Guide 6 min read

Which Loan Type Is Right For You?

Four options, one decision. Here's the fast version: skim the TL;DR, jump to the section that matches your situation, and move on with your day.

TL;DR

Buying equipment or expanding? → Term Loan
Need cash on standby for whenever? → Line of Credit
Need money today and can repay from daily sales? → MCA
Have equipment, property, or receivables to leverage? → Asset-Backed Loan
Still not sure? → Skip to the table below or just ask us.

1Start with one question

Do you know the exact dollar amount, or do you just want cash available "just in case"?

If you know the number (a specific piece of equipment, a specific expansion, a specific acquisition), you're probably looking at a term loan or an asset-backed loan. If you don't know the number yet and just want flexibility, a line of credit is usually the better starting point.

💡 Tip: You can hold more than one of these at once. Plenty of businesses run a line of credit for day-to-day flexibility and a term loan for a specific big purchase.

2Term Loan

What it is: A lump sum, paid back on a fixed schedule, at a fixed (or scheduled) rate.

Best for:

Buying equipment, vehicles, or inventory in bulk
Funding a specific expansion (new location, new production line)
Refinancing existing higher-cost debt

Not great for: ongoing or unpredictable expenses, since you'll be paying interest on money you're not using yet.

3Line of Credit

What it is: A pool of approved capital you draw from as needed. You only pay interest on what you actually use.

Best for:

Smoothing out seasonal cash flow gaps
Covering payroll or inventory during slow stretches
Having a safety net without committing to a lump sum

📌 Think of it like a credit card built for your business, except the limit is sized to your revenue, not your personal credit score.

4MCA (Merchant Cash Advance)

What it is: An advance against future sales, repaid automatically as a percentage of daily or weekly revenue.

Best for:

Businesses that need cash within 24–48 hours
Businesses with strong, steady daily card/bank transactions
Short-term gaps you're confident you can repay quickly

⚠️ Heads up: MCAs are the fastest option but usually the most expensive per dollar borrowed. Great for speed, not for long-term financing.

5Asset-Backed Loan

What it is: A loan secured against something you already own (equipment, property, inventory, or receivables), usually meaning better terms because the lender has collateral.

Best for:

Businesses that want to avoid giving up equity
Larger facilities (property purchases, big equipment buys)
Owners with valuable assets but less-than-perfect cash flow history

6The quick-scan table

Type	Speed	Best for	Repaid via
Term Loan	Days	One-time, known cost	Fixed schedule
Line of Credit	Days	Ongoing flexibility	As drawn
MCA	24–48 hrs	Urgent, short-term	% of daily sales
Asset-Backed	1–3 weeks	Large purchases, no equity given up	Fixed schedule

Still not sure which one fits?

Tell us what you need the money for, and we'll tell you which type makes sense.

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