Growth usually costs money before it makes money: a new vehicle, more inventory, a second location, another hire. The right financing depends on what you’re paying for, how quickly it will pay back, and what your business can afford each month.
Match the money to the purpose
Table of Contents
| What you need | Good fits |
|---|---|
| Short gaps in cash flow | Business line of credit, invoice financing |
| Equipment or vehicles | Equipment financing, SBA 504 loans |
| Inventory for a busy season | Line of credit, short-term loan |
| Buying a business or real estate | SBA 7(a) or 504 loans, conventional bank loans |
| Larger, long-term growth | Term loans, SBA 7(a), investors |
A useful rule: don’t use short-term, expensive money for long-term needs.
The main options
Your own profits. Slower, but no interest or debt. Many owners grow in steps funded by earnings.
Business line of credit. Borrow, repay and borrow again up to a limit, paying interest only on what you use. Ideal for uneven cash flow. Open one before you need it; banks lend more readily to businesses that aren’t in a cash crunch.
Term loans. A lump sum repaid on a fixed schedule. Banks and credit unions usually offer the lowest rates to established businesses with good records.
SBA loans. The SBA guarantees part of loans made by approved lenders, which can mean longer terms and lower down payments. 7(a) loans go up to $5 million for many purposes; 504 loans fund real estate and major equipment. Since March 1, 2026, applicant businesses must be 100% owned by US citizens or US nationals living in the US. See SBA loans in 2026.
Equipment financing. The equipment itself secures the loan, so it’s often easier to qualify for.
Invoice financing. Borrow against unpaid customer invoices. Useful for businesses with slow-paying commercial clients, but check the fees carefully.
Community lenders and microloans. Community development financial institutions (CDFIs) and SBA microlenders often serve businesses that banks turn down, sometimes with free coaching.
Investors. Selling a share of your business makes sense mainly for high-growth companies. You give up ownership and some control.
Be very careful with merchant cash advances
A merchant cash advance gives you cash now in exchange for a share of future card sales or daily bank withdrawals. They’re fast and easy to get, but they’re not loans, and their effective cost can be far higher than any bank loan. Many businesses get trapped taking one advance to pay off another. Treat them as a last resort.
Before you borrow
- Know exactly what the money will do and how it will pay back.
- Compare the total cost, including all fees, not just the interest rate or "factor rate".
- Check the monthly payment against your cash flow in a slow month.
- Read the personal guarantee: you may be personally responsible if the business can’t repay.
Use the break-even calculator to test whether the growth plan pays for itself. More on running and growing your business: Grow.
This guide is general information, not financial advice.
Sources
- US Small Business Administration, Loans
- Compliance Alliance, SBA notice on citizenship and residency requirements (February 2026)
Last reviewed October 17, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.
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