Business Loans Every Entrepreneur Should Know About

By Wednesday, July 20, 2016 0 No tags Permalink

If you are a business owner or are trying to start a business, financing can be a huge issue. It takes a lot of money to get a business off the ground, and most people can’t finance a business out of their own pocket. A business loan is the most common way to get a business off the ground, but there are many different kinds of loans you can get, so you might be frustrated trying to figure out the best route to go. Here are some different types of loans and how they can benefit your business.

Equipment Loan

An equipment loan is another possibility for your business. If one of your major needs is some equipment to make your business more profitable or run more smoothly, this might be the simplest loan to get. An equipment loan is similar to an auto loan. This is because the equipment is treated as collateral like a vehicle would be. You make payments on the specific equipment, and the equipment can be repossessed if you don’t make your payments. Once your equipment is paid off, you can take out another loan for your next piece of equipment and slowly expand your business while building your business’ credit.

Line of Credit

A business line of credit is a great way to secure some cash for your business and use it for whatever you need. A line of credit is great because you don’t have to get a new one every time you need more money. A line of credit is revolving, meaning, every time you pay it down, you receive the credit that you paid off. It’s like having a high-limit credit card for your business. The line of credit will depend on your business’ credit, the age of your business, how much money your business makes, and other factors as well. As you use your line of credit and pay on it regularly, you will probably see your line of credit limit increase.

SBA Loan

A small business loan is usually the first type of loan people look into. They’re a bit misleading because they’re called SBA Guaranteed Loans. These loans aren’t guaranteed and they aren’t given out by the SBA. The Small Business Association sets loan guidelines that lenders have to follow when they give out small business loans. The guarantee is the guarantee that the lenders follow the guidelines. In order to get an SBA loan, you usually need to have financial statements that prove how much money your business makes each month. Your business also needs to have good credit, a solid business plan, and some collateral to offer. Therefore, a startup business that hasn’t even opened yet isn’t likely to qualify. However, if your business is already successful but you want some money to expand, an SBA loan might work for you. You can get rates as low as 5.99% if you qualify. Search all of your options so you can get the best possible rate.

Short-Term Loan

A short-term loan is kind of like a cash advance for a business. This option is great for people who don’t need a lot of money at one time. If you just need a little extra cash to purchase some supplies, this might be your best choice. Short-term loans are often used by seasonal businesses or businesses who need to build up a quick inventory. The amount is generally under $100 thousand and your approved amount will depend on how much your business makes. The time to pay back the loan depends on the amount and the lender. It could be in a month, a quarter, or a year. This is also a great loan option for businesses who have poor or no credit. It can allow you to build your credit as a business and qualify for more substantial loans in the future.

Peer-to-Peer Loan

A peer-to-peer business loan is a type of loan where you borrow from another individual instead of a bank. Peer lending is a business trend that is allowing many more businesses to have a real chance in the business world. To get a peer loan, you can go on a peer lending website and apply. You need to stand out from the crowd and make sure you have a well-thought out business plan and let your peers know that you’re a good investment. Peer lending is helpful because individuals with extra money can choose who they want to see succeed and fund their projects. Of course, they are doing it as a business move, and they aren’t going to fund someone who they consider to be a serious risk. Each person will have their own lending stipulations, so you can apply for a loan and see what happens.

Everyone with the drive to have a successful business should get a chance at succeeding. You need money to get your business off the ground, and there are many ways to acquire it. Consider all of your options and apply for one of these loans.

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