The loan you avail of can make or break your business’s success. Hence, it is best to be aware of the different types of business loans and select which ones best suit your business’s goals.
As of 2021, there are up to 32.5 million small businesses registered in the US. Each of those small businesses has needs and demands to meet two common goals: to make a profit and to expand. To achieve these goals, there should be a sufficient budget and cash flow to fund these businesses’ operations and projects. And that is where business loans come in.
Wiseteam Consulting is the right funding partner to help business owners achieve their goals. The financing firm offers merchant cash advance, business line of credit, SBA loans, equipment financing, invoice factoring, real estate financing, credit repair, and term loans in Wyoming.
Before getting any kind of financing for your business, you need to know the loan’s requirements or purpose. There are different kinds of business loans out there, and understanding each of these programs would help you how to prepare for the loan application process or find out which of these loans is appropriate for your business needs.
Common types of Business Loans
Other factors, aside from the loan purpose, can ultimately influence your choice when deciding which business loan to avail of. Factors such as qualification requirements, terms of payment or payment agreement, and the amount of loan that can be approved all play into if that type of loan is what your business needs or not.
Here are the top business loans currently available out there in the market.
One of the most preferred business loans is the term loan. Term loans offer a more flexible payment arrangement, with lower and often fixed interest rates. This type of loan is commonly used by small businesses as startup funding for their operations, purchasing fixed assets, and other capital and operational expenditures. The processing time for term loans is relatively short, with minimal documents required.
SBA, or Small Business Administration loans, are ideal for small business owners who want to avail of low-cost loans that are partially guaranteed and backed by the government. Applying for an SBA loan can be a tedious process, even challenging at times. But once approved, an SBA loan is also the type of loan that offers one of the longer repayment terms and lower interest rates out there in the market.
Business Lines of Credit
A business line of credit loan is akin to how a credit card works or a revolving credit. The lender approves the business owner for a credit limit, and that credit limit is renewed after repayment of each credit used. This type of business loan is suitable for those business owners who are unsure about the amount of funds they need to take out for a loan.
Equipment Loans and Real Estate Loans
These types of loans are specific to their purpose: equipment-only loans and real estate-only loans. Both offered up the acquired property or equipment as collateral for the availed loan in case of default in payment.
This “invoice” type of financing sells some, if not all, of your business’s outstanding invoices to a factoring company as a way to improve your business’s cash flow and revenue. A factoring company offers invoice factoring services, in which they buy a business’s unpaid invoices at an already discounted price. Invoice factoring is commonly availed by companies with clients who are not being proactive with making payments or for other business reasons such as acquisitions or expansion.
Merchant Cash Advances
Merchant cash advances are loans taken against a portion of your credit card or against your future sales. Although this type of loan offers one of the highest interest rates, they’re also the most convenient and fastest way to get cash, especially if your business has a high credit card volume and good credit card history.
Microloans are ideal for business owners requiring a loan amount of $50,000 or less and short repayment terms. This type of loan usually offers low-interest rates and less stringent requirements—another ideal loan for startup businesses and micro-business owners.
Yes, it is also possible for business owners to avail of personal loans to be used for business purposes. This is one way of building up a credit history, especially for new business owners who don’t have an existing credit score. Personal loan amounts available for business owners are considerably lower compared to the other types of business loans.
Work with the industry’s best to help you determine which business loan is best suited for you. Whether for business growth expansion or to implement marketing strategies to increase sales revenue, a good finance partner can help provide the financial solutions to help you achieve your business goals.
Get in touch with Wiseteam Consulting and start building your successful business journey with the right financing.