate set above the 10-year Treasury, and comes in 10-, 20- or 25-year terms. You can't use 504 money for working capital, inventory or rental real estate.
SBA microloans
Microloans go up to $50,000, with an average of about $13,000, according to the SBA. Nonprofit community lenders make the loans and set the terms. Rates are generally 8%–13% and terms run up to seven years. Microloans can pay for working capital, inventory, supplies and equipment, but not existing debt or real estate. The SBA requires these intermediaries to have experience with business management and technical assistance, so ask what support comes with the loan.
The SBA's free Lender Match tool connects you with interested lenders, usually within two business days. More than 800 lenders take part.
Term loans and lines of credit
A term loan gives you a lump sum to repay on a fixed schedule. A line of credit lets you draw what you need and pay interest only on what you use. Banks offer the lowest rates but want more history. Online lenders accept newer businesses and decide faster, at a much higher cost.
| Lender and product | Rates from | Maximum | Min. time in business |
|---|---|---|---|
| Bank of America Business Advantage Unsecured Term Loan | 7% | $100,000 | 2 years |
| Wells Fargo BusinessLine line of credit | 8.75% | $150,000 | 6 months |
| Accion Opportunity Fund working capital loan | 9.99% | $250,000 | 2 years |
| Bluevine line of credit | 14% | $200,000 | 1 year |
| iBusiness Funding term loan | 22.45% | $500,000 | 2 years |
| OnDeck term loan | 35% | $400,000 | 1 year |
| Fundbox line of credit | 36% | $250,000 | 3 months |
Source: NerdWallet, Best Small Business Loans of October 2026 (updated Oct. 1, 2026). Starting rates go to the strongest applicants; confirm current terms with each lender.
For SBA loans, a few banks dominate. In fiscal 2025, Live Oak Bank made about $2.8 billion in 7(a) loans and Newtek Bank more than $2 billion, according to the Coleman Report. Huntington, Northeast Bank, ReadyCap, U.S. Bank and JPMorgan Chase were also in the top 10.
Equipment financing and invoice factoring
Equipment financing
The equipment itself secures the loan, so lenders may accept less time in business or lower credit than for an unsecured loan. Rates run roughly 4%–45% APR. Some lenders finance 100% of the price, including delivery and installation, with no down payment. If you can't pay, the lender takes the equipment. Match the loan term to the equipment's useful life.
Invoice factoring
You sell unpaid invoices to a factoring company for cash now. NerdWallet's example: on a $10,000 invoice, you get $8,500 upfront (85%). The customer pays in 30 days. The factor keeps a 3% fee ($300) and sends you the remaining $1,200. You get $9,700 in total, roughly a 42% APR. With recourse factoring, you must repay the factor if your customer doesn't pay. Non-recourse factoring shifts that risk to the factor but costs more.
Merchant cash advances: the real cost
An MCA isn't a loan. The provider buys a share of your future sales and takes a fixed percentage, the "holdback," typically 5%–20%, from your daily or weekly receipts. Instead of interest, you pay a factor rate, typically 1.1–1.5.
Converting a factor rate to APR: Take a $50,000 advance at a 1.4 factor rate. You repay $70,000, so the fee is $20,000. With a 10% holdback and $100,000 in monthly card sales, you repay about $10,000 a month and finish in about seven months. NerdWallet estimates that's roughly a 125% APR. Compare that to a $50,000, five-year loan at 13.5%: total interest is about $19,000, spread over five years instead of seven months. The dollar cost looks similar, but the MCA takes it out of your cash flow far faster.
Risks to know:
- Little regulation. Because MCAs are structured as sales, federal lending laws don't apply. Ten states (California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah and Virginia) now require some cost disclosure, and California requires the price to be shown as an APR.
- Confessions of judgment. Many contracts make you waive your right to defend yourself in court if the provider says you defaulted.
- No savings for paying early. The fee is fixed, though some providers offer payoff discounts.
- Debt cycles. High costs plus frequent withdrawals squeeze cash flow and can make the debt hard to escape.
- Deceptive practices. In 2021, MCA provider Yellowstone Capital agreed to pay $9.8 million to settle FTC charges. The FTC alleged it misrepresented collateral and personal-guarantee requirements, withheld undisclosed fees, and took unauthorized withdrawals.
What lenders look for
According to SBA guidance, lenders review:
- Personal and business credit: your personal scores, plus business reports from Dun & Bradstreet, Experian and Equifax. See our guide to building business credit.
- Cash flow: the clearest sign you can make payments.
- Financial statements: recent profit and loss and cash flow statements, plus bank statements.
- A business plan: a lean summary of what you sell, your market, your team and your numbers.
- Trade references: often three or four suppliers.
- Time in business: many products in the table above require one to two years.
Ask each lender up front whether it requires collateral or a personal guarantee. Insurance coverage may be required too; see our business insurance guide.
How to compare the true cost
- Ask for the APR and the total amount you'll repay. If a provider only quotes a factor rate, work out the total payback and time to repay.
- Count every fee: origination, guaranty, draw, maintenance and prepayment fees.
- Check the payment schedule. Daily or weekly payments hit cash flow harder than monthly ones.
- Read the collateral, personal guarantee and confession-of-judgment terms.
- Start with the cheapest option you might qualify for: SBA, bank or credit union, then online lenders, and only then factoring or MCAs.
For small, short-term needs, compare these options with a business credit card especially one with a 0% intro APR you can repay before the promotion ends. For more background, see our small business loans overview.
Frequently asked questions
What is the maximum SBA 7(a) loan?
Most 7(a) loans go up to $5 million, and SBA Express loans up to $500,000. The SBA guarantees 85% of loans of $150,000 or less and 75% of larger ones. The CDC portion of a 504 loan for real estate and equipment generally goes up to $5 million, or $5.5 million for some projects such as manufacturing.
What are SBA loan interest rates in October 2026?
7(a) variable rates are capped at prime plus 3% to 6.5%, depending on loan size. With the prime rate at 7% in early October 2026, the caps run from 10% for loans over $350,000 to 13.5% for loans of $50,000 or less. Microloans generally run 8% to 13%.
How much is the SBA guaranty fee?
For 7(a) loans approved from October 1, 2026, the upfront fee is 2% of the guaranteed portion for loans of $150,000 or less, 3% for $150,001 to $700,000, and 3.5% to 3.75% for larger loans. It's waived for loans of $700,000 or less to manufacturers, certain food supply-chain businesses and rural businesses.
Who is eligible for SBA loans in 2026?
The business generally must be for-profit, operate in the US, meet SBA size standards, be creditworthy and lack reasonable credit elsewhere. Since March 1, 2026, all owners of 7(a) and 504 applicants must be US citizens or US nationals living mainly in the US.
How do I convert a merchant cash advance factor rate to APR?
Multiply the advance by the factor rate to get total payback, then factor in how quickly you repay. A $50,000 advance at 1.4 costs $20,000. Repaid in about seven months, that's roughly a 125% APR, according to NerdWallet's estimate. Faster repayment means a higher APR.
Can I get a small business loan as a startup?
It's harder. SBA microloans, which average about $13,000, are designed for very small and new businesses. Some online lines of credit accept businesses with three to six months of history, at higher rates. Equipment financing may also be easier because the equipment secures the loan.
Sources
- SBA – 7(a) loan program terms, conditions and eligibility
- SBA – 504 loans
- SBA – Microloans
- SBA – Lender Match
- SBA – How to have a stand out business credit application
- Coleman Report – FY 2027 SBA 7(a) fees and fee relief
- Coleman Report – Top 100 SBA 7(a) lenders by loan amount, FY25
- Compliance Alliance – SBA procedural notice on ownership, citizenship and residency requirements
- Bankrate – Wall Street Journal prime rate
- NerdWallet – Best small business loans of October 2026
- NerdWallet – What is a merchant cash advance?
- NerdWallet – Invoice factoring
- NerdWallet – Best equipment financing
- Consumer Finance Monitor – FTC settles claims against merchant cash advance providers
- Venable – State commercial financing disclosure laws
Rates, fees and terms change often. Figures were checked in October 2026; confirm current details with the provider before you apply.