Getting a small business loan may be easier than you think with the right tips.
Whether you’re a brand-new startup or have decades of experience, there will be times when you need extra funding to bring your business up to the next level. A small business loan may be a good option if you consider acquiring new equipment, expanding into a new location, or upgrading existing facilities.
So, what exactly is a small business loan, and how do you qualify? This guide has you covered. Let’s dive in and see if a small business loan is the right option for you.
What is a Small Business Loan?
A small business loan is a type of financing business owners use for equipment, real estate, unexpected invoices, inventory, working capital, etc. Often utilized for expansion, operational expenses, and growth opportunities, these loans are provided through private institutions like banks and guaranteed by the U.S. government.
Remember that if you’re based in Canada, the application process may differ from what’s outlined in the U.S. system.
American businesses can apply for this financing through a traditional bank, an online bank, a credit union, or a lending marketplace. Lenders receive a government-backed from the Small Business Administration (SBA) to offer more favourable loan terms.
Types of Small Business Loans
Small businesses can access financing solutions, including lines of credit, merchant cash advances, invoice factoring, and equipment loans. Each option serves different business needs and has unique benefits.
1. Term loans
Business term loans are one of the most common types for small businesses. Upfront, you get a lump sum of cash, which you repay over a set monthly schedule at a fixed interest rate. Most online lenders, Banks, and nonprofit lenders offer term loans.
2. Equipment loans
Most business equipment can be financed, from semi-trucks to commercial kitchens and office furniture. Equipment loans can be an interesting choice when using the equipment as collateral.
3. Business lines of credit
A business line of credit is a flexible business financing option. You can withdraw funds up to a pre-approved limit and only pay interest on the amount borrowed. As you repay what you’ve used, your available credit replenishes, allowing continued access to funds as needed.
4. Invoice factoring
Invoice factoring differs from traditional business loans. This financing option allows you to sell unpaid invoices to a factoring company for immediate cash. The factoring company then collects payment from your customers. Once your customer pays, the factoring company remits the balance to you minus agreed-upon fees.
5. Merchant cash advances
A merchant cash advance (MCA) is an alternative financing type for merchants accepting credit and debit payments. A merchant cash advance company advances you a set amount in exchange for a portion of your future sales. The repayment is made directly with your credit and debit card processing company.
Where to Start?
The best way to start is to talk with the lenders you have in mind or found online. With a detailed conversation about your goal and your current situation, they may be able to help you. Getting the financing you are looking for may help your business expand. From equipment financing to merchant cash advances, there are many solutions available for new and existing businesses.
Disclaimer : All loans and credit cards are subject to credit and underwriting approval. ConsumersAware.org is an information blog and a search platform, not a lender. ConsumersAware.org only works with advertiser partners and networks that comply with laws and regulations of Canada, United Kingdom, United States, Australia, and New Zealand. Credit cards range from $500 to $50,000 with Annual percentage rates (APRs) range from 12.5% to 19.9% and depend on the assessment of your credit profile. Loans range from $500 to $50,000 with terms ranging from 12 months to 60 months or more. Loans APRs range from 5.99% to 29.8% and depend on the assessment of your credit profile. For example, for a $7,500 loan paid monthly over 24 months, a person would pay $332.40 per month for a total of $7,977.60 over the course of the entire loan period.
