Small business loans can help finance a startup, provide the money to purchase a business’s equipment and real estate, and can also provide the funds needed to expand an existing business.
Some examples of the financial products that are provided with small business loans are working capital, merchant cash advances, business lines of credit, small business credit cards, business term loans, short term loans, SBA loans, and startup business loans.
The decision leading to a small business loan will rely on a few things, including, but not limited to:
It’s important to learn about the different types of business loans online that you can choose from when moving forward in your application process.
Term Loans are the most common type and what people think of first when they’re pursuing a small business loan. They both have similar characteristics. A “term” is the time period in which you’ll be making recurring payments. A typical loan term with a bank can be anywhere from four to 10 years. In some instances, it can be even longer. The purpose behind your loan may help determine the term.
Term loans are usually taken to make real estate or equipment purchases. The goal is to expand a business. The goal is fulfilling a business’s needs and providing money so that a company may grow or so that an individual may finally be able to start a business of their own.
These kinds of purchases are considered investments due to having an impact on the future growth of a business. This means they can also have an impact on how long the term may turn out to be.
Although it’s not the only option, many business owners will turn to a bank when they’re looking to apply for a small business loan. Although pursuing a bank is common, it’s best to look at all your options and compare rates.
Applying for a term loan can take several weeks or months. In order to apply for one, you’ll need to visit a bank you trust and meet your assigned banker. You’ll then need to fill out and submit an application.
An SBA-guaranteed loan is subsidized by the government and has become a favorite due to its appealing rates and terms. The government agency is backed by the Small Business Administration, which is known for offering support to smaller businesses. The SBA works with lenders like credit unions, banks, and charitable organizations to provide a fraction of loan payments to these businesses.
The SBA is able to provide 85% of loans in the $150K region and 75% of anything higher than $150K. These loans can be used towards creating new businesses, growing existing businesses, new construction, a business’s capital, and refinancing existing debt.
Additionally, the SBA may offer express loans that provide 50% of a loan up to $350K. Microloans are made by single lenders instead of unions or banks. Small businesses that are new or expanding may receive up to $50K with their loans.
These loans are most beneficial for businesses that are looking to expand or evolve and are provided by Certified Development Companies. Disaster loans are loans with low-interest rates to be used to help repair property, inventory, or equipment that have been destroyed or damaged in a disaster. They are also the only program by the SBA that is not only for small businesses but for bigger ones as well.
The other two types of fast loans are commercial mortgages and business acquisition loans.
A commercial loan provides funds to purchase or renovate properties like offices, warehouses, and retail spaces. Business acquisition loans provide capital to buy an existing company or to start a new franchise.
Business lines of credit provide a lump sum of revolving credit. Borrowers can use up to the credit limit. Once the used amount is paid back, it is available for use again without having to reapply. They’re like credit cards in that you are charged interest for the money you take out. There is financial independence in this type of situation, but it’s important to keep track of how much you spend.
Startup business loans are geared towards startup businesses that have very little business history and are based upon the business owner’s personal credit history.
Equipment financing is provided to help a business afford equipment and inventory like office supplies or warehouse equipment.
Finally, there are loans where you may receive financing in days. With a merchant cash advance, you may receive the funds quickly as long as you agree to give the lender a fraction of your profits from commerce.
Business credit cards are also a great option if you don’t need a lot of cash. They may also build up your business’s credit history, which will help with getting loans in the future.
Accounts receivable financing, or invoice factoring, allows companies to sell their unpaid invoices. This type of method is also known as factoring.
Before applying for a loan, there are steps you should follow in order to best prepare.
1. Anticipate the amount of funding you will need. Review your expenses and budget how much you can afford in loan payments. You can determine this by going over your debt service coverage ratio. Lenders will typically prefer a 1.0 ratio.
2. Look over your credit score. Review your credit score for potential errors or negative marks. These may lower your chances of approval.
3. Compose a solid business plan. This will show lenders the foundation of your business and how profitable it will prove to be. It’s very important to show a strong business venture and a business plan that is on track. A business plan should start off with a basic summary of your company. Then, it should include the following:
Below are the summarized steps to getting a loan for your business venture.
The next thing to do is apply for a business loan online. Listed below are the documents and personal information that will be asked for when you’re filling out your application and speaking with your lender.
It is important to weigh the good with the bad before making the decision to apply for a business loan online.
|Company name||Terms||Funding Amount|
|Fora Financial||Up to 18 months||Up to $500,000|
|Credibly||Up to 17 months||Up to $250,000|
|BlueVine||Up to 12 months||Up to $200,000|
|LendRev||Varies by funding type||Up to $500,000|
|EasyFunding||Up to 24 months||Up to $350,000|
|Imperial Advance||Varies by funding type||Up to $1,000,000|
|RapidAdvance||Varies by funding type||Up to $500,000|
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