There are many fantastic reasons to open your own small business. Being your own boss means you can set your own hours, call the shots, and reap all the benefits of your own success. This is why small business owners, when surveyed, are often found to be more satisfied than other types of workers.
Of course, starting your own small business is not as easy as just saying you want to do it. You’ll have a lot of challenges in getting going, financing your new business being one of the primary ones.
What are the types of loans for business that you need to consider? Read on and we’ll walk you through what you need to know.
1. SBA Loans
The federal government has a vested interest in supporting small businesses, often seen as the backbone of the country. As such, they support business owners and those looking to become ones via something known as a small business loan.
The Small Business Administration is the arm of the federal government that provides these loans to people. They are low-cost and government-backed, which makes them an attractive opportunity for many looking to start a new business.
At the same time, there are some downsides to the SBA loan system as well.
For one, the popularity of these loans means the application process can take forever. That means you might not actually get the funding that you apply for when you need it. You might be forced to sit around and wait.
How long might you have to wait? On average, it takes business owners somewhere in the window of three months to actually get approved and receive the loan they requested.
If you’re in no hurry to get the funding you need, this can be a great option. However, if you need the business a little faster, this isn’t going to be a great option for you.
It’s important to note that the SBA offers a number of different loans. You’ll need to do some research and determine which kind of loan will be the right fit for your business and your needs.
The SBA 7(a), SBA 504, and the express loan are all fantastic examples of SBA loans that might be worth considering. The SBA 7(a) is more or less the most popular loan that the government offers.
2. Business Line of Credit
One quick way to get funding for your business is to open a business line of credit. With a business credit card, you can get up to $500,000 in funds depending on your application and credit background.
You could have this money in your possession within two weeks’ time. The rates for a business line of credit will vary depending on the provider. However, it is fully possible to find a lender with a low-interest rate.
With a business line of credit, you won’t receive the money as a lump sum. The money will be there and you can access it, but you will only owe what you borrow at any point in time.
The flexibility of this kind of borrowing is one of the many advantages of the business line of credit. You won’t have to pay interest on the money you don’t use, only the money that you actually use for purchases.
How much credit you’ll be able to obtain will depend on your background, as we’ve mentioned. Your credit score will play a big role and you should have a score of 580 or more in order to secure a good amount.
In addition, if you’re already in business and are bringing in profit, you’ll make yourself an excellent candidate for a lender to consider.
There is a chance you may need to put some assets up as collateral if your background isn’t quite as strong.
3. Business Term Loan
This business loan literally has business in the title, so you know it will likely be a good fit for your new enterprise’s needs. These loans are reliable, consistent, and have been a favorite among small business entrepreneurs for decades.
How does it all work? A business term loan will need to be repaid to the lender in a window of somewhere between one and five years. The interest rates on these loans are generally very low and quite generous to those whose applications are accepted.
Interest rates can be as low as 6% on a business term loan. Most of the time, these loans also have a fixed interest rate, which means the amount you owe should not rise over the life of the loan itself.
This means it’s easier for business owners to plan out payments and determine how much they will owe and when. When running all the many needs of a small business, this sort of consistency is a huge help.
The size of these loans varies widely. You might be able to secure a sub-$10,000 loan for your needs, or you could possibly go as high as one million dollars. It all depends on the lender and your needs as a business owner, as well as your background.
You’d be a fool not to at least consider a business term loan for your company. Learn more about these loans to determine which might be best for your needs.
The Many Types of Loans for Business
If you’re in need of some extra financing for your business, it’s important to get familiar with the types of loans for business. There are a lot of options out there for those looking to start a small business and the above are really just the tip of the iceberg.
Need more business tips, tricks, and advice? Keep scrolling our blog for more.
