Types Of Loans To Try And Get For Your Small Business

Choosing a loan to finance your small business is an important decision. There are many types of loans, each with its own characteristics that suit different situations. Check out this post for detailed information on the types of loans you can seek to fund your small business and their benefits.

Business Lines of Credit

Business lines of credit are revolving loans that allow you to borrow a certain amount of money for a fixed term. They usually offer lower interest rates than traditional loans because they do not have to be paid back with the principal. Instead, the borrower can take out the money as needed over time, topping off the outstanding balance whenever it goes below its limit.

SBA Loan

Small business administration (SBA) loans are provided by banks and other lenders who partner with the SBA to make small business loans available to those who meet the required criteria. Most SBA loans have long repayment periods, up to or more than 10 years. However, this type of loan comes with a few demerits, including slow processing time and being paper intensive.

Merchant Cash Advance

A merchant cash advance is a type of working capital loan offered to small businesses that need funds to meet their working capital needs. The borrower receives an initial lump sum of money and agrees to pay the lender back through a fixed percentage set on each purchase made on credit.

Small Business Loans

Small business loans provide financial assistance to establish, buy or improve a small business. It usually requires a down payment of about 25%, and the borrower must have sufficient equity or collateral to back the loan. Generally, they have a maximum repayment period of 7 years with a fixed interest rate. However, some small business loans have longer repayment periods and variable interest rates.

Equipment Loans

Equipment loans help businesses purchase equipment, machinery, and other capital assets. The borrower pays back the loan using the profits made from the business. Usually, equipment loans have repayment periods of about 5 to 7 years, but there are some with longer repayment periods.

Commercial Mortgage Loans

Commercial mortgages, also known as real estate loans, are among the most common types of loans for small businesses. Commercial mortgage loans are available to businesses that have properties in which they want to lease, buy or refinance.

Final Thoughts

Loans are important whether you are starting a new business or have been in operation for some time. While there are many types of small business loans, knowing how each works can be instrumental in making sound decisions. The loans mentioned above are the common types of loans for small businesses you are likely to get when you need some cash for your business.