Loans come in all shapes and sizes, but they can be divided into four main categories: Small Business Administration (SBA) loans, Lines of Credit, Term Loans, and Cash Advances.
Research shows that business startups end up capitulating often. A lot of reasons are involved. But, the most common one is the financial aspect.
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, your 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 of the Four most popular types of business loans that small businesses use:
What is a term loan? A term loan is 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.
In this type of business loan, the interest rates can be fixed or variable.
As major benefits of this type of loan, we can count on the flexibility in repayment, the minimal documentation, and the quick disbursal of funds.
Cash advance loans
What do cash advance loans mean?
A cash advance loan is best explained as a loan with a term of repayment done in a short period of time. Cash advances are short-term loans with higher interest rates than other loan types. Cash advances are typically used when businesses need quick access to capital and don’t have the time or resources to apply for traditional financing. You’re taking money against your credit card processing or revenue monthly.
This type of business loan is 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
A line of Credit is a flexible funding option that consists in getting a defined amount of money that can be accessed when needed. The repayment can be done in two ways: either immediately or over time.
Lines of credit are a type of loan that businesses can use when needed. With lines of credit, the borrower can access additional funds as needed up to an approved limit without having to reapply for a loan each time. This is useful for businesses that have unpredictable cash flow needs.
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 interest on a bigger loan.
The last option from the four most popular types of business loans you can use for your business is the SBA loan.
The SBA (Small Business Administration) loan is a business loan that is partially guaranteed by the government.
It lends money to small businesses, eliminating some risks for the financial institutions that are issuing the loan.
SBA Loans come in all shapes and sizes. What does this mean? It can mean for example that the repayment terms can vary from 5 to 25 years, despite the standard length of an SBA being 10 years.
The SBA advantage is the low-interest rates, the payment terms, and the capital that’s made available.
An SBA business loan can keep your business afloat, or expand it, or any other business reason at all, do not forget that you can also choose one of the four most popular types of business loans used by small businesses to help yours, too.