Operators usually ask the wrong first question about funding. They ask, "what's the cheapest rate I can get?" The better question is, "what kind of funding fits what I'm actually doing with the money?" Get that one right, and the rate question takes care of itself. Get it wrong, and you can end up paying a great rate on the wrong product.
Five common use cases for business capital, and what each one calls for.
One — equipment purchase. The asset has a useful life of five to ten years and lives in the business. The funding should match. Equipment financing or a term loan with collateral works best — the loan is secured by the equipment itself, rates are competitive (often 6–9% in 2026), and the payment schedule lines up with the asset's productive life. A line of credit is the wrong product for this. You don't want short-term revolving debt funding a long-term asset.
Two — working capital for seasonal cash flow. The business is profitable annually but cash flow swings month to month. A revolving line of credit is the right tool. You draw during the lean months and pay it down during the strong ones. The line stays open, you only pay interest on what you actually use, and the credit limit grows as the business grows. A term loan for the same purpose locks you into payments during months when cash flow is already tight.
Get the use of capital right and the rate question takes care of itself. Get it wrong and you can pay a great rate on the wrong product.
Three — real estate purchase or build-out. The asset is long-lived, illiquid, and significant relative to the business. SBA 504 loans were designed for exactly this — they fund up to 90% of commercial real estate at favorable rates, with twenty-five-year amortizations. A conventional commercial mortgage is the alternative: faster to close, fewer documentation requirements, but higher down payment and shorter terms.
Four — acquisition of another business. You're buying revenue, customers, or assets from someone else. SBA 7(a) loans are the standard answer; they fund acquisitions up to $5 million with reasonable terms and personal guarantee requirements. The trade-off is paperwork — SBA loans take three to four months from application to funding. If timing is tight, conventional acquisition financing or seller-carry notes are alternatives, both with downsides (higher rate, smaller funding amount, or ongoing seller involvement).
Five — bridge between a customer paying and your bills coming due. You have $200K of invoices outstanding from solid customers, and you have payroll on Friday. This isn't a loan problem; it's a factoring or invoice-financing situation. Factoring sells the invoice to a financing company at a discount. Invoice financing borrows against the invoice and is repaid when the customer pays. Both are expensive on a per-dollar basis but cheap relative to missing payroll or losing a customer.
The mismatches that cost real money. The most common ones we see:
A merchant cash advance funding equipment purchases. The MCA repays daily from card sales, which makes it punishing on a multi-year asset and creates cash flow pressure when you need slack the most.
A term loan funding seasonal working capital. The payments come due in the months when cash is already tightest.
A line of credit funding real estate. The line gets fully drawn, becomes effectively a balloon loan, and can be called when the bank reviews the relationship.
An SBA loan funding a quick acquisition where the timeline doesn't allow for SBA underwriting. The acquisition closes with bridge debt and never gets refinanced cleanly.
The question we ask first. When a client comes in talking about funding, we don't lead with rates. We ask three questions. What is the money going to do? How long until that activity generates the cash to repay it? How predictable is that cash? Once those answers are clear, the right product usually picks itself.