Are you a business owner who has just started and needs access to funds? If yes, applying for a small business loan might help you out. These loans cater to versatile business needs. They are easy to avail and have a lower rate of interest. Whether you seek funds for machinery or a new business setup, there is a business loan for every purpose. Keep reading on as we outline the top eight loan options for small business owners like you.
Term loans
It is one of the most popular small business loans. Terms loans can be secured or unsecured. They are suitable for daily business expenditures. The tenure for a secured loan lies in the range of one to five years and an unsecured loan can have a tenure of 15-20 years. The total loan amount directly depends upon the credit history of the applicant.
Start-up loan
A start-up loan comes as a respite to new business owners who lack business vintage. The lender will consider the personal credit history of the applicant while sanctioning the loan. The best part is that this small business loan is easy to avail of and includes minimal paperwork. It is an excellent way to get hassle-free finance for your new business setup.
SBA loan
Are you looking out for a low-cost government-backed loan? If yes, small business administration loans can be the right choice for you. Please note that these are secured loans and require personal or business security. Business owners with limited collateral can apply for microloans. The processing of SBA loans might take up to three months. It makes them a less favourable option if you have immediate fund requirements.
Equipment loan
Do you want to purchase, repair, upgrade, or replace business machinery? If yes, an equipment loan is worth considering here. It is a specific loan in which the machinery in question is used as collateral. Furthermore, the interest rates of equipment loans are lower than term loans. You can also apply for this small business loan online.
Commercial real estate loans
Business owners who want to purchase a new commercial property like a warehouse, retail space, or office can opt for this loan. Commercial real estate loans usually range from five to 20 years. However, the repayment period is higher than the term loans. Make sure you read all the terms and conditions before you apply for this business loan.
Working capital loan
Many small businesses struggle in meeting their day-to-day business expenses. If you happen to face the same problem, a working capital loan can be the right pick for you. It creates a balance in the cash flow and enables smooth business operations. It also helps in dealing with off-season cash shortages and meeting peak season demands. Working capital loans are useful for traders, retailers, wholesalers, and manufacturers who are in the imports and exports business.
Bridge loan
It is an excellent small business loan option for small-scale business owners. The tenure of bridge loans ranges from six months to a year. It is a boon for small businesses that need immediate funds. These loans are easier and quicker to secure than term loans. However, they are also one of the costliest loan options.
Invoice financing and invoice factoring
These are also beneficial business finance options, with a slight difference. In an invoice factoring loan, the unpaid invoice purchaser will take over the collections. But the customer retains control of payment collections in invoice factoring. The buyer can pay up to 90% of the invoice value in both options.
It is crucial to choose the right type of loan for the appropriate purpose. The wrong loan can add up to your costs, resulting in a loss of deals. If you seek funds to meet your daily business needs, you can go for working capital or tenure loans. If you want to buy machinery or buy an asset, an equipment loan or commercial loan is the right option for you.
Last but not least, if you are looking for some quick cash, you can go for bridge loans. In other words, you can pick the right small business loan by considering your business needs. You can also consider partnering with a market expert for more details.
