Types of Business Loans You Need to Be Aware Of

There’s no shortage of financing options for your small business, but that doesn’t mean every loan is a good fit. Finding the right type of funding can take time and research, but the effort is worth it. Here’s an overview of some of the most popular types of business loans, so you can put the right one to work for you.

Term Loans

A term loan gives you an amount of cash up front, and you are required to repay it with interest over a fixed pre-agreed time period. You can even get a term loan of $1 million from online lenders (and these loans are usually processed fast as well). Term loans, however, may sometimes require a personal guarantee or collateral like real estate or other assets.

SBA

 Small Business Administration loans (SBA) are guaranteed by the SBA and are offered by banks and commercial lenders. You have to repay the loan in 10 years if it is for the purchase of equipment and in 25 years if you used the sum to acquire real estate.

Business Lines of Credit

 This loan provides money up to your credit limit. The interest is payable only for the amount you have borrowed. This is an unsecured loan, and so, no collateral is required.

Equipment Loans

 This loan is for you to purchase equipment for your business. In the case of this loan, the equipment you buy will serve as collateral for the loan.

Invoice Factoring

 If your customers are yet to clear the payments they owe you, and you need the money urgently, you can get the required funds via invoice factoring. All you need to do is sell these invoices to a factoring company, and they will collect the dues from your customers.

Microloans

For businesses that need loans of $50,000 or less, microloans are a great option. These loans are typically offered to startups, newer businesses, and businesses in disadvantaged communities. Entrepreneurs often seek microloans rather than traditional business loans because they are easier to qualify for and don’t require collateral. They also generally have competitive interest rates and long repayment terms.