Once a business needs more than $500,000, there are several kinds of lenders and loan structures to choose from. Each is built for a different situation, so the best one depends on what the money is for, what the business owns, and how steady its cash flow is. BizyFi arranges financing above $500,000; this guide compares the options you are most likely to see at that size.
The quick way to narrow it down
- Buying a business: SBA 7(a), a bank or private credit term loan, often with a seller note. Larger, sponsor-backed deals add mezzanine debt.
- Buying real estate or major equipment you will keep for years: SBA 504, a commercial real estate loan, or equipment finance.
- Funding growth or day-to-day needs: a bank line of credit, or an asset-based line if most of your value sits in receivables and inventory.
- Refinancing expensive debt: a bank or SBA term loan if cash flow supports it; private credit if leverage is higher than banks allow.
SBA 7(a) loan
- Best for: buying a business, partner buyouts, working capital, equipment and refinancing, especially when a bank alone would want a bigger down payment.
- Typical size: up to $5 million.
- Lenders look at: cash flow coverage of the payments (DSCR), the buyer's or owner's experience, and an equity injection (at least 10% for most acquisitions). Owners of 20% or more give personal guarantees.
- Strengths: long repayment terms (typically 10 years for most business uses and up to 25 for real estate), which keep payments manageable, and lower down payments than many conventional loans.
- Watch out for: SBA paperwork and fees, the personal guarantees, and rules on seller notes in acquisitions.
SBA 504 loan
- Best for: owner-occupied real estate and long-life equipment.
- How it works: a bank lends about half, an SBA-backed lender about 40% on a long-term fixed rate, and the business puts in about 10%.
- Strengths: a long, fixed-rate portion and a low down payment for property and major equipment.
- Watch out for: it is not built for working capital or for most of the goodwill in a business purchase, and it has two lenders to work with.
Conventional bank term loan
- Best for: established, profitable businesses refinancing, expanding or buying equipment or another business.
- Lenders look at: several years of steady profits, solid coverage of the payments, collateral and a reasonable amount of total debt.
- Strengths: usually the lowest cost when you qualify, with no SBA fees.
- Watch out for: shorter terms than SBA (so higher payments), larger down payments, and covenants you must keep meeting.
Bank line of credit
- Best for: seasonal swings, inventory build-ups and bridging the gap between paying suppliers and getting paid.
- Lenders look at: profitability, the business's bank relationship, and often a borrowing base of receivables and inventory.
- Strengths: you draw only what you need and pay interest only on what you use.
- Watch out for: annual renewals, covenants, and the bank's right to reduce the line if results weaken.
Asset-based line of credit (ABL)
- Best for: businesses with significant receivables and inventory, including those growing fast or with uneven profits.
- Lenders look at: the quality of the collateral more than recent earnings: who your customers are, how old the receivables are, and how quickly inventory sells.
- Strengths: the line grows with the business and can be larger than a cash-flow loan would allow.
- Watch out for: regular reporting, collateral audits and field exams, and fees on top of interest.
Equipment finance and leasing
- Best for: trucks, machinery, medical equipment and technology.
- Lenders look at: the equipment's value and useful life, plus the business's ability to make the payments.
- Strengths: the equipment is the collateral, terms can match how long it lasts, and approvals are often quicker than a general loan. See lease vs. loan.
- Watch out for: end-of-lease terms, and the total cost compared with a loan.
Commercial real estate loan
- Best for: buying or refinancing property the business occupies or owns as an investment.
- Lenders look at: the property's value and income, the loan-to-value ratio, and the business's ability to cover the payments.
- Strengths: longer amortization than most business loans.
- Watch out for: appraisal and environmental requirements, and balloon payments on some loans.
Private credit (unitranche and direct lending)
- Best for: larger acquisitions, recapitalizations and refinancings, often for companies backed by private equity or independent sponsors, and for businesses whose leverage is higher than a bank allows.
- Lenders look at: earnings (EBITDA), the quality and predictability of revenue, and the strength of any sponsor.
- Strengths: speed, flexibility on structure, and one lender for the whole senior loan.
- Watch out for: higher interest rates than banks, prepayment terms and financial covenants.
Mezzanine and subordinated debt
- Best for: filling the gap between what a senior lender will lend and the equity available, in acquisitions and growth plans.
- Lenders look at: the business's cash flow after senior debt, its growth plan, and the sponsor or owners.
- Strengths: less dilution than raising equity, and flexible repayment (often interest-only, then repaid at the end).
- Watch out for: a higher cost, sometimes with warrants or other equity-like features, and it sits behind the senior lender.
Seller note
- Best for: buying a business from an owner who will accept part of the price over time.
- How it works: the seller lends part of the purchase price, usually subordinated to the bank. See how a seller note works.
- Strengths: reduces the cash a buyer needs, and shows the seller believes in the business.
- Watch out for: SBA rules on seller notes, and the terms you negotiate if the business underperforms.
How BizyFi helps
BizyFi is the financing platform of Fusion Network, an independent commercial debt advisory. We are not a lender. For requests above $500,000, we match your business with the lenders whose criteria fit, across banks, SBA lenders, asset-based and private credit lenders, so you can compare real options. Describe the financing you need to get started, or check the numbers first with the DSCR calculator and the SBA payment calculator.