Small business owners have access to a variety of loan options, from term loans to lines of credit, SBA loans, equipment loans, microloans and more. Each type of loan has its own requirements and is best suited for different types of businesses. Term loans are one of the most common types of small business loans. They are a lump sum of cash that is repaid over a fixed term with monthly payments that include interest in addition to the principal balance.
Traditional bank loans and SBA loans are two of the most affordable ways for a company to obtain funding, but the requirements for applying for a loan can be extensive and the process can take several weeks or even months to complete. A business line of credit is similar to a credit card. When approved, the company receives a maximum credit limit and can borrow from the fund at any time, as long as they don't spend more than the loan limit. Interest is only paid on money withdrawn from the line of credit. Short-term business loans are generally considered low-risk because they have short terms.
They are a good choice for new businesses and borrowers with low credit ratings, and most short-term lenders charge a one-time fixed fee rather than interest. An equipment loan is used to purchase equipment. The company will be able to use the equipment right away, but will not have to pay the full cost up front. Instead, they will be able to pay smaller payments on a regular basis with interest charged by the lender. A merchant's cash advance is another option for small business owners. After receiving a cash advance from the merchant, the lender withdraws daily payments from the company's bank account.
This type of loan offers some of the most competitive terms, the lowest APR, and high loan amounts compared to other loan options. Startup funding includes a variety of options, from SBA microloans to online loans and business credit cards. Small business owners who are trying to start a new business might consider this option since approval depends solely on their personal credit and not on a business credit score. Fundbox is an AI-powered business lending platform that accelerates the application, decision-making and funding process. Kabbage offers other beneficial tools for small business owners, including its own mobile application that provides comprehensive information on cash flow. Small business loans are available at a variety of traditional banks and credit unions, as well as online lenders.
A prospective borrower will need an existing solid business that is already up and running with proof of a certain amount of annual income.
