Here’s financing options that can help boost business growth? Check out a list of the 5 most common business loans entrepreneurs use so you can weigh your options and find the best fit.
Here’s 5 Common Business Loans that can help you;
Term loans are the designated period of time given by a lender for repayment, i.e. 6, 12, 36, 60 month and so on to repay your loan. This is arranged upon approval and in some cases during your application. Some traditional banks and lenders are flexible with regards to their terms.
Option 1: Short-Term Loans
These options are unique. Less responsibility since you will pay the loan in a short period of time. It could be from several weeks to most of three years. In a short-term loan, you need to take a look at the interest rate. If it’s daily or weekly, presumably it is with a high-interest rate. It could be attractive and seem so convenient but with high payments it’s risky. The constant payments may have a negative effect on your business cash flow. You should assess this small business owner loan categories very well.
Option 2: Medium-Term Loans
This is the small business owner loan category with flexible terms. Medium-term loans are often used for lager loan amounts, 30k and up. Were a short term loan can be made in a few days, medium terms loans take about a week to process. Because this term can carry within 5- 10 years wherein the interest is a bit lower. It also has lower monthly payments. This type of loan is one of the best choices among the small business owners loan types.
Option 3: Long-Term loans
For the most affordable terms, Long-term is the best. You can pay them back over 10 years or more. It has the lowest monthly interest rate. That means monthly payments are the lowest as well and have the least impact on your business’s cash flow.
SBA Loans are usually longer term longs lasting 7 to 10 years. Small Business Administration or (SBA) supports this type of loan. This is a program from the US government in which they provide resources to help small business.
Also, to provide low monthly payments and rates for the loans. SBA is more favorable with a variety of benefits. Privileges like reduced risk and no prepayment penalties. The only most common disadvantages are the long and complicated process. This is when GreatBiz can help, making the loan simple and taking only a week to process. This is the preferred loan for small business owners and is recommended that you put on the list as top choice.
GreatBiz role is to match your application with the lender from their marketplace. The process helps to approve the loan. GreatBiz can help you if you pre-qualify. GreatBiz loan funds can help you boost your cash flow. You can invest it back directly into your business. Also, they help a fast process to your application.
Credit Line Loans
This type of loans is based on a credit limit. It only allows you to borrow an amount that is covered by your credit line. Compared to a term loan this is smaller. Only the amount used earns an interest. Loans are only limited to an allowable amount provided.
It works like a credit card. The only difference is that it does not terminate or stop the use even if you reach a credit limit. It also comes with rewards when there is good performance.
Merchant Cash Advances Type
It caters to businesses that accept credit and debit card sales. The (MCA) process begins in receiving a specific sum in advance. There is a percent deduction from every transaction or on daily or weekly payments. So, for small business owners loan categories that favors, reward, think about it.
The downside of this MCA is that it can lead to extremely high annual percentage rates. Regardless of the minimum range, the percentage can grow really high. It can even reach up to well over 300%. compared to annual percentage rates.
Equipment Financing Loan
The Equipment loans are also term loans. It is specifically intended for purchasing a piece of equipment for your small business. The product or equipment purchased acts as collateral for the loan. The term usually matches the expected duration for the equipment.
The Invoice Factoring and Financing Loan Type
In the traditional sense, invoice factoring does not seem a loan. It is to sell your customer invoices to such a factoring company for an exchange to a specified sum. This way you don’t have to take care of the collections. This means you can receive funds more quickly and you don’t have to wait.
Its different among all the small business owners loan categories. Here you can control your invoices if you want to. Instead of selling them to a factoring company, you use them as collateral. You can use it when you decide to apply for a short-term cash advance in case
Getting into a loan needs the right timing, right reasons and the term with the right amount. You need to plan carefully how it could help in generating more income for your business. For small business owners loan categories find out which is the best fit for your needs.
Are you ready to find out which financing option you are approved for? Get Started!
The information provided through this article is for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.