Starting your own business can be one of the most challenging and fulfilling experiences. After so much planning and work, you’re finally out there on the market. But the process of opening a business and staying on the market can be quite daunting and sometimes, depending on various financial factors, a business can be on the verge of going down.
Research shows that business startups end up capitulating often. A lot of reasons are involved. But, the most common one is the financial aspect.
So how can you ensure that your small business won’t end-up being on the side where you’re forced to capitulate?
Or, in the good case, you small business is growing so fast that you now see yourself put in the position to have to expand. That means new plans, new spaces for your business, a lot of new equipment etc. How can you ensure you get all the necessary money for a change like this?
By using loans dedicated to small businesses.
Here’s a list with the 4 most popular types of business loans that small businesses use:
What is a term loan? A term loan is a simply put capital borrowed from a lender. The reimbursement is done at fixed intervals, over a period of time you set with the lender. The intervals can be weekly, bi-weekly or monthly. That’s to be decided between the business and the lender. The set period of time is the term, which varies and can go up to 5 years.
With this type of business loan, the interest rates can be fixed or variable.
As major benefits for this type of loan, we can count the flexibility in repayment, the minimal documentation and the quick disbursal of funds.
Cash advance loans
What does cash advance loans mean?
A cash advance loan is a best explained as a loan with a term of repayment done in a short period of time. It’s also known as a payday loan.
This type of business loan is universally known as an emergency loan that you take from a bank or alternative lenders. It’s usually a loan offered by the credit card issuer of your business card. To put it simple, you are taking money against your credit card line of credit.
The advantages of this type of business loan are that it’s an easy to access type of business loan, it’s fast and it usually has fewer requirements than the other types of loans.
Lines of Credit
This type of business loan is a flexible funding option which consists in getting a defined amount of money that can be accessed when is needed. The repayment can be done in two ways: either immediately or over time.
This type of business loan can be useful in covering the gaps your business might have due to irregular monthly income. It can also be used to finance a project within your business whose costs you cannot predict from the very beginning.
The most beneficial thing about this type of business loan is that you have the ability to borrow only the amount that’s needed. In return, this can help you avoid having to pay interests on a bigger loan.
The last option from the 4 most popular types of business loans you can use for your business is the SBA loan.
Like the name says, the SBA (Small Business Administration) is a business loan which is partially guaranteed by the government.
It lends money to small businesses, eliminating some risks for the financial institutions that’s issuing the loan. This way, if you’re unable to pay the loan, the lender knows that the SBA will cover the portion that they guaranteed.
It’s a type of business loans that comes in all shapes and sizes. What does this mean? It can mean mean for example that the repayment terms can vary from 5 to 25 years, despite the standard length of an SBA being of 10 years.
The advantages of this type of business loan are the low interest rates, the payment terms and the capital that’s made available.
So, if you find yourself needing a business loan to keep your business afloat, or to expand it or any other business reason at all, do not forget that you can also choose one from the 4 most popular types of business loans used by small businesses to help yours, too.