TEN TYPES OF BUSINESS LOANS

TEN TYPES OF BUSINESS LOANS

Starting a new company requires good funding. These businesses and start-up entrepreneurs always require a unique idea in the market to bloom. The easiest way to boost the business is to borrow a handsome amount of money by taking a loan. For this purpose, many platforms provide different types of business loans to new start-ups. Using the loan amount can help a business to grow effectively.

WHAT IS MEANT BY A BUSINESS LOAN?  

Every business needs capital to progress. Business loans are a perfect way to do that. This is an amount of capital that is paid to the business owners or lenders for a specific period that helps them to earn a good profit. The borrowed money is then paid back to the lender with a decided interest rate.

WHY DO YOU NEED A BUSINESS LOAN?  

To meet the financial need of the business, whether it is planned or unanticipated, a business loan is required. Besides, to increase your profit, widen your reach, and for long-term growth, a business loan can be a helping hand.

REASONS TO TAKE OUT A BUSINESS LOAN

Money borrowed can be used to:

  • Buy new types of equipment
  • Upgrading inventory
  • Pay wages
  • Open a new location
  • Pay unpaid invoices
  • Invest in social media advertisement
  • Buy Business supplies, etc.

TYPES OF BUSINESS LOANS

Depending on a few features, including the source of capital you borrowed and agreed-upon payback time, business owners can easily get money. Let us study the top ten popular types of business loans below.

1- Business Line of Credit – Loan

Also known as LOC, during the time of uneven cash flow, this unsecured line of credit will be the best solution. This is an agreement between the lender and the borrower to decide a maximum amount the person can borrow, with a specific interest rate and rules. A business owner can borrow money usually from the bank and take it out in chunks until the limit is reached. After the money is paid back, they can borrow the money again using the LOC method.

2- Invoice Financing – Loan 

Also termed as Accounts Receivable Financing, this type of loan is more popular in B2B businesses. This is a short-term borrowing that enables the businesses to meet the needs based on the invoices developed and are unpaid by the clients. The businesses do not have to wait, and they will receive immediate payment from the bank within 48 hours.

3- Business Financing – Loan

Starting up, a new entity is not an easy job. From the unique idea to funding, every step is very crucial. A business loan here will help achieve the goals you have made for the business. They will help finance your business in easy term loans that you can easily pay later at reasonable interest rates.

4- Business Term – Loan

It is a traditional business term loan where regular repayments of the loan are paidin a lump sum amount of capital with the decided fixed interest rates. Many small businesses avail of this opportunity to finance their business because they have a quality credit score, a good profit rate, and collateral.

5- SBA – Loan

These are the guaranteed loans by the government that depend upon the needs of the borrower. You can avail it for both short-term and long-term needs of the business, as it benefits both ways for the new as well as already existing businesses. You can use these assets as collateral to borrow capital:

  • Equipment
  • Real State
  • Land
  • Personal guarantor
  • Accounts Receivable
  • Bonds
  • Saving accounts etc.

6- Microloan Program – Loan

Each entity that is lending money has its lending and capital requirements. Most of them have a maximum limit of six years to pay back the borrowed money. This program finances money to small business entities and not-for-profit childcare centers to grow. These loans are generally provided to the people who have low-income or are unable to get a loan from other sources. Some of them are even interest-free. These can be used for inventory, fixtures, and working capital.

7- Rapid or Bridge Loan

Many businesses need a quick response, and rapid loan suits their situation. These financing methods provide fast and temporary financing. They can be as quick to provide a loan in one day. This is the easiest way to get a loan, and entities who are borrowing the money can be from any line of credit. In this borrowing method, they have a monthly fee instead of a weekly, monthly, or yearly fee because it is closed in less than a month. Most small- business owners avail it to cover the expenses while they find a permanent solution for it.

8- Merchant Cash Advance – Loan

Also called MCA Loan or business cash advance provides the fastest way to get the loan for your business. It offers financing based on future sales. On a finalized interest rate of credit or debit card, the lump sum payment is provided to the businesses. The requirement to avail of this loan is that you should provide a bank statement, bank tax returns, etc.

9- Start-up – Loan

This type of loan is a government-backed personal loan that is provided by the government to the businesses or individuals who are looking forward to growing their own business on a small scale. Every business gets loans to help them to begin equipment financing, furniture, supplies, etc.

10- Business Credit Cards – Loan

Business credit cards are made specifically to use for business purposes instead of any personal use. This is a way to improve the bank statement of the business for future credit use. They have a credit limit that will increase the purchase at any time and can withdraw cash as well.

CONCLUSION

In conclusion, businesses must be very careful while borrowing money from one of these ways. Loans are a great solution for businesses to expand by finding a good investor. However, before borrowing money, it should be ensured that you will be able to payback on the agreed-upon time; otherwise, the assets that you provide as a collateral can be taken away from you. Despite the risks involved, businesses must focus on the advantages of taking a business loan.

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