The main Types of Small Business Loans: A Complete Guide.
Are you thinking of applying for a small business loan?
Before finding a lender or applying, you need to know various types of small business loans. As a result, you do not have to rush into applying for one without knowing what it entails, unless you want many problems.
Applying for these loans may look like a simple process, especially when lenders use sugarcoated languages to get you on board. However, you will notice that it pays to take time and check every detail. Nobody wants to get a loan only to find out that it is not useful to their business.
Read this guide to know the main types of small business loans and how they can help you run and grow your company.
Related topic: outsource services for your small business.
Small Business Administration Loans
Also known as SBA loans, you can use the fund from this channel to support your company’s operations, especially when you are disadvantaged. They are administered by a federal government agency and act as your government friend. These loans often start from $50,000 up to $5,000,000 with terms of 10-25 years.
Because of the nature of SBA loans, you can use them for a wide range of tasks, including:
- Recovering from an emergency
- Hiring staff
- Getting new business premises
- Purchasing inventory
- Repairing your business premises after damage
- Getting new customers and partners on board
One of the downsides of these loans is the slow processing, often related to the submission and verification of paperwork. And that’s because the government agency receives lots of applications, and they have to review all. For example, it may take up to three months after application for you to see the funds.
Business Line of Credit
If you are looking for flexibility, you should consider applying for a business line of credit because the loan allows you to access funds depending on your needs. The money is processed fast too, and you can expect to have it in your bank account within two weeks. The loan allows you to borrow anything from $1,000-$500,000 at a rate of 8-24%.
With these loans for businesses, you can perform a wide variety of tasks, including expanding to new locations, adding a new vehicle to your fleet, and paying invoices. You can choose to withdraw all the funds at once or take in as many installments as you wish, depending on your needs. The best part is that your money will always be there no matter how many times you choose to withdraw.
Business Term Loans
Business term loans are a great way to get working capital, especially when just starting a business. As a startup, you are likely to experience many financial problems unless you have huge amounts of money in your savings. As a result, applying for this loan gives you a chance to create a kitty from which you can draw funds to manage your daily operations.
These loans are popular among small companies because they have been around for longer and have been reliable even though they are not the flashiest. You can expect to get any amount from $5,000 up to $2,000,000. What makes them even better is that the amount will be in your account in a few days.
Short Term Loans
Do you want a loan facility that allows you to receive the money within 24 hours of application?
If you want the money urgently, you should choose short-term loans. They have always been helpful to many businesses. For instance, they are the kinds of loans that you can apply for when faced with an emergency.
They are some of the best small business loans because you can use them to pay for various expenses, including hiring new staff, endure a sales slump, pay for unexpected expenses, and replace broken equipment. However, you also need to know that you have to pay them fast the same way you got them. It is usually between 2-3 years.
Business Credit Cards
If you have ever had a business credit card, you know that it is the friendliest way to access credit, and you do not even have to go through too many processes.
These cards allow you to access up to $500,000 in loans and get 8%-24% interest rates. The processing time does not exceed two weeks, and therefore, you can always count on these cards to give you money to enhance the operations of your business.
If you read this article, you will notice that there are various reasons loans can be declined, but that hardly happens when you are using a business credit card. Therefore, you can use the money to boost your working capital and pay for other expenses. You can also build your credit by leveraging the card’s reward program.
Merchant Cash Advance Loans
If you can use your future earnings to secure a loan, you should go for the merchant earnings cash advance.
After the merchant agrees to give the loan, you will begin paying from daily earnings deposited to your credit card, depending on that agreed percentage. In addition to that, you enjoy a lot of flexibility because you can use the loan for myriad purposes.
Merchant cash advance loans can be equated to short-term loans because of the speed with which they are processed. You can also expect to get any amount from $5,000 to $200,000, with the funds being deposited in your account within 24 hours.
However, you should know that such convenience comes with a premium rate, and therefore, you should expect to pay an interest rate, not below 18%.
Know the Different Types of Small Business Loans
After looking at all these types of small business loans and choosing one that suits you, you should find a reliable lender. You may want to search locally, but if none is suitable, turn to online borrowing. You will find several reliable online companies that help you grow your business.
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