Every Way to Fund a Small Business — Honestly Compared

By Filip Kozina · Co-Founder, Commera Funding

Reviewed June 8, 2026 · 13 min read

The short answer

There is no single best way to fund a small business. The right capital depends on three things: how fast you need it, how strong your credit and revenue history are, and what you're using it for.

Bank lines of credit and SBA loans cost the least but take weeks and require strong credit. Merchant cash advances cost the most but fund in 24–48 hours and accept FICO 500+. Equipment financing and invoice factoring fit specific situations (an asset purchase or B2B receivables, respectively). Credit cards are cheaper than MCA below ~$15K but expensive above that.

This guide walks through every common option with honest cost, speed, and qualification numbers. Read it once, then pick the option that fits your actual situation — not the one a salesperson is pushing.

Comparison at a glance

Here's every common funding type side-by-side. Numbers are typical ranges in mid-2026 — your specific quote depends on your credit, revenue, time in business, and industry.

• Bank term loan — Cost: 7–15% APR. Speed: 2–8 weeks. Qualification: 680+ FICO, 2+ years in business, collateral or strong financials. Best for: large stable purchases, predictable cash flow.

• SBA 7(a) loan — Cost: prime + 2.25–4.75% (≈10–14% APR mid-2026). Speed: 30–90 days. Qualification: 680+ FICO, 2+ years, SBA underwriting (very thorough). Best for: lowest possible cost when you have time and clean financials.

• Business line of credit — Cost: 8–25% APR on drawn balance. Speed: 1–4 weeks (bank), 1–3 days (online). Qualification: 650+ FICO, established revenue. Best for: ongoing variable needs, payroll bridges, inventory.

• Merchant cash advance (MCA) — Cost: factor rate 1.15–1.50× (no APR; see our factor-rate explainer). Speed: 24–48 hours. Qualification: 500+ FICO, 6+ months in business, $20K+ monthly revenue. Best for: time-critical needs, variable-revenue businesses, sub-650 credit.

• Revenue-based financing (RBF) — Cost: 1.10–1.35× total payback, similar to MCA. Speed: 3–7 days. Qualification: $25K+ monthly revenue, 12+ months in business. Best for: businesses that prefer structured monthly payments over daily/weekly MCA deductions. See [MCA vs RBF](/resources/mca-vs-revenue-based-financing).

• Invoice factoring — Cost: 1–5% of invoice value per 30 days (effective APR 15–60%). Speed: 1–7 days for first deal, instant for repeat. Qualification: must be B2B with invoiced customers. Best for: B2B businesses with stretched-payment customers. See [MCA vs invoice factoring](/resources/mca-vs-invoice-factoring).

• Equipment financing — Cost: 8–25% APR. Speed: 1–7 days. Qualification: 600+ FICO, the equipment itself serves as collateral. Best for: a specific equipment purchase (HVAC unit, vehicle, machinery, etc.).

• Business credit card — Cost: 18–28% APR on revolving balance, 0% intro on some cards. Speed: instant once approved. Qualification: 660+ FICO personal credit usually required. Best for: under $15K of mixed expenses, especially if you can pay off monthly.

How to choose: the decision framework

Walk down this list and stop at the first option that fits.

1. Do you have 4+ weeks AND 680+ FICO AND clean financials? Get an SBA loan or bank line of credit. You'll pay the least.

2. Do you need under $15K and can pay it off in 30–60 days? A business credit card (especially with a 0% intro period) is cheaper than any term loan or advance.

3. Are you buying a specific piece of equipment? Equipment financing is built for this — the equipment is the collateral, rates are reasonable, qualification is easier than a general business loan.

4. Are you B2B and your customers pay you on 30/60/90-day terms? Invoice factoring may cost less than any other fast option because your invoices are the collateral.

5. Do you have ongoing variable cash-flow needs (payroll bridges, inventory cycles)? A business line of credit, if you qualify, is cheaper than MCA over time because you only pay for what you draw.

6. Do you need money in days, not weeks, with FICO below 650 or under 2 years in business? MCA or revenue-based financing — these are designed for time-critical needs and variable-revenue businesses. They cost more for a reason: speed and accessibility.

This order is intentional: cheapest first, fastest last. Most brokers reverse it because they make commissions on advances. Read this list as if you were giving advice to a friend.

Cheapest doesn't mean best — and most expensive doesn't mean predatory

Two honest framings small business owners rarely hear:

**Cheapest isn't always best.** An SBA loan at 10% APR is cheaper than an MCA at a 1.30 factor rate. But the SBA takes 60 days to fund. If you lose a customer or miss a payroll because you waited 60 days for cheap capital, the 'savings' on the rate cost you the business. The right cost is the cost that actually arrives in time.

**Expensive isn't always predatory.** An MCA at a 1.40 factor rate is expensive because the funder is taking risk a bank won't take — funding a business with seasonal revenue, sub-650 credit, or 8 months of operating history. The price reflects the risk. What IS predatory: hidden fees, stacking encouragement, daily debits the business can't afford, undisclosed prepayment penalties, and aggressive collections. Price alone doesn't tell you whether a funder is honest — terms and behavior do.

Honest pros and cons — the short version

**SBA 7(a):** + lowest cost. - slow, paperwork-heavy, government-guarantee process.

**Bank term loan:** + low cost, predictable. - high qualification bar, slow.

**Line of credit:** + flexible, you only pay for what you draw. - bank version is slow to set up; online version is faster but more expensive.

**MCA:** + 24–48 hour funding, FICO 500+, no collateral, payment adjusts with revenue. - highest dollar cost, daily/weekly deductions can stress cash flow.

**RBF:** + similar to MCA but monthly payments instead of daily, slightly cheaper for some profiles. - newer product category, fewer funders, longer underwriting than MCA.

**Invoice factoring:** + cost scales with actual invoice age, no fixed term, B2B-friendly. - only works if you have invoiced B2B customers, factor takes over collections.

**Equipment financing:** + reasonable rates, easier qualification because the equipment is collateral. - tied to a specific purchase; can't use the cash for other expenses.

**Business credit card:** + instant access, rewards/points, 0% intro on some. - high APR on carried balances, personal-credit dependency, low limits relative to other options.

What every funder MUST disclose before you sign

Regardless of which funding type you choose, your funder is required (by state law in many states, by best practice everywhere) to disclose these five items in writing before you sign:

1. **Principal or advance amount** — the exact dollar amount you're receiving. 2. **Total repayment** — what you'll pay back in dollars (for MCA / RBF this is fixed; for loans this is principal + interest). 3. **Payment amount and frequency** — your daily/weekly/monthly payment in dollars. 4. **Repayment timeline** — fixed term (loan) or estimated days (MCA). 5. **All fees** — origination, processing, prepayment, ACH, default. Itemized, not bundled.

In California, New York, Florida, Georgia, Utah, Virginia, and several other states, these disclosures are required by law for non-bank commercial financing. If a funder won't put all five in writing before you sign, walk away — regardless of how attractive the headline rate looks.

Common mistakes small business owners make

**Stacking advances.** Taking a second MCA while a first is still active. The combined daily debits often exceed what the business can sustain. Most well-run brokers refuse to facilitate stacking.

**Comparing APR on MCA to APR on a loan.** They're not the same math. APR is time-based; MCA factor rates aren't. See our [factor rate explainer](/resources/what-is-a-factor-rate) for the conversion. Direct APR comparison usually overstates MCA cost vs a long-term loan.

**Treating any funding as 'free money'.** Capital is a tool. If the use of funds doesn't generate enough return to comfortably cover the repayment, the cheaper option is no funding at all.

**Negotiating only the headline rate.** Prepayment terms, fees, and collections behavior matter more than a 0.05 difference in factor rate. Ask about all of it.

**Believing 'pre-approved' marketing.** Pre-approved means a funder bought your contact data and pre-screened it. It doesn't mean an offer. Real offers come after real underwriting.

When to use Commera's calculator

Our [funding calculator](/resources/business-funding-calculator) gives you an honest estimate range for MCA specifically — advance amount, factor rate range, daily payment — based on your monthly revenue and time in business. It's free, doesn't require an account, and doesn't run a credit check.

Use it to understand the rough shape of an MCA before talking to any funder (us or anyone else). If the estimated payment looks unsustainable for your business, the right answer might be a different capital type entirely — and that's the kind of honest comparison this guide is designed to help with.

Next steps

If you've read this far and MCA looks like the right fit (you need capital in days, your credit is under 650, your revenue is variable), our [3-minute pre-qualification](/apply) gives you matched offers from 3–5 funders in 2–4 business hours. No hard credit pull, no fees to apply.

If MCA doesn't fit your situation, the honest answer might be SBA, a bank line of credit, or invoice factoring — and we'll tell you that. The whole point of this guide is to help you choose the right tool, even if that means not using us.