Three types of small business credit

This chart explains the three primary types of small business credit: secured, unsecured, and Small Business Administration (SBA).

For more information about the SBA and the many ways it assists small business owners, see the lesson Getting Good Advice.

Three types of small business credit

Secured Credit Unsecured Credit SBA Credit
“Secured” credit means that the lender knows you have the assets, or collateral, available to repay them. For example, to qualify for $1,000 of secured credit, you would need to provide the bank with proof that you have $1,000, either in cash or another acceptable form, such as equipment or investments. “Unsecured” credit has no collateral attached. This means your personal assets are not a factor in the loan deal. Loans or credit lines from the U.S. Small Business Administration (SBA). To qualify for most SBA credit, your business should have a good credit history and show the capacity to repay. For most SBA loan programs, you apply to a financial institution, but the SBA helps you, the business owner, by guaranteeing to repay the lender a certain percentage of the loan amount if you were unable to. Your business may be able to borrow a higher amount or receive a better interest rate than you would without an SBA guarantee.

Lenders make an investment in you and your business. It can be helpful to work with a lender who is familiar with your type of business.

Click the Next button to compare two common credit products: loans and lines of credit.