Glenpoint Finance, a small-business funding service in Dubuque, Iowa, compares six structures on one page: working capital, term loans, lines of credit, inventory financing, equipment financing and merchant cash advances. Each row shows how it is repaid, what it suits and what partners commonly review before deciding.
Six structures compared by repayment
| Structure | How it is repaid | Typical uses | Often secured by |
|---|---|---|---|
| Working capital | Fixed payments over a short term, often weekly or monthly | Payroll, supplier invoices, a gap before receivables land | Business assets or a general lien; sometimes a personal guarantee |
| Term loan | Fixed installments over a set number of months or years | Remodels, a second location, buying a business | Business assets, real estate or equipment |
| Line of credit | Draw, repay, draw again; interest on the drawn balance | Uneven months, recurring payables, tax bills | Receivables or a general lien |
| Inventory financing | Repaid as stock sells or on a schedule | Shelf stock, parts, fuel, seasonal buys | The inventory itself |
| Equipment financing | Loan installments or lease payments over the machine's useful life | CNC machines, lifts, ovens, chairs, trucks | The equipment |
| Merchant cash advance | A share of daily or weekly card or bank receipts | Card-heavy businesses with uneven sales | Future receivables (a purchase, not a loan) |
What are the four types of business loans?
Lists that count four usually mean term loans, lines of credit, equipment loans and short-term working capital loans. Inventory financing is often grouped under asset-based lending, and a merchant cash advance is left off because it is not a loan at all. The six here cover the four plus those two.
Another way to sort them is by the commercial loan types a partner thinks in: installment debt (term and equipment), revolving debt (credit lines), asset-based (inventory, receivables) and receivables purchase (merchant cash advances).
Secured vs unsecured business loan
A secured loan names specific collateral the partner can claim if payments stop: a machine, the stock on the shelves, a building. An unsecured business loan names no single asset, but partners may file a general lien on business assets and ask owners for a personal guarantee, so unsecured does not always mean nothing is at risk.
Common types of collateral for business loans include equipment, inventory, receivables, commercial real estate, vehicles and cash deposits. Equipment and inventory financing are secured by the thing being bought.
Types of working capital loan, with examples
- Short-term installment loan. A machine shop borrows to cover three payrolls while a large job is invoiced on 45-day terms.
- Revolving line. A landscaping company draws ahead of a busy stretch for mulch and fuel and repays as contracts pay.
- Invoice-based funding. A plumbing contractor advances against commercial invoices still outstanding.
- Receipts-based advance. A restaurant sells a share of future card sales; this is a merchant cash advance, not a loan.
These examples are illustrative, not offers. Partners decide whether any of them fits.
Funding by purpose
Payroll. Usually working capital, or a draw on a business line of credit if the gap recurs.
Inventory purchases. inventory financing when stock secures the debt; a credit line for smaller, repeated buys.
Used, restaurant or contractor equipment. equipment financing; the machine is the collateral.
Seasonal swings. a business line of credit, drawn when receipts lag.
Expansion or a second location. a term loan, sized to the build-out quote.
Questions to answer before choosing a structure
- What exactly must the money pay for, and when is it due?
- Will the thing you buy earn money, save money or just keep the business running?
- How soon will the business recover the cash: weeks, months or years?
- What can secure the funding: equipment, stock, receivables or nothing specific?
- What payments does the business already make each month?
The answers can point to one or two rows of the table above.
How to get a business loan for a small business
- Write down what the money must pay for and when it is due.
- Pull the last few months of business bank statements; partners read them.
- Have your most recent business tax return and a current balance sheet ready if you keep one.
- Collect quotes for equipment or build-out work.
- Send the request and compare any offers on total cost, not only the payment.
Industry notes for Dubuque County businesses are on the industry pages.
By Glenpoint Finance · Updated
