Small Business Finance

What this section covers

Small-business finance is where the gap between what a lender advertises and what a borrower actually pays is widest. A merchant cash advance quoted as a "1.3 factor rate" is not a 1.3% loan. An invoice-financing arrangement that looks like a loan may be a true sale of your receivables, with entirely different consequences if a customer disputes the bill.

These guides work through the structures one at a time: term loans, lines of credit, invoice financing, merchant cash advances, equipment finance, SBA-backed lending and startup funding. Each one explains what the product actually is, what it costs on a like-for-like basis, and the specific situation it does and does not suit.

Nothing here is written for a lender’s benefit. Where a product is expensive, the guide says so and shows the arithmetic.

How to use this section

1. 1
   Start with the guide for the type of finance you are already considering, so you can price it before you talk to anyone.
2. 2
   Run the numbers through the matching calculator — the loan, ROI and break-even tools cover most small-business decisions.
3. 3
   Compare at least two structures side by side. The cheapest option is frequently not the one with the lowest headline rate.