There are many reasons why you might want to consider taking a business loan. Are you considering starting your own business ? You want to scale up your existing business or probably you are experiencing difficulties with your business cash flow…? Then, it won’t be bad for you to consider going for a business loan.
Whichever reason it is, it is pertinent for you to understand some important things about it. The types of business loans, and the features of these business loans. I believe these would enable you to pick an appropriate business loan that suits your needs.
Below are the types of business loans we have:
The business line of credit:
Just like a credit card, a business line of credit allows you to have access to money when you need it. While you repay at your convenience…in addition, this goes on for as long as you keep refunding the borrowed fund. Furthermore, it is important that you stay within your credit limit! Another added advantage of the business line of credit as a business loan is the fact that you only have to pay interest on the portion of money you access from your available credit. The Business line of credit allows you to have access to funding between $1,000 – $5,000. And you can get this within two weeks.
The small business administration SBA:
You can think of the small business administration as a personal government fund. Noteworthy, the essence of the federal agency is to help small businesses access funds and any other assistance they might require to stay afloat. A small business administration loan allows you access to funding that ranges from $50,000 – $5,000,000 over a period of 10 to 25 years. The major problem with an SBA loan is the duration it takes to process it. The agency requires a lot of documentation and as such it might take two to three months for funds to be accessible for the business.
Merchant cash advances:
From time immemorial, the merchant cash advances are mainly used by businesses whose existence is tied to the sales. That involves the use of debit and credit cards. Furthermore, businesses that make use of merchant cash advances include retailers and restaurants. However, in recent times, other types of businesses now make use of merchant cash advances to meet up with their financial needs.
Loans from friends and family
It is not a totally bad idea to source for funds from families and friends to sort out a business idea. Although this practice is age-long. However, it is important that some details are well spelled out. Details such as interest rate and the duration of loans. Furthermore, the importance of clarifying these details cannot be overemphasized as it could make the relationship estranged. The major problem associated with getting loans from families and friends is the fact that not so many people have extra cash they could part ways with. Many people, however, believe that borrowing family members money as a business loan is not a good idea.
Working capital loan:
In addition to the others, the working capital loan is a short term loan meant for the growth of the business. Working capital loans are also used in the daily running of the business such as running of adverts, payroll, and maintenance of equipment or tools. Furthermore, working capital loan is used to cover for unforeseen circumstances such as emergencies, as well as to pay off a debt. In conclusion, to access a working capital loan, you must have a very good track record with repayment of credit facilities and there is a lot of documentation required.
Commercial estate loans:
How does a commercial estate loan work? For businesses that are looking at buying or building a structure that will serve as their offices or manufacturing plants, this is the most ideal loan for this purpose. Banks give out this loan to viable businesses with a very long term repayment mode.
Equipment financing:
On the other hand, equipment financing is a type of loan that gives you access to funding that will enable your equipment purchasing power. It enables you to have access to the money needed in purchasing the equipment needed to scale up your business. Furthermore, this type of loan is available to both startups and already established businesses. It requires less paperwork and it is usually disbursed within a short time frame.
In conclusion, let me say that the type of business loan an individual would use for his business varies from one business to another. As a business owner, it is your duty to ensure you go for the one that suits your business needs.
