Business Financing Options: A Complete Guide for Small Businesses

Business Financing Options: A Complete Guide for Small Businesses

The Complete Guide to Business Financing Options

Finding the right financing for your Dallas business can feel overwhelming, especially in today’s tight lending market. Big banks are currently approving only about 13% of small business loan applications, leaving many qualified owners searching for alternatives.

We created this comprehensive guide to walk you through every major financing option available in 2026, from working capital loans to equipment financing and beyond. This resource breaks down the specific rates, terms, and requirements you need to know to make a confident decision.

Overview of Business Financing Categories

Business financing falls into several broad categories, each serving a distinct purpose in your capital strategy.

Let us explore each option in detail to find your best fit.

Traditional Bank Loans

Traditional bank loans remain the gold standard for business financing because they offer the lowest interest rates in the market.

Characteristics

• Rates: 6.3% to 11.5% APR typically (based on 2026 averages)
• Terms: 1-10 years (up to 25 for real estate)
• Amounts: $25,000 to millions
• Collateral: Often required
• Personal guarantee: Usually required

Pros

• Lowest cost of capital available
• Longer repayment terms reduce monthly strain
• Builds a strong banking relationship for future needs
• Can access additional bank services like treasury management

Cons

• Strict qualification requirements exclude many SMBs
• Lengthy approval process (2-8 weeks is common)
• Extensive documentation required (tax returns, P&L, balance sheets)
• Approval rates at big banks hover around 13%

Best For

• Established businesses with strong financials (2+ years profitable)
• Borrowers with excellent credit (680+)
• Long-term financing needs like expansion or renovations
• Owners who can wait weeks for the lowest possible rate

Insider Tip: Look Beyond the “Big Four”

We often see clients get discouraged after a rejection from a major national bank. Smaller community banks and credit unions currently have approval rates closer to 52%. These local institutions often look beyond just the credit score to understand your specific business story.

SBA Loans

Government-backed SBA loans offer favorable terms because the SBA guarantees a portion of the loan, reducing risk for lenders.

Types Available

SBA 7(a): General purpose working capital, up to $5 million. Note that the “Small Loan” cap was recently adjusted to $350,000. SBA 504: Fixed assets like real estate, up to $5.5 million. SBA Microloans: Smaller needs, up to $50,000.

Characteristics

• Rates: Prime + 2.25% to 4.75% (Currently ~9.75% - 14.75%)
• Terms: Up to 25 years for real estate, 10 for equipment
• Down payment: 10-20% typically required
• Guarantee: SBA guarantees 50-85% of the loan

Pros

• Lower rates than most online or alternative options
• Longest repayment terms available for working capital (10 years)
• Lower down payments preserve your cash
• Cannot be denied solely for lack of collateral

Cons

• Lengthy approval process (30-90 days)
• Extensive paperwork and strict eligibility rules
• Personal assets often required as collateral if business assets are insufficient
• May require 2+ years in business

Best For

• Businesses meeting SBA size standards
• Owners needing long amortization periods to lower payments
• Commercial real estate purchases (SBA 504 rates were ~5.85% in Jan 2026)
• Borrowers who can plan 3 months ahead

Business Lines of Credit

A business line of credit provides flexible access to funds you can draw as needed, similar to a credit card but with higher limits and lower rates.

Characteristics

• Credit limits: $10,000 to $500,000+
• Rates: 7-25% APR
• Draw period: 1-5 years typically
• Repayment: Interest only on drawn amounts, or principal + interest

Types

Secured: Backed by collateral (inventory, receivables), offering rates as low as Prime + 2%. Unsecured: No collateral required, but rates are higher and limits often cap at $100,000.

Pros

• Pay interest only on the specific amount you use
• Revolving access means you can borrow, repay, and borrow again
• Flexibility for seasonal inventory or payroll gaps
• Great for building business credit history

Cons

• May have annual maintenance or draw fees
• Variable rates can increase if the Fed raises rates
• Banks can reduce limits or freeze the line if your financials dip
• Requires discipline to avoid treating it like permanent capital

Best For

• Ongoing working capital needs
• Seasonal businesses bridging the off-season
• Emergency funds access for unexpected repairs
• Managing cash flow fluctuations between large payments

Equipment Financing

Equipment financing specifically funds hard assets, using the equipment itself as collateral to secure the loan.

Characteristics

• Amounts: Up to 100% of equipment cost
• Rates: 6-30% depending on credit and equipment type
• Terms: 2-7 years (usually matches the useful life of the asset)
• Collateral: The equipment being financed
• Down payment: 0-20%

Options

Equipment loans: You own the equipment from day one and claim depreciation. Equipment leases: You pay to use the asset and may have a purchase option ($1 buyout) at the end.

Pros

• Equipment serves as collateral, sparing your personal assets
• Preserves working capital for other needs
• Section 179 tax benefits allow expensing up to $2.56 million (2026 limit)
• Bonus depreciation is back to 100% for 2025 and 2026

Cons

• Limited strictly to equipment purchases
• Equipment may depreciate faster than the loan payoff
• May require a down payment for startups or specialized gear
• Specialized equipment with low resale value may have fewer lender options

Best For

• Purchasing vehicles (SUV deduction cap is ~$31,300 for vehicles >6,000 lbs)
• Businesses needing to preserve cash flow
• Asset-heavy industries like construction or manufacturing
• Taking advantage of massive tax deductions

Invoice Factoring and Financing

These options leverage your accounts receivable to generate immediate cash flow, which is ideal for B2B companies waiting on 30-90 day payments.

Invoice Factoring

You sell your invoices to a factoring company at a discount for immediate cash.

• Advance rate: 70-95% of invoice value
• Factor fee: 1-5% of invoice value
• Collection: The factoring company collects directly from your customer

Invoice Financing

You borrow against your invoices while maintaining control of the customer relationship.

• Advance rate: 80-90%
• Interest: Weekly or monthly rate on the advanced amount
• Collection: You collect payment and repay the lender

Pros

• Fast access to cash (often 24-48 hours)
• Approval is based on your customer’s credit, not yours
• Scales automatically with your sales volume
• No debt is created on the balance sheet (for factoring)

Cons

• Costs can be high (APR equivalent often 15-60%)
• Factoring companies may contact your customers directly
• Reduces profit margins on every sale
• Only works for B2B businesses with invoiced sales

Best For

• B2B businesses with slow-paying corporate clients
• Bridging cash flow gaps caused by rapid growth
• Businesses with poor credit but high-quality customers
• Staffing agencies or trucking companies with high weekly payroll

Insider Tip: Recourse vs. Non-Recourse

We always advise clients to check if the factoring agreement is “recourse” or “non-recourse.” In a recourse agreement, you must buy back the invoice if your customer never pays. Non-recourse costs slightly more but protects you against customer non-payment.

Merchant Cash Advances (MCAs)

MCAs provide a lump sum in exchange for a percentage of your future daily credit card or bank sales.

Characteristics

• Amounts: $5,000 to $500,000
• Factor rates: 1.1 to 1.5 (this is a multiplier, not an interest rate)
• Repayment: Daily or weekly deduction from sales
• Term: 3-18 months typically

Pros

• Extremely fast funding (often same-day)
• High approval rates for bad credit or tax liens
• Payments adjust with sales volume (if percentage-based)
• No physical collateral required

Cons

• Highest cost option (Effective APRs can reach 40% to 350%)
• Daily payments can severely strain cash flow
• No benefit to early payoff in most contracts
• Many contracts require a Confession of Judgment (COJ)

Best For

• Critical emergency needs where speed is the only priority
• Businesses with high volume card sales but low credit scores
• Those who cannot qualify for any other financing
• Short-term opportunities with massive profit margins

Warning: Watch the ACH Trap

Some MCA providers now use fixed daily ACH withdrawals instead of a percentage of sales. We warn business owners that this removes the main benefit of an MCA. If your sales drop, that fixed payment still comes out, which can quickly drain your operating account.

Online Business Loans

Online lenders offer speed and accessibility, bridging the gap between traditional banks and high-cost alternative financing.

Characteristics

• Amounts: $5,000 to $500,000
• Rates: 9-99% APR (wide range based on risk)
• Terms: 3 months to 5 years
• Speed: 24 to 72 hours funding

Major Online Lenders

Platforms like OnDeck, BlueVine, and Credibly use algorithms to assess risk quickly. They look at cash flow and daily balances rather than just credit scores.

Pros

• Fast application and approval process (often minutes)
• More accessible than banks (minimum 600 credit score often okay)
• Technology-driven efficiency means less paperwork
• diverse products including lines of credit and term loans

Cons

• Higher rates than traditional bank loans
• Daily or weekly payments are common, unlike monthly bank loans
• Less relationship-focused than a community bank
• Shorter repayment terms increase payment size

Best For

• Businesses needing speed but wanting better rates than an MCA
• Borrowers with “good enough” credit (600-680)
• Tech-comfortable borrowers who want a digital experience
• Mid-range credit profiles with strong cash flow

Revenue-Based Financing

Repay a fixed amount through a percentage of monthly revenue, similar to an MCA but typically with lower costs and monthly (not daily) debits.

Characteristics

• Amounts: $25,000 to $3 million
• Repayment: 2-8% of monthly revenue
• Total repayment: 1.3x to 2x borrowed amount
• Term: Varies based on your revenue speed

Pros

• Payments flex with your revenue highs and lows
• No equity dilution for founders
• No personal guarantee is often required
• Aligns lender incentives with business performance

Cons

• Higher total cost than a bank loan
• Limited to businesses with strong, recurring revenue (MRR)
• Monthly reporting requirements can be strict
• May require minimum monthly revenue of $15k+

Best For

• SaaS and subscription businesses with high margins
• Growing companies with consistent monthly recurring revenue
• Founders wanting to avoid giving up equity
• Businesses needing growth capital for marketing

Microloans

Small loans for startups and small businesses, often provided by nonprofit lenders or CDFIs (Community Development Financial Institutions).

Characteristics

• Amounts: Up to $50,000
• Rates: 7-15% typically
• Terms: Up to 6 years
• Lenders: PeopleFund, LiftFund, DreamSpring

Pros

• Accessible to startups and those with limited credit history
• Lower credit requirements than banks
• Often include free business mentoring and consulting
• Support underserved communities and minority owners

Cons

• Limited to smaller dollar amounts
• May require participation in training workshops
• Application process can take longer than online lenders
• Geographic restrictions often apply

Best For

• Startups and new businesses (under 2 years old)
• Underserved entrepreneurs in Texas and beyond
• Smaller capital needs for initial inventory or equipment
• Those who value mentorship alongside capital

Spotlight: Texas Nonprofits

We frequently refer clients to excellent local nonprofits. PeopleFund offers loans up to $50,000 for startups and larger amounts for existing businesses. LiftFund, based in San Antonio but active in Dallas, sometimes offers interest buy-down programs with rates as low as 0-5%.

Business Credit Cards

Credit cards provide flexible, revolving credit for smaller daily needs and offer valuable rewards.

Characteristics

• Limits: $5,000 to $100,000+
• Rates: 15-25% APR (0% intro periods common)
• Rewards: Points, cash back, travel
• Billing: Monthly minimums or pay in full

Pros

• Easiest form of financing to obtain
• 0% introductory APR offers act as an interest-free loan
• Build business credit separately from personal credit
• Earn 2-5% rewards on ad spend or office supplies

Cons

• High interest rates if you carry a balance past the intro period
• Low limits compared to loans or lines of credit
• Can encourage overspending on non-essentials
• Personal guarantee is almost always required

Best For

• Daily operational expenses
• Building a business credit history
• Short-term financing using 0% APR offers (12-18 months)
• Earning travel rewards to offset business trip costs

Equity Financing

Raise capital by selling ownership stakes in your business to investors.

Types

Angel investors: Individual investors who write smaller checks for early-stage companies. Venture capital: Institutional firms investing large sums in high-growth startups. Crowdfunding: Platforms like Wefunder allow you to raise small amounts from many people.

Characteristics

• Amounts: $50,000 to millions
• Cost: Ownership stake and future profits
• Repayment: None (capital is exchanged for equity)
• Involvement: Investors often require board seats or voting rights

Pros

• No debt payments to drain monthly cash flow
• Access to investor expertise and networks
• Can raise substantial amounts for rapid scaling
• Validation of your business model adds credibility

Cons

• You permanently give up a portion of ownership
• Loss of full decision-making control
• High pressure for rapid growth and an “exit” strategy
• Extremely difficult to obtain for traditional small businesses

Best For

• High-growth potential businesses (tech, biotech)
• Scalable models that need cash to capture market share
• Businesses needing significant capital without debt service
• Founders open to outside partners and guidance

Choosing the Right Option

Consider these four critical factors when choosing your financing path.

1. Purpose of Funds

2. Timeline

3. Qualification Strength

4. Cost Tolerance

Getting Expert Guidance

With so many options available, finding the right financing can be challenging. At Equipment Financing Dallas Pros, we help businesses navigate these choices to find the best fit for their specific situations.

Need help choosing the right financing? Contact us for a free consultation. We will evaluate your needs and present the most appropriate options for your business.