 TITLE: How Do Small Business Loans Work? CONTENT: Types of Small Business Loans\n-----------------------------\nThere are a variety of small business loans you can consider:\n### Small Business Line of Credit\nA small business line of credit is similar to a credit card. You can borrow up to a certain limit and only pay interest on the amount of money you borrow. If you take out a small business line of credit, you'll be able to draw funds and repay them as often as you'd like as long as you don't go over your credit limit.\n### Accounts Receivable Financing\nAlso known as factoring, accounts receivable financing involves selling your receivables or outstanding invoices to a lender so you can receive early payment for them. The lender takes the risk on your receivables and provides your business with some cash in exchange for a fee. Age and quality of the receivables will play a role in the amount of money you'll receive. While quick access to cash is an advantage of accounts receivable financing, you're likely to pay more for this type of financing than others, especially if your business credit is less than stellar.\n### Working Capital Loans\nUnlike some small business loans intended to pay for long-term assets or investments, working capital loans are used to finance the everyday operations of your business. These operations can include things like rent, payroll and debt payments. Compared with other small business loans, working capital loans feature shorter terms and lower amounts. These loans are sometimes linked to your personal credit, which could take a hit if you don't make your payments on time.\n### Small Business Term Loans\nIf you take out a small business term loan, you'll get a lump sum of capital that you'll pay back at a fixed interest rate with regular repayment terms. In most cases, these types of loans are repaid in five years and used to fund a specific investment for a small business.\nJust like mortgages and car loans, small business term loans usually follow an amortization schedule, meaning most of your payment will go toward your interest at the beginning.\n### SBA Small Business Loans\nSBA loans are small business loans guaranteed by the U.S. Small Business Administration, a federal agency that helps entrepreneurs grow their businesses. A guarantee means that if you aren't able to make your payments to your lender, the SBA will pay out the guaranteed amount.\nThe SBA guarantees 85% of loans that are $150,000 or less and 75% of larger loans. Due to their guarantee, SBA small business loans can be tough to get.\n### Equipment Loans\nEquipment loans can help your small business replace existing equipment or buy new equipment as it grows. If you're a health care business, for example, you may use an equipment loan to pay for things like X-ray machines or infusion pumps. Typically, equipment loans require less documentation than other small business loans, so you can receive funding fairly quickly.\n### Small Business Credit Cards\nWhile a small business credit card is similar to a personal credit card, there are a few noteworthy differences. A small business card may provide you with reporting features so you can categorize and track your spending. It may also feature a rewards program that can help you save on common business expenses like office supplies and marketing services. Additionally, it is exempt from the Credit CARD Act of 2009. END