What are the Different Types of Business Loans?

Many business owners face the same major hurdle: finding the right business loan. Whether you want to expand your operations, manage short-term cash flow, or invest in commercial real estate, understanding the basics of business lending is very important. But how can you choose the best business loan, especially with countless options available? Keep reading. This guide walks through six different business loan options and explains the best reasons to use each one.

Business Term Loans

When you hear “business loans,” you are probably thinking of business term loans—and for good reason. They are one of the simplest and most reliable ways to secure business financing.

When you apply for a business term loan, you receive a lump sum upfront, which you repay in steady installments over a set timeframe (often with a fixed interest rate). This is a trusted solution for businesses making long-term investments.

Use Business Term Loans To:

• Buy expensive equipment
• Grow your operations
• Finance large projects that need upfront capital

Business Term Loans from Armed Forces Bank

Business Lines of Credit

Business lines of credit, also called “business credit lines,” function similarly to credit cards. They offer flexible, revolving access to borrowed funds, allowing you to pay interest only on the amount you use. When you need more funds, you can borrow again without the hassle of reapplying each time.

A business line of credit is a practical, reliable tool designed to help you navigate the ups and downs of running a business. Therefore, you can focus on what matters most: serving your community and achieving your goals.

Use Business Lines of Credit To:

• Handle short-term expenses
• Manage cash flow during seasonal fluctuations
• Cover unexpected operational costs

Example: Mark is a U.S. Army veteran who owns a landscaping business. During the busy spring season, a major client requests an expanded project that includes specialized plants and additional materials. To meet the demand quickly, Mark taps into his business line of credit to cover the upfront costs. He only borrows what is needed, completes the project on time, and repays the credit once the client pays. Having this flexibility lets Mark seize the opportunity without straining his cash flow.

Business Lines of Credit from Armed Forces Bank

SBA Loans

SBA loans are a lifeline for many small business owners, offering financing options that might otherwise feel out of reach. Backed by the Small Business Administration, these loans reduce the perceived risk for lenders, making it easier for entrepreneurs to access money for business growth. Small business loans are known for their competitive terms, lower down payments, and greater flexibility—even for borrowers with limited credit history.

Every company is unique. Luckily, SBA loans are too! The Small Business Administration provides a variety of options to meet different needs, helping more small businesses receive funding.

Use SBA Loans To:

• Secure funding when you can’t qualify for a traditional business loan
• Buy necessary equipment or inventory
• Grow into new markets

SBA Small Business Loans from Armed Forces Bank

Commercial and Industrial Loans (C&I Loans)

Commercial and Industrial Loans (C&I Loans) are tailored for businesses in the manufacturing, distribution, and service sectors. These loans are typically used for major projects like financing equipment or expanding facilities.

Use Commercial and Industrial Loans To:

• Fund manufacturing, distribution, or projects needing a substantial upfront investment for large-scale items
• Grow and expand facilities to accommodate increased operations
• Buy equipment or machinery
• Finance owner-occupied real estate to support business activities

The approval process for C&I Loans considers a business's creditworthiness, profitability, and cash flow. The lending structure depends on the purpose of the loan. For one-time expenses, such as buying equipment, acquiring owner-occupied real estate, or financing a big expansion, a lump sum loan with a defined repayment plan is ideal. On the other hand, for continuous financial needs like managing cash flow, purchasing inventory, or covering operational costs, a revolving line of credit is more suitable.

Corporate Lending / Corporate Banking

Corporate lending is designed for large, established businesses that need substantial financial support for activities like mergers, acquisitions, or refinancing existing debts. This type of financing often comes with complex terms and conditions, and the borrower needs to provide collateral to secure the loan (such as real estate, equipment, or inventory).

Use Corporate Lending To:

• Expand your business through acquisitions
• Restructure and recapitalize
• Refinance existing loans at a better rate
• Entering new markets to grow your business
• Obtain sponsor financing

Commercial Real Estate Loans

Commercial real estate loans (CRE Loans) are mortgages used to buy, improve, or develop commercial properties. CRE Loans are backed by a lien on property, providing a level of security for both borrowers and lenders. This means the lender holds a legal claim to the property until the loan is fully repaid. In the rare event that a borrower is unable to meet their repayment obligations, the lender may sell the property to recover the remaining balance.

CRE Loans are typically sought by business investors such as corporations, developers, partnerships, funds, and real estate investment trusts (REITs). These entities do not use the property themselves; instead, they earn rental income from other businesses and tenants who occupy the space. In essence, the property acts as an investment that generates revenue to pay back the loan.

Commercial real estate loans typically have long amortization periods, which means the loan is repaid over an extended timeframe (usually 20-30 years). At the end of the term, they often include balloon payments, meaning the borrower must pay a large lump sum to settle the remaining balance.

When evaluating CRE Loan applications, lenders review several important factors, such as the type of property being purchased (collateral), the borrower’s creditworthiness, and key financial ratios. These considerations allow lenders to carefully assess the risk and create fair loan terms.

Use Commercial Real Estate Loans To:

• Buy commercial property for business-related purposes, such as office buildings or retail spaces
• Refinance existing property loans to receive better terms or interest rates
• Take on new development projects, like building a shopping mall, apartment complex, or warehouse
• Fund renovations to boost the value or functionality of commercial properties

Choose the Best Loan for Business

Business loans are not one-size-fits-all. The right product depends on your business size, goals, and financial circumstances. It’s important to take time evaluating what your business truly needs for success. Consider these questions before deciding:

• What are your most immediate financial needs?
• Are you looking for short-term flexibility or long-term stability?
• Does your cash flow align the loan repayment terms?

At Armed Forces Bank, we specialize in loans for small to mid-size businesses, including those led by military veterans, military spouses, and their families. Whether you are a startup entrepreneur looking for the perfect SBA small business loan, or a mid-size company exploring different business lending options, our military bank is here to support you!

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Are Small Business Loans Right for You?