Best Small Business Loans – Taking the best business loans involves a clear understanding of just two things: the future you see for your business and your business’s current financial position. You want to take your time to choose a loan that will not bring problems for you down the road.
Before you apply with any lenders, scrutinize the lender’s requirements. Check out the interest rates and determine if the loan is an amount you can reasonably afford to pay back.
Compare the interest rates of various lenders until you find the rate that is best for you.
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Best Business Loans for Small Businesses
It’s hard to grow your business without the right kind of financing. There are different types of financing options for small businesses.
Traditional banks offer long-term loans for major purchases, SBA partners can provide small business-specific loans, and alternative lenders provide creative options like invoice financing and lines of credit.
Alternative lenders and banks can generally meet your funding needs if your business is financially stable.
Here is a brief overview of the types of loans that are available to small business owners and how the funds can be used.
Small Business Administration (SBA) Loans
Small Business Administration loans are processed by banks and lenders. They are low-interest loans that are available to aid business owners to expand their business. The maximum amount you can receive from an SBA loan is five million dollars.
When you go for a term loan, you get a sum of money that you get to pay back in installments over a set time period.
- Short-term loans are to be repaid in less than a year. Funding can be fast – it can take a day or two before the borrower can access it. Amounts ranges from $5,000 to $250,000.
- Long-term loans are for established businesses that are looking to grow. Repayment spans several years. They come with low monthly interest.
Line of Credit (LOC)
This type of business loan is an option for small business owners. Line of Credit business loans provide fast access to capital, and you’re not restricted by certain rules about what the money can be used for.
This type of business loan can be secured or unsecured. The amount of money you can access and the interest rate are determined by the lender. Also, interest begins accruing as soon as you draw on your LOC.
Many Lines of Credit loans have qualification requirements such as how long your company has been established, minimum annual revenue, and, in some cases, a minimum credit score of 500 or higher is required for this type of business loan.
Merchant Cash Advance
A cash advance is a lump-sum payment – an advance – that a business owner can borrow against future income. Business owners repay advances using a percentage or portion of credit card income. The fees can be very expensive for merchant cash advances.
Peer-to-peer (P2P) lending is a loan from an individual investor or business owner interested in financing your business. This takes out the need for banks. However, Peer-to-peer lending is not allowed in some countries.
Unsecured and Secured Business Loans
An unsecured loan doesn’t mandate you to put up collateral. However, you need to have a good credit score to qualify, which is considered a score of 630 to 850. Maximum amounts go up to $50,000.
A secured loan usually requires collateral. The amount that can be given out ranges from $50,000 to $100,000 and many business owners use these funds to cover startup costs.
With the above, as a business owner, you should be able to figure which amongst them will suffice for the best business loan for your small business. Good luck!