Rockstone Lending, a small-business funding broker in Yuma, Arizona, helps businesses compare three types of business loans: working capital loans, term loans and lines of credit. A business loan is borrowed money that the business repays, with interest, on a schedule the lender sets. Lending partners make the credit decision and set rates and terms. Call (928) 436-5545 or apply online.
How business loans differ from other funding
With a loan, a lender advances money and your business agrees to pay it back, plus interest and any fees, on a schedule written into the loan agreement. That obligation is debt. It stays on the books until it is repaid, whether sales rise or fall, and the lender decides whether to lend based on its own evaluation of the business and, often, its owners.
Other kinds of business funding work differently:
- Equipment leases let the business use equipment in exchange for lease payments. Depending on the lease, you may or may not own the equipment at the end.
- Merchant cash advances are not loans. A funder buys a portion of your future receivables and collects a share of your sales until the purchased amount has been delivered.
- Equity means selling part of the ownership of the business to an investor. It is outside the options covered on this site.
Everything on this site concerns commercial loans and other business-purpose funding, not personal or consumer credit. Among loans, the three types below differ mainly in how the money arrives and how it is paid back.
Working capital
Working capital funding pays the everyday costs of running the business when cash coming in has not caught up with cash going out: payroll, inventory, rent, supplier invoices. It is usually sized to a specific gap and repaid over a shorter period than a loan for a long-lived asset. Lenders structure it in different ways, including short-term loans and longer working capital term loans. If the gap comes from stock you buy ahead of sales, see our page on financing inventory.
Read about working capital loans
Term loans
A term loan delivers one lump sum that is repaid in regular installments over a term the lender sets. It suits a defined, one-time need where you know the cost up front: opening a second location, renovating, buying out a partner or refinancing more expensive debt. The fixed payment is easy to plan around, but interest runs on the full amount from the start, whether or not you have spent it yet.
Read about business term loans
Lines of credit
A line of credit sets a borrowing limit you can draw against when you need it. Interest is generally charged only on what you have drawn, and as you repay, that amount becomes available again. It fits needs that recur but are hard to time, such as covering a slow month or buying stock ahead of a busy one. Lenders periodically re-evaluate lines and can renew, reduce or close them under the terms of the agreement.
Read about business lines of credit
Short-term vs. long-term business financing
Business financing is often grouped by how long you have to repay it, and the useful rule is to match that length to the need.
- Short-term financing, such as a working capital loan or a draw on a line of credit, suits needs that pay for themselves within months: payroll until an invoice is paid, or stock ahead of a busy stretch. Payments may be weekly or monthly.
- Long-term financing, such as a term loan or equipment financing, suits investments that earn over years: a remodel, a second location, a machine. Spreading payments out lowers each one but raises the total interest.
Mismatches cause trouble both ways. A long-lived investment paid for with short-term money crowds cash flow, and a short gap financed over years keeps you paying long after it has closed. Our guide to what a business loan can be used for maps common uses to each option.
Types of business loans and funding compared
The table below compares all five options Rockstone Lending helps businesses explore. It is a general guide, not a quote: each lending partner sets its own requirements, pricing and terms.
| Option | How you receive the money | How repayment works | Typical uses | What partners usually look at |
|---|---|---|---|---|
| Working capital loan | A lump sum sized to a specific gap | Scheduled payments over a shorter term set by the lender | Payroll, inventory, seasonal slowdowns, supplier bills | Revenue and cash flow, time in business, credit history, bank statements |
| Business term loan | One lump sum at closing | Fixed installments over a set term; prepayment terms vary by lender | Expansion, renovation, acquisitions, refinancing | Track record, profitability, existing debt, collateral, often a personal guarantee |
| Business line of credit | Draws as needed, up to a limit | Repay what you draw; repaid amounts can be drawn again | Recurring or unpredictable short-term needs | Consistency of cash flow, how existing credit is managed, credit history |
| Equipment financing | Funds paid toward specific equipment, as a loan or a lease | Scheduled payments; the equipment usually secures the financing | Vehicles, machinery, kitchen, medical and shop equipment | The equipment and its quote, plus the business's revenue and credit |
| Merchant cash advance (not a loan) | A lump sum in exchange for a share of future receivables | Remittance taken as a share of sales, on a method and schedule set by the funder | Short-term needs for businesses with steady card or daily sales | Sales volume and consistency, existing advances, bank and card-processing statements |
Holding a loan offer already? Estimate a loan payment and the total interest from the offer's own numbers. The calculator does arithmetic only; it is not a quote.
Other options: equipment financing and merchant cash advances
Equipment financing is built around a specific purchase. Because the equipment itself usually secures the deal, it is often a more natural fit than a general-purpose loan when the need is a work truck, an oven or a production line. It also includes leases, which is why it sits outside this loan section.
A merchant cash advance is not a loan. The funder buys a portion of your future receivables and collects a share of your sales until it has received the agreed amount. Depending on the contract, remittances may adjust when sales change, but the total cost can be high. Compare it with loan options before you sign anything.
SBA loans are a separate route, made through SBA-participating lenders. Rockstone Lending is not an SBA lender and does not arrange them, but our guide explains how SBA loans compare with the options on this page.
What information partners usually ask for
Requirements differ by partner and by product, and Rockstone Lending does not set them. In general, lending partners ask about:
- How long the business has been operating, and how it is legally organized
- Revenue, usually confirmed with recent business bank statements
- The credit history of the business and, for many products, of the owners
- Existing debts and advances, including any merchant cash advances still being repaid
- What the money is for, with quotes, contracts or invoices where relevant
- For larger requests, financial statements or tax returns
The form on this website asks only for basic details. It does not ask for bank statements, Social Security numbers or bank account numbers. For how partners turn this information into an amount, see how much business funding you can get.
Working with a broker
Rockstone Lending connects you with lending partners; partners make credit decisions and set rates and terms. We are not a lender, and submitting a request does not guarantee approval.
What a broker adds is legwork and context: explaining how each product works, helping you get clear about what you are asking for and why, and putting your request in front of partners that offer that type of funding. When an offer comes back, the terms are the partner's, and the decision to accept is yours. Our disclosures page explains the relationship in full, and how it works walks through each step.
By Rockstone Lending · Updated
