Business HELOC vs. SBA loan vs. business line of credit

Short answer: an SBA loan is often the cheapest money but the slowest and most paperwork-heavy; an unsecured business line of credit is the easiest to use but is sized to the business's own track record and usually priced higher; a business purpose HELOC sits between them — secured by your home, so it prices like secured debt, but verified from bank deposits and funded in days. If you own a home with equity and need the money this month, the HELOC usually wins.

SBA loans

SBA loans are made by banks and partly guaranteed by the Small Business Administration. Rates and terms are among the best available to a small business, and terms can be long. The cost is time and documentation: business plans, multiple years of business and personal tax returns, financial statements, and personal financial statements, with timelines that commonly run from several weeks to a few months. When business assets do not fully secure the loan, SBA lenders often take a lien on the owner's personal real estate anyway.

Unsecured business lines of credit

A business line of credit from a bank or online lender is sized to the business's own revenue, time in business, and credit. Online lines can fund quickly but tend to be smaller and more expensive; bank lines are cheaper but usually want two or more years of history and strong financial statements. Neither looks at the equity you have built personally.

Business purpose HELOC

A business purpose HELOC is a revolving line secured by your home, used for the business. Because it is secured by real estate, it prices like secured debt. Because it is a business-purpose loan, income is verified through a bank connection rather than a stack of financial statements, applying is a soft pull, and qualifying files close with an online notary and no in-person appraisal. Through Capova Capital, lines start at $25,000 and typically fund in 5 to 11 days.

Side by side

• Speed — SBA: weeks to months. Business line: days to weeks. Business HELOC: typically 5 to 11 days.
• Paperwork — SBA: heavy. Business line: moderate. Business HELOC: light; bank connection, with tax returns only as a fallback.
• Collateral — SBA: business assets, often personal real estate too. Business line: usually none, plus a personal guarantee. Business HELOC: your home.
• Who qualifies — SBA: established businesses with clean financials. Business line: established revenue and credit. Business HELOC: owners with home equity and debt-to-income at or below 50%.
• Cost — SBA: low. Business line: moderate to high. Business HELOC: secured-debt pricing.
• Revolving — SBA: no, most are term loans. Business line: yes. Business HELOC: yes, redraw as you repay.

Which to choose

1. 01Strong financials, a long-term project, and months to wait: apply for an SBA loan.
2. 02No home equity but solid business revenue: a business line of credit, or bridge funding if you need money within a day.
3. 03Home equity, and you need the money in days — especially to pay off merchant cash advances: a business purpose HELOC.
4. 04Need money today and a HELOC is the right long-term answer: take bridge funding now and pay it off from the HELOC when it funds.